Coast FI Determining whether you’ve hit Coast
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Posted On: 01/14/2024 7:56:06 AM
Coast FI
Determining whether you’ve hit Coast FI is going to require some math. First, you need to have a FIRE number in mind. Generally, you find this figure by determining the annual income you’d want to live on in retirement and multiplying by 25. Really, you’re dividing by 4% — the amount you’re thought to be able to safely withdraw every year in retirement without running out of money.
Say you thought you could live comfortably in retirement on $40,000 per year. Under the traditional FIRE number calculation, you’d need $1 million in investments to make that happen.
If you’ve reached the level the Fioneers call Coast FI, the money already in your investment accounts will hit your FIRE number, given certain market assumptions, without you ever having to invest another dime.
You can play around with a compound interest calculator to see if you’re on track. Returning to the previous example, say you’re 25 and aiming to hit your FIRE number by age 50. If you had $175,000 in a Roth IRA and expected to earn a 7% annualized return on your portfolio, you’d be on track to be a millionaire by age 50 without having to add to your investments.
In the meantime, every dollar you make goes toward funding your current lifestyle. In other words, you coast.
For the Ficks, it’s meant putting money into a business that has grown profitable enough to allow them to leave their day jobs and hit the road in their camper van.
“The dream is location independence and being able to achieve that well before we reach financial independence,” Corey says. “Buying and building out the camper van and being able to travel for three or six months a year is part of the dream.”
Determining whether you’ve hit Coast FI is going to require some math. First, you need to have a FIRE number in mind. Generally, you find this figure by determining the annual income you’d want to live on in retirement and multiplying by 25. Really, you’re dividing by 4% — the amount you’re thought to be able to safely withdraw every year in retirement without running out of money.
Say you thought you could live comfortably in retirement on $40,000 per year. Under the traditional FIRE number calculation, you’d need $1 million in investments to make that happen.
If you’ve reached the level the Fioneers call Coast FI, the money already in your investment accounts will hit your FIRE number, given certain market assumptions, without you ever having to invest another dime.
You can play around with a compound interest calculator to see if you’re on track. Returning to the previous example, say you’re 25 and aiming to hit your FIRE number by age 50. If you had $175,000 in a Roth IRA and expected to earn a 7% annualized return on your portfolio, you’d be on track to be a millionaire by age 50 without having to add to your investments.
In the meantime, every dollar you make goes toward funding your current lifestyle. In other words, you coast.
For the Ficks, it’s meant putting money into a business that has grown profitable enough to allow them to leave their day jobs and hit the road in their camper van.
“The dream is location independence and being able to achieve that well before we reach financial independence,” Corey says. “Buying and building out the camper van and being able to travel for three or six months a year is part of the dream.”
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