Imagine waking up every morning to a life without a boss or the 9-5 grind. The freedom to travel, pursue hobbies, and live life on your own terms. This dream can become a reality much sooner than the traditional retirement age and even well before hitting your financial independence number.
COAST Fire gives you the flexibility to pursue financial independence without sacrificing the ability to retire early. It gives you the option to take risks, pursue passions, or simply change how you're trading your time for money now in order to live your most optimistic financial life on your path to FI.
The Coast FIRE Calculator is a great tool to start to plan your journey to financial independence and retire early. Use the Coastfire calculator to calculate your CoastFire number and the total years it will take for you to reach COAST FIRE.
What is COAST FIRE?
COAST FIRE is when you have enough savings or net worth already saved that one day, your funds will reach a point where you will become financially independent. That is, you don't need to worry about saving and your income will cover your living expenses.
This is achieved by not touching the nest egg you have saved and letting it compound and grow in the stock market. Consequently, your Coast FI number indicates how much net worth you will need to reach financial independence, as well as how many years it will take you to become Coastfire. This method of financial independence gives you the flexibility to choose your own path without sacrificing retiring early.
COAST FI gives you the flexibility on your path to financial independence without sacrificing retiring early.
How to Calculate Your Coast FIRE Number
There are several inputs needed to calculate your COAST FI number with the coast fire calculator:
Traditional Financial Independent Age
This is the age that you want to become financially independent- where you can live on your passive income without needing to save anymore. The longer the time between your current age and your FI age, the smaller your COAST FIRE number will be as it will have more time to compound and grow in the stock market.
Current Total Investments
This is the total amount of your net worth. Your net worth is the sum of all your assets, such as cash, investments in retirement accounts, your investment portfolio, and property, minus any liabilities, such as car debt, student loans and credit card debt, that you may have. Your net worth is basically your starting point for where you are currently at with your COAST financial independence number
Current Monthly Expenses
This is your total monthly spending. This includes the essentials such as food, rent or mortgage payments, and utility bills, as well as any additional expenditures such as entertainment and other variable expenses. Also include your non-monthly costs like travel, insurance, and car maintenance.
Monthly Total Savings Contribution
This is the total savings contribution that you calculated from the savings rate calculator . It includes your monthly savings from your after tax income but also includes any savings contributions to retirement, HSAs and other savings vehicles that are deducted directly from your paycheck.
Annual Interest Rate (%)
This is the expected growth rate at which your investments are expected to grow. On average, the stock market has historically provided an average growth rate of 8%, which has been adjusted for inflation. While this rate is historically reliable, it is important to note that there are no guarantees and that the growth rate of return can vary depending on the type of investments you make. As I'll discuss more in other blog posts, I'm a big believer of investing in low cost indext funds or ETFs for long term sustainable growth. It is wise to research and diversify your investments to ensure that you are making the most of your money. Additionally, it is important to remember that this 8% rate of return is an average, and that there may be times when you can expect to see higher returns, or there may be times when you experience a lower rate of return.
Withdrawal Rate in Retirement
This is the percentage of your financial independence savings that you withdraw each year to cover your living expenses. This is also referred to a lot in the FIRE movement as the "safe withdrawal rate". It is a critical component to consider when planning for retirement or financial independence, as it is important to determine the rate that will ensure that your nest egg will last for the duration of your FIRE life aka retirement. Withdrawal rates should be carefully chosen and monitored, as withdrawals that are too high can deplete your savings too quickly, while withdrawals that are too low can lead to a need for more funds during later stages of retirement.
The 4% default rate is based on the well-referenced Trinity Study , which examined the past 50 years and concluded that withdrawing 4% from liquid assets for 30+ years would not lead to running out of money. This assumes that assets are invested in the stock market and the stock market grows at an average annual return of roughly 7% after inflation.
The Coast FI Calculator Results
Below are the calculated results of the coastfi calculator. You can email them to yourself to track your progress on you path to Coast Financial Independence.
COAST FIRE Number
This is the amount you'd need to have saved as your "nest egg" in order to stop saving and just cover your expenses with your income.
Years to COAST FIRE
This is how long it'll take you to reach coast fi and your COAST FIRE number based on how much you have saved already, your expenses and your monthly savings. You should compare this time to the traditional retirement age and think about adjusting your numbers in the Coastfire calculator accordingly if your years to coast fire is still close to the traditional retirement age.
You can also fast track your savings with a 100 day savings challenge !
Financially Independent Age If You COAST FIRE Today
This is the age that you can become financially independent and live off your investments if you stopped contributing to your savings today and just covered your expenses with your income. So essentially you're trading off hitting your FI number early in order to start COAST firing today.
An Example of COAST FI: Coast FIRE with 500k
Let's take a family of 4 who have annual spending of $94k. Let's assume both parents are 30 and dutifully saved in their retirement and investment accounts for the past 8 years. Now they have a net worth of $500,000.
They need $2.34M in total net worth to reach FIRE and live off their investments in early retirement, but if kept untouched, their $500,000 will grow to that amount in 20 years and they can retire early. So from now until they turn 50 they only need to cover their annual spending of $100,000/year and do not need further contributions to their nest egg.
Given their COAST FIRE number is ~$500,000, they have official reached COAST FIRE and are on their path to early retirement.
That dramatically alters how they can think about how they spend their time. Maybe they always envisioned working in some capacity to earn income but now one of them can make the decision to go part time, start a business, stay home with the kids, or start their real estate portfolio in order to generate enough rental income to cover their current expenses.
How much do you need to save to reach Coast FIRE?
To reach Coast FIRE, you will need to save a certain amount of money that will allow you to cover your yearly expenses without necessarily relying on traditional employment. As calculated with the COAST FI Calculator above, the exact amount you will need to save will depend on several factors, including your annual spending, investment growth rate, and desired early retirement age. However, a a nice rule of thumb from the FI community for those pursuing Coast FIRE is to have saved enough to cover 12 to 15 times their annual spending. That's basically the midway point to your traditional FIRE number.
For example, if your annual expenses are $50,000, you would need to have saved between $600,000 to $750,000 to reach Coast FIRE. This is based on the assumption that you will be able to live off of 4% of your savings each year, which is a commonly used safe withdrawal rate for retirement planning and it will depend on when you want to hit the traditional FIRE number. Your COAST FIRE number will have to be higher if you want to hit traditional fire sooner.
It's important to note that the amount you need to save for Coast FIRE is just a target, and your actual savings will depend on a number of other factors, such as your investment returns, taxes, and any changes to your spending over time. Additionally, it's important to plan for unexpected expenses and build an emergency fund in order to ensure a successful and sustainable journey to financial independence and early retirement.
COAST FIRE vs Traditional FIRE
Coast FIRE and Traditional FIRE are two different approaches to achieving FIRE. The main difference between the two lies in the amount of money they require to achieve their goals. Traditional FIRE focuses on saving and investing as much money as possible in order to reach the target savings rate, which typically ranges from 25x to 30x your annual expenses.
On the other hand, Coast FIRE, is the point on the way to financial independence where you have enough saved up that you can dial down your savings rate and just cover your expenses while you let your nest egg to continue to grow with compound interest in the stock market. If you can figure out a way to cover your expenses, COAST FI allows you to tap into that feeling of financial freedom much sooner than regular FIRE.
For me, reaching COAST FI was life changing. It gave me the freedom to rethink how I. I immediately adjusted my lifestyle to be more balanced between all of my passions in order to enjoy life more. I always wanted my own business and being COAST Fire allowed me the freedom to pursue that full force without the pressure of needing to maintain a huge savings rate and continue in the rat race of full time employment.
Some people in the fire community look at COAST FIRE as semi retirement. Maybe being COAST fi allows one person in a relationship to quit work completely and "retire" or it allows both people to semi retire for a few years. That's the beauty of COAST FI. The flexibility to choose different lifestyles without needing to expand your retirement age significantly.
Next Steps
- Now that you have your COASTFIRE number, learn more about the 5 simple steps you can take to start your FI journey .
- You can also now calculate your FAT FIRE number if you're trying to live your most optimistic luxorious FI life.
