The other night, I told my wife, “If we stopped contributing to retirement today, we will be millionaires before the traditional retirement age.” CoastFIRE is the first major milestone on the path to financial independence for our family of 5.
We achieved CoastFIRE by combining our finances, earning an education (without student loan debt), increasing our income, reducing our expenses, and investing at a young age. Coast FIRE is the mathematical tipping point where the money you’ve invested will grow to an amount sufficient for retirement even if you stop all future contributions.
If my wife and I stop contributing towards retirement today, we will have ~$1.4 million net worth by the age of 67 (assuming a 6% average rate of return). This retirement fund has the ability to pay us $50,000 per year at a 4% safe withdrawal rate (not counting social security or other government programs). We have no plans to stop contributing at this point so we can now reduce the time it will take to achieve financial independence. CoastFIRE is simply a milestone along the journey.
I made The FIRE Calculator below for you to run your own numbers and determine for yourself if you’re on track to be financially independent or not.
How we achieved coastFIRE in 4 steps
Since the age of 19, we’ve been laser-focused on increasing our income and learning how to invest in order to build wealth. Instead of living minimally on rice and beans forever, we chose to invest in ourselves through education, increase our incomes, geoarbitrage and limit our debts.
We earned a college education without student loan debt
We spent the first 7 years of our marriage investing heavily in ourselves and our education. I have 3 degrees including an MBA and Kayla has 2 degrees including her Masters of Curriculum and Instruction. We achieved 5 degrees between the two of us with zero student loan debt.
Our undergraduate degrees were completed at a brick-and-mortar branch campus. I was able to use the Post 9/11 GI Bill to cover my tuition and receive a monthly housing stipend. I then was approved for the vocational rehab chapter 31 benefit to extend my GI Bill by 15 months so I could complete my MBA.
We cash flowed my wife’s degrees by saving everything we could and using the school’s payment plans to cover the costs. Upon graduation, her master’s degree provided her with an instant salary increase which more than covered the cost of the degree.
We focused on increasing our household income
We had 3 kids in our 20’s (one at 21, 25, and 27). During this time, my wife was a stay-at-home mom, worked part-time at a preschool, and completed her bachelor’s degree. Once I graduated, I made $63,000 at my first, entry-level job in a software sales department making cold calls. This allowed us to buy our first house at 27 years old.
Two years ago, my wife decided it was time for her to start working full-time. Deciding to remain a stay-at-home parent or work full-time can be a difficult decision to make. She had been a stay-at-home mom for nearly a decade and when we ran the numbers, daycare expenses would put us at about the same financial position we were currently in. I had also promoted into a sales position and was making substantially more money.
With her income, we were bringing home about $10,000 per month on average (my income is variable due to commission) after taxes, 401k, healthcare, etc. Our expenses including daycare were only about $6,000 a month. This allowed us to save a lot of money really quickly and easily absorb any financial emergencies. Here’s what our family of 5 expenses look like now after moving across the country.
We entered the real estate market intelligently
Our first home was built in 1996 in one of the most popular neighborhoods to raise a family in the region. We paid $242,000 in 2018 for the house and employed a live-in-flip strategy to improve it prior to reselling just 2 years later.
We sold this house in 2020 for $290,000 and walked away with $32k in cash after all fees were assessed. That’s basically the same as if we increased our income by $1,300 a month for two years and put it in a savings account ($32k / 24 months = $1,333).
We moved our family of 5 across the country to geoarbitrage
We sold the house because we decided to enact our plan to move from Washington to Texas in an effort to geoarbitrage (move from a high cost of living area to a low cost of living area while maintaining your income).
Geoarbitrage allowed us to buy a house for about 40% of what it would have cost us in our high cost of living area. We also bought in one of the fastest-growing areas in the country (near Austin) and have already experienced rapid appreciation in the first year.
What does our household net worth look like?
Our household net worth is currently just shy of $200k. I’m 30 and my wife is 29 and we have three kids under the age of 8. Our network is about 60/40 home equity and stock market investments. We’re working hard to increase our stock investments, but since we’re so young, compound interest hasn’t started helping us out much.
Why we include home equity in our net worth
People like to debate whether or not to include home equity in your net worth. Definitely, net worth is your assets less your liabilities. A home is an asset, but also a liability. If you have positive equity in your home, you can tap into it in many ways (HELOC, Line-of-Credit, selling the home, etc.).
Not counting home equity in net worth is like not counting your stock investments because you’d have to sell them to realize the capital gains. Of course, you add your home equity. Because half of our net worth is home equity, I reduce our expected average rate of return from 10% down to 6%.
CoastFIRE is a milestone on our financial independence journey
Whenever you have a large goal, it’s wise to break it down into its various achievable parts. In my day job I have a quarterly sales quota, it’s easier to break it down into monthly, weekly, and daily quotas.
Benefits of creating micro-goals:
Keeps you on track
Keeps you motivated
CoastFIRE is the first of many milestones on our path to financial independence. Ideally, we’ll be financially independent in our 40’s and have the choice to live, work, and play how we want. CoastFIRE is an achievable milestone that renews our motivation, provides us feedback that we’re on track, and sets our family up for financial success should something happen to one or both of us.
How would it feel for you to be able to tell your spouse that retirement is taken care of?
What comes after coastfire?
We’re still contributing as much as we can to retirement as we want to have the option to retire at a younger age if we choose to do so. The goal now is not to have enough for retirement, but to shrink the timeline to when we can retire. Each month that we contribute to our retirement accounts is reducing the amount of time it will take us to reach financial independence.
Our focus has been on identifying the standard of living we want for our family, to earn an income above that level so we can both live the way we want, but also save enough to pursue financial independence. At this point, we simply need to keep our income stable, be cautious of debt and financial missteps, invest and give our investments time to grow with compound interest.