Coast FIRE means you have saved enough in your retirement funds that they will grow on their own to support you when you’re older, even if you don’t add more money to them.
After you reach this Coast FIRE goal, you still need to make enough money to pay for your daily expenses, but you don’t have to put away any more money for the time after you stop working. By saving and investing a good amount of money while you’re young, you can let those savings increase over the years until you have enough to live on when you retire.
Choosing the “Coast to FIRE” way lets you have the choice to work a job that might pay less, work fewer hours, or simply have extra cash to enjoy your life more.
Using this CoastFIRE Calculator
This CoastFIRE Calculator helps you figure out and see how your savings can grow as you work towards being financially independent without needing to save more.
The green line on the chart shows how much your savings will increase over time based on how much you add each month. The blue line shows how much money you should have at different ages to meet the Coast FIRE goal.
You can move the sliders around to see how the lines change in relation to each other. If your savings are more than the Coast FIRE target, then you’ve made it to Coast FIRE.
The math behind CoastFIRE Calculator
Here’s how to work out your FIRE number in simple terms:
- Age Details: Write down how old you are now and the age you want to stop working.
- Retirement Spending: Think about how much money you’ll need every year after you retire. This might be less than what you spend now because you’ll have health insurance from Medicare and you might not have a house loan to pay off.
- Savings Now: In the “Current Invested Assets” section, put in the total amount you have saved up. For example, if you have $100,000 in the stock market from your 401k at work and $25,000 in a fund for emergencies, you should only count the $100,000.
- Adjusting Rates: Move the sliders to change the rates and watch how the chart updates right away!
- Investment Growth Rate: This is the yearly growth rate you expect from your investments, not counting inflation. The CoastFIRE Calculator uses 7% by default, which is a careful guess. In the past, the S&P 500 has grown 10% a year on average from 1926 to 2018.
- Inflation Rate: This is how much you think prices will go up each year on average. In the past, prices in the US have gone up by about 3% a year.
- Safe Withdrawal Rate (SWR): This is the part of your total savings you plan to use each year to pay for things when you retire. 4% is often recommended and is known to work well for a 30-year retirement with an equal mix of stocks and bonds.
To put it simply, your FIRE number is how much money you need to have saved to cover your yearly costs without working, based on a safe amount you can take out each year (SWR). The formula looks like this:
(FIRE number)=SWR(annual spending)
The CoastFIRE Calculator uses the compound interest formula to show how your savings will grow:
A=P×(1+n)t
In this formula:
- ( A ) is the final amount of money you’ll have after it grows.
- ( P ) is the initial amount you start with.
- ( n ) is the annual growth rate (how much your money grows each year).
- ( t ) is the time in years until you retire.
To find out your Coast FIRE number, which is how much you need to start with so that your money grows to your FIRE number by the time you retire, you use this formula:
(Coast FIRE number)=SWR×(1+n)t(annual spending)
This tells you the amount you need to have saved now, so it will grow into the amount you need for retirement, without needing to save more later.
But what about inflation?
Inflation is a key factor to consider when saving for retirement far in the future. It’s very likely that prices will go up over time, which is why it’s important to invest your money in things like stocks and property instead of just keeping it as cash. These investments usually increase in value with inflation, while cash becomes less valuable.
The good news is that the CoastFIRE Calculator takes care of inflation for you! It figures out an adjusted growth rate for your investments by taking the inflation rate from the slider and subtracting it from the expected growth rate. This adjusted rate is then used to work out your Coast FIRE number and to make the graph.
This way, all the numbers you see are as if they’re in today’s money. So, you don’t need to stress about the rising cost of living because the CoastFIRE Calculator has already factored it into your investment growth.