Most tools that calculate your retirement savings just seem like fun little games— you input 2 numbers, and it gives you a vague prediction that does not take into account the real life factors. This Coast FIRE Calculator is not like that. At the first glance, it might seem naïve, but it is capable of complex, professional retirement planning.
It doesn’t matter if you have just entered the labor market or if you are close to retirement; the knowledge of “Coast FIRE” will totally revolutionize your ways of working and living.
What is Coast FIRE?
It is essential to grasp the idea before using the calculator. Coast FIRE is the stage when you have already deposited so much money and your investments have worked in such a way that, even if you stop adding money to the investments, the value of your portfolio will increase to a level that it will be able to give you a comfortable retirement at the age of your retirement.
After you have accumulated your “Coast” number, you no longer have to worry about saving money for the future. What you basically need is just to earn enough to pay your monthly bills. This is how many people get the opportunity to accept the jobs that pay less but are more aligned with their values or even to work only part-time.
What Makes This Calculator Stand Out?
This calculator is not limited to merely doing simple addition and subtraction. It serves as an all-round financial prediction model of your future. See below what it does to make the planning “complex”:
- Inflation Adjustment: Instead of just showing “future dollars”, it calculates how much those funds will be able to buy in today’s dollars.
- Dynamic Income Estimates: It allows you to guess what your lifestyle in terms of costs will be like a few decades from now.
- Accurate Forecasting: It reflects how well your investment value grows owing to the effect of compounding interest on your current net worth in comparison with your future contributions.
How to Use the Coast FIRE Calculator: Step-by-Step
Reach the most credible answers by carefully following the below steps of feeding your information into the calculator.
Step 1: Enter Your Current Financial Situation
Initially, input Your Age and your Current Invested Assets. Unless you are planning to sell your home to make your retirement money, don’t count the home equity. Only include the marketable securities like stocks, bonds, or retirement accounts.
Step 2: Set Your Desired Retirement Age
Type in your Age at Retirement. Then, figure out your Annual Expenses in Retirement. The simplest way is to base your calculation on your current spending and remove the items that will be gone after you retire (like mortgage and commuting cost).
Step 3: Establish Your Growth Factors
Here comes the “greater” part of the continuation. You have to enter the following:
- Expected Investment Return: Generally, between 7% and 10% (before inflation).
- Inflation Rate: Usually 2% to 3%.
- Safe Withdrawal Rate: The majority of the specialists are of the opinion that there is a 4% withdrawal rate.
Step 4: Understanding the Outcome
The tool will display your Coast FIRE Number. If your current net worth is equal to or greater than the number, congratulations—you are officially at Coast FIRE! However, if you are not, the utility will inform you how much more you either have to save or work to achieve the goal.
Benefits of Reaching Coast FIRE
Getting there is usually more of a mental thing than a financial one. It is like a “safety net” that your spirit lays on.
- Career Flexibility: Since you are not forced to max out your 401k contribution anymore, you can afford to take a less stressful job.
- Reduced Anxiety: The “fear of the future” is gone because the numbers show that everything is taken care of.
- Early Semi-Retirement: You get to live the “retirement lifestyle” while you are still young by working less and having more fun.
Frequently Asked Questions
Is Coast FIRE the same as regular FIRE?
The answer is no. Traditional FIRE (Financial Independence, Retire Early) implies that you have sufficient funds to stay away from the workplace for the rest of your life starting now. Coast FIRE indicates that you have enough that it is no longer necessary to save, but you still have to work in order to support your basic needs until retirement age.
What investment return should I use?
Most people go with the conservative approach and pick a “real return” of 5% to 7%. This takes into consideration inflation, thus giving you a more prudent and real picture of your wealth in the future.
Does the calculator account for Social Security?
Even though the calculator is quite sophisticated, the great majority of users opt to discard Social Security from the equation as a “cushion.” However, you may figure out your personalized result by deducting your anticipated Social Security benefit from your yearly retirement expenses.
What if my expenses change?
The great thing about this tool is that you can always come back to the calculator to update your age and expenses, so your Coast FIRE plan will be in line with your life changes.
Conclusion
The Coast FIRE Calculator is a lot more than just a sheet of numbers; it is your key to liberation. By determining your needs with great accuracy and incorporating the intricacies of inflation and market growth adjustments, it points out your target in black and white. After you achieve your Coast figure, the “rat race” is over and the real life starts for you.
