Formula Guide
The Coast FIRE Formula Explained
A plain-English walkthrough of the inputs and formula behind a Coast FIRE estimate, with the assumptions stated clearly.
Noah BennettEditorial contributor
Quick answer
What this article explains
The Coast FIRE formula works backward from a retirement portfolio target. It estimates today’s required invested assets by dividing that target by the assumed inflation-adjusted growth factor over the years until retirement.
Step 1: estimate the retirement target
The calculator uses: retirement portfolio target = annual retirement spending ÷ safe withdrawal rate. Both inputs are planning assumptions that you can adjust.
For example, $30,000 divided by 0.04 produces a $750,000 target in today’s dollars. Taxes, fees, pensions, and Social Security are not included in this simplified model.
Step 2: estimate the Coast FIRE number
The calculator uses: Coast FIRE number = retirement portfolio target ÷ (1 + real annual return) raised to the years until retirement. Its real annual return is the expected annual return minus inflation.
When the expected return equals inflation, the real return is zero and the current Coast FIRE number equals the retirement target. Negative real-return scenarios are allowed, but they deserve careful interpretation.
What the formula does not capture
A compact formula cannot model every retirement risk. Actual returns vary, inflation can differ from expectations, and taxes, fees, health costs, debt, employment changes, and spending changes all matter.
- The result is displayed in today’s dollars for a clearer comparison.
- Monthly contributions are modeled at the end of each month and assumed to keep pace with inflation.
- Use the estimate to compare scenarios, not to treat a projected return as guaranteed.
The simplified calculator formula
Retirement portfolio target = annual retirement spending ÷ withdrawal rate
Coast FIRE number = retirement portfolio target ÷ (1 + real annual return)years to retirement
For this educational model, real annual return = expected annual return − inflation. It is a simplified assumption, not a forecast.
Try the Coast FIRE Calculator
Compare your own retirement spending, timeline, savings, return, and inflation assumptions in a private browser-based estimate.
Common questions
Why does inflation matter in the formula?
It helps put the return and spending assumptions on a purchasing-power basis in this calculator’s simplified model.
Does the formula include investment fees?
No. Fees and taxes are exclusions and should be considered separately when evaluating a plan.
Sources and further reading
These links provide general background. They do not validate any individual projection or replace professional advice.
