Coast FIRE is a milestone in the FIRE movement where existing savings, compounding without additional contributions, will grow to cover retirement spending by a target age. The threshold equals annual expenses divided by a safe withdrawal rate (typically 4%), so the portfolio must reach 25 times annual spending. Enter age, savings, expenses, and expected returns to check the result.
How the Coast FIRE Number Is Derived
- Coast FIRE Number = Annual Expenses / Safe Withdrawal Rate. At 4%, this equals 25x annual expenses.
- Real Return Rate = (1 + Nominal Return) / (1 + Inflation) - 1. This strips inflation from the growth projection.
- Projected Value at Retirement = Current Savings x (1 + Real Return)^Years. If this meets or exceeds the Coast FIRE Number, Coast FIRE is reached.
- Shortfall Savings = remaining gap annuitized over the years to retirement using the real return rate.
Assumptions Behind the 4% Rule
The 4% safe withdrawal rate originates from the Trinity Study, which back-tested U.S. stock/bond portfolios from 1926 to 1995. Over every rolling 30-year period, withdrawing 4% of the initial balance (adjusted for inflation each year) never depleted the portfolio. Critics note that future returns may be lower, non-U.S. markets have fared differently, and early retirees face horizons longer than 30 years. A more conservative 3.25%-3.5% rate can be substituted by adjusting the annual expenses input upward.
What Changes After Reaching Coast FIRE
Once Coast FIRE is reached, the mathematical requirement shifts from saving-and-investing to simply covering current expenses. Earned income no longer needs to generate a surplus for retirement, which opens options like part-time work, career changes, sabbaticals, or entrepreneurship. The portfolio still benefits from additional contributions, but they are no longer necessary for the retirement goal.
Limitations of This Model
- Returns are modeled as a constant annual rate; real markets fluctuate, and sequence-of-returns risk can alter outcomes.
- The 4% rule assumes a fixed withdrawal strategy; actual spending tends to vary year to year.
- Tax treatment of investment gains and withdrawals is not modeled.
- Healthcare costs, Social Security, and pension income are excluded.
FAQ
Q: What is a Coast FIRE number?
A: It is the portfolio balance needed at retirement so that a 4% annual withdrawal covers living expenses indefinitely. At a 4% rate, the number equals 25 times expected annual spending in retirement.
Q: How does inflation affect the Coast FIRE calculation?
A: The calculator subtracts the inflation rate from the nominal return to get a real return rate. This means the projected portfolio value is expressed in today's purchasing power, so the Coast FIRE number does not need separate inflation adjustment.
Q: Can I use a withdrawal rate other than 4%?
A: Yes. To model a 3.5% rate, divide your annual expenses by 0.035 instead of 0.04. In this calculator, the simplest approach is to increase the annual expenses input by about 14% to simulate the same effect.