Back in 2020, we reached Coast FI!
It was an exciting time for us as the world was shutting down and everyone was just trying to figure out life. But this accomplishment gave us a much more relaxed feeling towards money as we all worried about job loss and worldwide health.
The feeling of knowing our old age retirement was secure, opened us up to a whole new stage of life.
What is Coast FI?
FI (Financial Independence) is when your investments are high enough to cover 25+ times your annual expenses. Due to the growth and returns of your investments, you are able to live off of them indefinitely without the NEED to work for money.
Coast FI is when your retirement investments reach a level that, thanks to compound interest, will provide enough money to live comfortably in your old age without ever adding another dollar yourself.
Example:
Say your annual expenses are $70,000
$70,000 X 25 = $1,750,000
Your FI number would be $1,750,000. Once you reach this number in investments, you could technically retire and never work for money again. (The 4% Rule has been tested over the years, but it is a good place to start to figure out your numbers)
Now, assume you are 35 years old and want to retire at 62, giving you 27 years until your desired retirement age.
Using this calculator, plan for your money to grow at about a 7% return. (Using the assumption that the S&P 500 index return is about 10% a year minus 3% for average inflation)
Your Coast FI number would be $281,628. Once you reach this number in investments, you can technically never add another dollar to your retirement funds again and still have a comfortable retirement at 62!
What Can You Do Once You Reach Coast FI?
Once you reach Coast FI, you no longer have to worry about putting money away for old age. Just let it continue to grow in low-cost index funds and you should be all good.
If you’ve reached this level by age 35, you are probably used to putting $1,000+ a month into your retirement account and have little to no debt beyond a potential mortgage. Once you reach Coast FI, you can take your foot off the gas a bit, if you’d like, and use that money towards other things.
Work Less, Change Jobs, or Have One Spouse Stay at Home
Once you no longer have to worry about putting money away for retirement, you might enjoy working less. Maybe you’ve been taking any and all Over Time over the last few years in order to build up your retirement fund. Now that you’re Coast FI, you could pass on OT if you don’t want to do it.
Or possibly, you and your spouse have always wanted to have one of you stay home to care for the house and kids. If you no longer need to make that extra money to put away for retirement, maybe one of you could become a stay-at-home parent and you could become a single-income household.
Maybe you could get out of your high-pressure job and leap into part-time work or a career that gives you more job satisfaction, even if it pays less. Now that you only have to pay for daily expenses instead of saving for your retirement as well, you can make some changes that work better for you and your family.
Loosen the Reigns on Spending
Have you always wanted to travel? Maybe you’d love to add an addition to your house or eat out more often.
If you no longer have to worry about retirement, what would you spend that money on?
For us, we have put off travel over the last decade while we reached Coast FI. An annual trip to visit my family on the mainland was pretty much as far as we went.
Now that we have reached Coast FI, we are making travel more of a priority. Especially because of my ever-increasing disability from RA (Rheumatoid Arthritis), we want to travel while I can still physically enjoy it. This April, we will be taking the kids on a trip to Six Flags, Disneyland, and Legoland with their Hawaii grandparents. Next year, we hope to take my dad on his bucket list cruise to Alaska.
These are huge trips that we never could have dreamed of taking in back-to-back years while we were putting every available dollar into our retirement funds. Now that we know our retirement is covered, we are able to take the extra money we make from side jobs and hustles and put it towards traveling instead of investments!
Pay Off Your Mortgage Early
When you know your retirement is covered, what better way to bring down future expenses in retirement than to get rid of your mortgage?
After reaching Coast FI, you can take some of that money you were putting towards retirement and begin putting it towards the principal of your mortgage.
Math-wise, if you have a low mortgage rate, below 6%, it might make more sense just to keep putting this money into investments and plan to use those future growths to pay your mortgage in later years.
But if getting rid of that last huge debt would give you breathing room and a feeling of accomplishment beyond measure, do it!
Keep Working Towards F.I.R.E.- Financial Independence Retire Early
Even though we know our post 62 years old retirement is covered, Mr. Bean does NOT actually WANT to work until 62. So while we have reached Coast FI, we are still on the path to Early Retirement.
While putting “extra money” from side jobs and such towards travel now, we are still contributing towards Mr. Bean’s retirement plan at work as well as maxing out both of our Roth IRAs and putting whatever we can towards after-tax brokerage accounts. And we continue to increase our contributions every time he gets a raise.
At the rate we are going now, we should reach Financial Independence before age 50. And if Mr. Bean still WANTS to keep working until his government job full retirement age of 57, we’re looking at a retirement pot of over $3,000,000, not including his pension and/or social security.
While 50 may not be the “super early FIRE” that some people talk about, retiring in their 30s or early 40s, we have built a comfortable life for ourselves. We’ve “Right Sized” our lives allowing us to travel, me to stay home to homeschool our kids, and Mr. Bean has the ultimate Boring Job that allows him a consistent schedule, good benefits, and paid time off with less than a 10-minute drive to work.
Coast FI Wrap-Up
Once you reach Coast FI, opportunities abound. Just like paying off debt, building an emergency fund, or right-sizing your living arrangements, Coast FI is just one more step in building a financially stable life.
So enjoy it! Celebrate your accomplishments and continue to build your best life!
Have you reached Coast FI yet? What have you decided to do with the extra freedom? If not, what are you doing to get there?
Leave a comment below and join the conversation.
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Congragulations on reaching Cost FI. We are about a year away from reaching Coast FI.
Thank you! It was an exhilarating realization! You must be very excited as well! We’re still investing as much as we can, but we’re also taking the time to breathe and travel more!