Coast FIRE Calculator
On mobile devices the chart is best suited for landscape mode.
What Is Coast FIRE / Coast FI?
It’s a key milestone in your financial independence journey. Coast FIRE is a powerful concept within the Financial Independence, Retire Early (FIRE) community. It represents the point at which your current investments are sufficient to grow, without further contributions, to support your financial goals by retirement. This means you can reduce your savings rate or focus on maintaining your current lifestyle while still progressing toward FIRE. To learn more about the fundamentals of Coast FIRE, check out our in-depth blog post.
Understanding Your Coast FIRE Number
The Coast FIRE number is the amount you need to have invested today for your portfolio to grow to your desired FIRE number by your planned retirement age. This is calculated using the following formula:
\( \text{SWR} \): Safe Withdrawal Rate
\( r \): Expected annual rate of return
\( t \): Years until retirement
For example:
- Annual expenses: €40,000
- SWR: 4%
- Rate of return: 7%
- Current age: 30
- Retirement age: 55
Your Coast FIRE number would be €184,249. If you have this amount invested in a stock market portfolio today, congratulations! You can “coast” your way to FIRE with no additional investments required.
Accounting for Inflation: Real vs. Nominal Returns
When planning for FIRE, it’s crucial to factor in inflation, which erodes the purchasing power of money over time. While nominal returns represent the total growth of your portfolio, real returns adjust for inflation to provide a more accurate reflection of growth. The formula for real returns is:
\( \text{Inflation Rate} \): Average yearly inflation rate
For example:
- Nominal return: 7%
- Inflation rate: 3%
The real return would be approximately 3.88%. By considering real returns, you ensure that your projections reflect future purchasing power, making your Coast FIRE and FIRE numbers more reliable.
Your FIRE Number
Your FIRE number is the amount of money you need to have saved up in your portfolio so that the passive income it generates can pay for your bills. Basically forever, without fearing to run out of money. That in itself depends on how much money you withdraw from your portfolio.
For example, let’s assume your annual spendings – you expect to have in (early) retirement – are 30.000. For a safe withdrawal rate of 4% you now multiply 30.000 by 25 and get your FIRE number with 750.000. If withdrawing 4 % annually you could take out 30.000 per year for up to 30 retirement years with a very high probability to never run out of money during those 30 years.
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