We’ve created a simple-to-use Coast FI Calculator to help you find your Coast FI Number. Sign up below to get access to the Google Sheets document. Make a copy and plug in your scenario to see where you stand.
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Want to Retire Early? Here’s How to Calculate Your Coast FIRE Number and Reach Your Goal
Coasting to Financial Independence is an alternative path to FI. The Coast FI approach affords freedoms during the journey to FI you might not expect.
Learn more about Coast FI : The Power of Flexibility: How Coast FI Can Improve Your Quality of Life
You will need a few pieces of data to calculate your Coast FI Number.
- Current Savings Balance
- Expected Retirement Year
- Expected Rate of Return on Investments
- Inflation Rate to Model
- Annual Spending to Model (In today’s dollars)
What is a Coast FI Number?
The Coast FI Number is the amount of current savings that will grow to your full Financial Independence Number by the time you reach your full retirement date.
Thanks to the power of compound interest, your investments will continue to grow even after you stop contributing. The longer you have until retirement, the more growth potential in your nest egg.
A Coast FI Number is not a static goal. If your are saving to reach Coast FI, you will need to reevaluate the number every year. As you get closer to retirement, the gap between the Coast FI and FI Numbers closes.
How to Estimate Your FI Number Years in the Future
Coast FI is different than Traditional FI, in that your retirement can be many years in the future. Inflation makes it more difficult to estimate your cost of living when you retire.
Not sure if Coast FI is right for you? Read – 6 Types of Financial Independence: Which Best Fits You?
Fortunately, it’s possible to model your living expenses based on inflation. You need three factors to make this estimation.
First, you need an understanding of your annual spending in today’s dollars. It’s helpful to have a budget for this step. You can take a SWAG, but garbage in, will produce garbage out.
Next, you need a target date to retire. This may be when you are 40, 50, at traditional retirement age, or something else. The date is a personal decision. Ideally, a Coast FI lifestyle will promote more years of work you enjoy. The further out your date is, the lower your Coast FI Number will be.
Finally, you will need an annual inflation rate to model. The average Consumer Price Index inflation rate since 2000 is 2.49%. This includes 2022’s 8.0% inflation. Our calculator is pre-filled with 2.5% for the model. You are free to make changes to your calculation. The higher the inflation in the model, the higher your FI Number. Setting the inflation rate to 0% will calculate an FI Number based on today’s dollars. This will make both Coast FI and FI Numbers artificially low.
Your Annual Spending and Impact to FI and Coast FI Numbers
Our Coast FI calculator uses the 4% Rule (of thumb) to estimate your FI Number. The formula takes your annual spending and multiplies it by 25.
Example FI Number Calculation based on $40K annual spending:
$40,000 X 25 = $1,000,000
Example FI Number Calculation based on $80K annual spending:
$80,000 X 25 = $2,000,000
Your Coast FI Number is a portion of the FI Number and relies on additional factors, including investment rate of return and years until retirement.
As spending increases, your FI Number increases, and so does your Coast FI Number.
The further out your retirement date, the closer the Coast FI Numbers are for disparate annual spending rates.
Like other forms of Financial Independence, Coast FI’ers benefit from careful cost control. A general anti-consumerism mindset is incredibly beneficial. Joy is available in many forms and frequently costs little to nothing. Remove spending on things you don’t need to reduce your FI and Coast FI Numbers. A great side-effect is more freedom and happiness in your life.
Want to learn more about the relationship between spending and Joy? Read – Stop Spending on Things That Bring No Joy
The Role of Your Retirement Date
Our Coast FI calculator uses your retirement year to create an FI Number. The FI Number is based on your annual spending in today’s dollars and is calculated using a modeled inflation rate. The calculation is essential because you project reaching FI in the future in Coast FI.
The Coast FI timeline is much greater than those on the regular FIRE path, striving to reach Financial independence as soon as possible.
A Coast FI Number is based on a FI Number and is calculated using the annual rate of return on your investments, and the number of years remaining until retirement. The target for reaching Coast FI increases each year as you get closer to retirement.
Don’t let Inflation Catch You Off Guard
A $1 Million FI Number sounds more achievable than $1.3 Million. However, if your retirement date is 30 years away, $1 Million will not have the same buying power as today.
Many overlook inflation when calculating an FI Number. If you intend to reach Financial Independence in the near future, this mistake may not be a big deal. However, with Coast FI, your FI date is much further away.
Excluding inflation and the impacts to the purchasing power of your savings can be disaterous.
Our Coast FI calculator provides a field to model inflation. The default value is $2.5%, which is in line with the average CPI inflation rate since 2000. You can change the rate in your calculation. Changes will affect your FI Number and, thereby, your Coast FI Number.
What happens when I reach Coast FI?
If your savings exceeds your calculated Coast FI Number, congratulations! You’ve reached Coast FI.
But what does that mean?
When you reach coast FI, you no longer need to contribute to your retirement accounts to reach FI by your retirement date. That’s a bold statement with a huge asterisk.
Nothing is guaranteed. You need to continue to track your progress over time. Markets don’t move smoothly. One year you might be up 20% and the next down by that much or more. These swings impact your coasting progress.
The longer you have until retirement, the less likely the impact on your retirement date. However, when your timeline is much shorter, a bear market can derail your plans to retire on a specific date. Compound interest and time are your friends.
In the graph above, the near-term retirement date reached over 100% of the Coast FI number in late 2021. The bear market of 2022 dropped the portfolio below Coast FI. There is a risk that this portfolio will not recover before the intended retirement date.
The same portfolio with a much longer retirement date also saw big swings. However, it stayed above Coast FI. The risk of failure is much lower, thanks to the extended timeline.
When you reach Coast FI, it’s time to capitalize on the flexibility you’ve earned. Choose work that you enjoy over unsatisfactory work that builds wealth. You still need income to cover your annual expenses, but additional contributions to savings are no longer required. Full-time and part-time work are both possible when your retirement savings contribution is no longer necessary.
Please just keep an eye on your portfolio to make sure you are on track for success. You may need to make adjustments throughout the years if your portfolio fails to perform to the model. The Coast FI Calculator is a tool you can use throughout the years.
Perhaps a mini-retirement is an option when you reach Coast FI – Read 6 Life Lessons From Six Months of Mini-Retirement
How to make a copy of the Coast FI Calculator
After you sign up (see the form above), you will receive a link to the Google Sheets Coast FI Calculator.
Save the Coast FI Calculator Sheet to your personal Google drive. This step requires a Google account.
Desktop users, use File > make a copy to save the Coast FI calculator. You can edit the copied file.
Mobile users select the three dots in the top right and then Share & export > Make a copy to save the Coast FI calculator. You can edit the copied file.
Calculated fields are protected on the sheet. You will receive a warning if you attempt to edit a protected area. However, you can make any changes and use this Coast FI calculator to help you navigate your Financial Independence journey.