Coast FIRE … You’ve maybe heard of this concept before, but perhaps you don’t know what it is.

Recently, our family achieved this milestone by accumulating $500,000 in investments by age 40 years old. Let's dive into what coast fire is and how our family conquered this family financial independence step!

What is Coast FIRE?

Coast FIRE is when you have enough invested in your retirement accounts that you can decide to drastically slow down or completely stop new contributions and still retire comfortably in your 60s. 

When I’m talking about retirement accounts, I’m talking about your 401k, 403b, IRA, and even your Health Savings Account (HSA). These accounts are focused on your future retirement needs. I don’t know about you, but I don’t have a pension waiting for me, and my faith in social security being enough (or even being fully available by the time I'm 62) is not strong. So it is incumbent on us to create our own pensions.

How Our Family Achieved Coast FIRE

Over the last decade of our marriage, we have invested in tax-advantaged retirement accounts to create a comfortable retirement. 

From seven years, I maxed out my 401k contributions at work. Through time, compound interest, a strong stock market, consistent contributions, and a 15% employer match, my account grew quite a bit. Not only did this increase our retirement investments, but it also helped our net worth grow to over $1 Million.

Additionally, we have invested in Roth IRAs over the previous decade as well. Between my wife and me, we had $550,000 invested for our future retirement needs at 40 years old. And we still had decades for this money to take advantage of compound interest.

If our family simply did not add another dime to our $550,000, with a 7% real rate of return (this factors in average inflation), we could expect to have around $2 million by the time we retire at 60. 

Now, this math equation isn’t exact or perfect. There are many other factors to consider, like taxes and whether the stock market will continue growing at its 10% average over the next couple of decades. 

Let's say my estimate is off by half a million dollars; that still leaves us with $1.5 million at retirement time. With a 5% withdrawal rate, that will allow our family to live comfortably on $75,000 per year. And if I’m correct in my first calculation that we’ll be closer to $2 million at retirement time, we’ll be able to enjoy $100,000 per year.

If we land in that range, I believe we’ll be very comfortable and happy. 

What To Do With Your Money After Achieving Coast FIRE

The options for what to do with your money if you’re not worried about investing for your retirement anymore are plentiful! This may be one of my favorite things to think about and plan for our family. 

Here are some ideas:

Vacation More

With more money available, you can create some more memories with your family today. Our favorite way to do this is with an awesome vacation. 

We live in Michigan, so getting out of town in the winter is at the top of our to-do list going forward. Sunny weather, sandy beaches, and all-inclusive resorts are what we’re thinking of. 

The spring after we hit Coast FIRE, Nicole and I did a couples getaway to Jackson Hole (pictured above). Man, was that beautiful!

Invest More (Outside of Retirement)

Just because you stopped investing for retirement doesn’t mean you have to stop investing for other important goals in life. 

Nicole and I are now investing in two separate taxable brokerage accounts with different purposes. 

The first account is being built up to serve as an early retirement account that would allow us to slow down working around 55 years old instead of 60.

The second account currently allows us to enjoy dividends today for things like back-to-school shopping and dinners with family each year. This came from a $30,000 inheritance we received from Nicole’s Mom when she passed away five years ago. Since Grandma loved doing back-to-school shopping with our kids, we decided to create a fund that would allow her to take them shopping each year, even though she’s not with us. It helps us to have her memory live on. 

Upgrade the Home 

Since slowing down our retirement investing, we’ve taken the opportunity to plus up our forever home. We upgraded our kitchen, and we absolutely love it. 

After years of waiting, we finally got a hot tub to enjoy year-round. Nicole has wanted a hot tub ever since we got married, so I’m excited we’re finally made that dream of hers come true. 

Upgrade the Car

Nicole owned her car for 14 years. Since we had more money available after stopping retirement contributions, it was time to upgrade. 

We went with a slightly used Acura MDX — more room for our growing kids and a lot of nice features that make driving more enjoyable. 

After some time, I decided to get a new car too! I went with the Ford Mustang Mach-E. The look is sharp, and I think it's a massive perk to never fill up for gas again, as it's an electric SUV. 

Pay Off the Mortgage Early

We ended up becoming mortgage-free during our investing journey. For others who have reached this Coast FIRE milestone, eliminating the largest monthly payment you’ll ever make could be something to consider. 

This is a personal decision for sure, but paying off our mortgage early was one of the best decisions our family ever made. 

The freedom we now have is incredible. If I had to do it all over again, I would recommend achieving Coast FIRE and then paying off your mortgage early.

Design a New Lifestyle

With no debt, no mortgage, and no need for additional retirement contributions, we’ve adjusted our work lifestyle as well. 

In early 2020, I left my corporate 9-to-5 and I’m now working part-time as a financial educator online. Making videos on the internet, writing articles, and creating podcasts. I absolutely love my new job! And I love the flexibility it gives me to be a present Dad and husband as well. 

My wife took on a new part-time job as an aesthetician as well. Between the two of us, we’re pulling in around $100k per year as an aesthetician and a “YouTuber”.

That’s plenty for us to pay for what we need and enjoy life, a lot of awesome extras like vacations and summer camps for our kids. 

Give More

After achieving Coast FIRE and becoming mortgage-free, we allocated 10% of our budget to giving. This goes toward:

• Family and friends in the form of gifts, cash, and surprises
• Charities and causes we believe in
• Our hard-working neighbors in the service industry during the holidays

We know that giving back and service to others is a major tenet of a happy life. Now, we plan ahead with our money so we can be generous. It's not always easy to give away our money, but it's a muscle we've grown over the years. Helping our nephews and nieces start their first Roth IRA account, being extra generous during the holidays and tipping that $100 tip to someone who goes the extra mile to give their families a better life makes us feel incredibly happy. 

How Do You Know When You’ve Achieved Coast FIRE?

If all this sounds interesting to you, you may be wondering how you can reach Coast FIRE, too!

To understand when you’ve achieved Coast FIRE, you need to first find out two important numbers: (1) Your annual expenses, and (2) when you want to retire

Your Annual Expenses

Your “annual expenses” is just a fancy way of saying “how much do you spend each year?” 

If you don’t know this number, that’s okay. Not a lot of people do. 

The number most people know right off the bat is how much they make each year. I believe that knowing how much you spend each year is even more important. You can make a million dollars per year, but if you spend $1.1 million, you’re in the hole by $100k each year, and you’re not building wealth or setting yourself up for a comfortable retirement.

If you don’t know this number, create a budget, start tracking your spending, and find out.

Nicole and I use Monarch Money. It helps us lay out how much we're earning, how much we're spending. With that knowledge, we can make sure we're spending in accordance with our values. Monarch makes that process easy. It’s our budgeting tool of choice, but there are dozens of other budget apps for families out there to make budgeting and understanding your annual expenses a lot easier.

When You Want to Retire

For our Coast FIRE calculation, I chose 60 years old. 

You may want to be more aggressive and choose 59.5 years old, as that is when you can access your 401 (k) and IRA without penalty. The earlier you retire, the less compound interest has time to work in your favor.

If you choose 70 years old, then you’ll have even more money! But perhaps that’s waiting too long to enjoy your money. After all, the average lifespan in the US is only 78 years old. 75 if you're a man, sorry fellas.

When you want to retire … That is a decision only you can make.

Play Around With Calculators

Once you’ve determined your annual expenses and your desired retirement age, you now have the two most important numbers. 

To see where you are, use calculators like this awesome Coast FIRE calculator we created. 

Coast FIRE calculators like ours may not give you the exact answers you’re looking for, but they’ll help you see if you’re on the right track.

Final Thoughts on Coast FIRE with $500k by 40 Years Old

After playing around with the calculators, you may find that you need to do a lot more investing for retirement after all. And don’t worry if that’s the case.

The majority of America is there with you.

According to GOBankingRates, 42% of Americans are now expected to retire with less than $10,000 in their retirement savings accounts.

If you spend more than $10,000 per year, your retirement savings wouldn’t even last a year. 

So, if Coast FIRE sounds awesome and living on less than $10,000 per year sounds horrible, then it’s time to get rocking with your retirement investing my friends. 

Check out this step-by-step guide to get started with investing today.

What do you think of Coast FIRE? Is this a FIRE Movement step you appreciate?

Please let me know in the comments below.