The idea of financial independence is appealing to many physicians on our communities, as it gives them the ability to practice medicine on their own terms. We often talk about your financial independence number, which is how much money you need to retire. However, for those who don’t want to “FIRE,” ie Financial Independence Retire Early, but rather cut back their clinical hours or start spending more of the money that they’re earning instead of continuing to save for retirement. The point at which you’ve saved enough in your retirement accounts that you no longer need to contribute money for retirement savings because your current savings should support retirement at a traditional age is known to those in the FIRE community. Below, we’ll deep diver into Coast FIRE, what your Coast FIRE number is, and what to know about applying this number to your FIRE number.
Disclosure/Disclaimer: This page contains information about our sponsors and/or affiliate links, which support us monetarily at no cost to you. These should be viewed as introductions rather than formal recommendations. Our content is for generalized educational purposes. While we try to ensure it is accurate and updated, we cannot guarantee it. Rules/laws can change frequently. We are not formal financial, legal, or tax professionals and do not provide individualized advice specific to your situation. You should consult these as appropriate and/or do your own due diligence before making decisions based on this page. To learn more, visit our disclaimers and disclosures.
Article Navigation
How much money do I need to be financially independent and be able to retire as a doctor?
We dive into this deeper on our article about the four percent rule for financial independence, which is a quick back of the napkin way to estimate the amount of money you need to retire without having to worry about running out of money in retirement. It will depend on a number of factors, including your current lifestyle, the lifestyle you hope to maintain in retirement, and how old you are. While there are nuances to the rule, many physicians see this number as their target savings amount and budget and track their net worth accordingly.
What is Coast FIRE?
There are certain milestones along a physician’s journey to financial independence that are fun to celebrate, and one of the most popular ones is Coast FIRE.
Coast FIRE is when you’ve saved up enough money for retirement at a traditional retirement age that you now only need to make enough money to pay for your ongoing expenses, because the amount you’ve saved will continue to grow at a rate to support your retirement needs.
This frees up a significant amount of space in your budget (if you remember, we recommend saving 20% of your income typically), which allows you to cut back to part time, switch to a job environment that affords you better work life balance, or start spending more on discretionary expenses like that vacation or that fun car without worrying that you’re jeopardizing your retirement lifestyle.
This method uses historical data about the financial markets and inflation to project the compounded growth of your current retirement savings.
Compound growth: the secret weapon for retirement
The key here is that you’re counting on compounding growth of your existing savings, so your Coast FIRE number is going to be different depending on how old you are. The younger you are, the lower your coast FIRE number, because you have more years for your nest egg to grow before hitting a traditional retirement age. Again, the power of saving early in your career.
Learn more with our physician's guide to getting started with investing.
Use our tools for projecting the net growth in your investments and track to financial independence below.
How do I calculate my Coast FIRE number?
This number is going to depend on a variety of factors, including what you assume the average historical return in the market is, what rate you assume for inflation, your retirement age and how long you have to go before hitting that age, and what your safe withdrawal rate will be during retirement.
While everyone has their own take on these things, in our experience, most physicians on our communities will model for a 6-8% rate of average historical investment returns, a 3-4% rate of inflation, a 3-4% safe withdrawal rate, and in the case of Coast FIRE numbers, a retirement age of 67.
Safe withdrawal rate
A note on the safe withdrawal rate, if you aren’t familiar with the 4% rule we typically use for estimating your financial independence number independently of when you plan on retiring. The safe withdrawal rate is the percentage of your invested portfolio that you can take out and spend every year without reducing your principal amount that is invested, because you can assume the principal will continue to grow based on historical market data. Most people use 3% (conservative) to 4% (typical) for this number depending on whether they intend to retire at an earlier age, where they will want to be more conservative, and their risk tolerance.
Remember, to calculate your traditional FIRE number, you divide your anticipated annual spending in retirement by your safe withdrawal rate to estimate the amount of money you need to retire.
Financial Independence Number = Anticipated Annual Spending in Retirement / Safe Withdrawal Rate
Accounting for inflation
When you are doing this calculation, you have to account for inflation, so you can’t just plug in the historical rates of return for investments. You have to calculate the net growth rate of your investments when accounting for inflation, which means that you have to subtract the expected rate of inflation from your assumption of the rate of historical investment returns. So:
Net Growth Rate of Your Investments = Historical Investment Return Rate - Average Expected Rate of Inflation
As we indicated earlier, most physicians on our communities use 6-8% for historical investment return rates, and 3-4% for inflation (particularly as inflation has been high in recent years).
Compounding interest formula
Next, you have to take into account how the money you already have saved will grow, which you will see lots of calculators for online, but essentially this is:
Amount in N years = Principal Amount Invested x [(1 + Net Growth Rate of Your Investments) ^ (Number of Years Invested)]
If you set the amount in N years to be your financial independence number by the 4% rule, and substitute in the number of years to retirement based on your age as well as the net investment growth rate that you want to use, you will be able to solve for what the Principal Amount Invested should be.
That is your Coast FIRE number!
Example of calculating your Coast FIRE number
We can run through the formulas above for an example of how to calculate your Coast FIRE number.
Determine your Net Growth Rate of Your Investments
If we assume a historical investment return rate of 8% and an average inflation rate of 4%, our net growth would be:
Net Growth Rate of Your Investments = 8% - 4% = 4%
Determine your Number of Years Invested
If you are currently 57 years old and plan to retire at 67 as noted above, your number of years invested would be:
Number of Years Invested = 67 - 57 = 10
Determine your FI Number
We cover how to determine your FI number in length with our FIRE: physicians and financial independence article, and we'll use the example from that article here, which uses a 4% safe withdrawal rate
If you think you'll need $100,000 a year in retirement to live off of, your financial independence number is:
FI number = $100,000 / 0.04 = $2,500,000
This is our Amount in N Years part of the equation.
Putting it all together
Using the numbers above with our equations, we can determine our Coast FIRE amount with:
Principal Amount Invested = Amount in N Years / [(1 + Net Growth Rate of Your Investments) ^ (Number of Years Invested)]
which for our example is:
Principal Amount Invested = $2,500,000 / [(1+ 0.04)^(10)] = $2,500,000 / 1.4802 = $1,688,910
* Don't forget to convert your percentage to a decimal
Your Coast FIRE amount is thus ~ $1,690,000 invested in retirement savings today.
What to do when you’ve hit Coast FIRE
Once you’ve hit Coast FIRE, you open up a whole new approach to your career. You are now able to take more financial risks or spend more money because you don’t have to worry about saving for retirement anymore. This could mean:
Switching to a job or practice environment that offers more work life balance or switching to academia if you enjoy it without worrying about the financial penalties associated with jobs in academic medicine
Cutting back your clinical hours
Spending more time on your physician side gig, passion projects, or hobbies
Take a job in a field completely unrelated to medicine but that interests you (but we recommend thinking about alternatives to quitting medicine like cutting back at your medical job, because we need you in medicine!)
Spending more time trying to develop passive income streams that allow you to further your journey to financial independence
Practice medicine more happily, knowing that you have the power to walk away from a bad physician contract because you can find another job even if it pays less (i.e. they have less leverage on you)
Honestly, there’s no shortage of things you could do or changes you could make once you free up the space in your budget because you’re no longer having to contribute to retirement.
Conclusion
Achieving Coast FIRE gives you more ability to practice medicine on your own terms. This is an important step in the financial independence journey for physicians. If you’ve reached this phase - congrats! If you haven’t, we hope it gives you the inspiration to do so!
Tools to help you with your Coast FIRE retirement planning:
Empower is free way to aggregate your accounts and get a comprehensive overview of your finances. It includes lots of retirement tools/trackers/long-term financial tools that address questions often asked on the group in terms of tracking net worth, a savings tracker that shows you if you’re on track towards retirement goals, budgeting, cash flow, and fancier things like a retirement planner that will calculate your projected monthly income by your desired retirement date, planning for your kids’ education costs, portfolio allocations, and even analyzing the fees in your investments to make sure you’re aware of hidden fees. Use our affiliate link to sign up today.
Empower Personal Wealth, LLC (“EPW”) compensates us for new leads. We are not an investment client of Empower Advisory Group, LLC.
YNAB (You Need A Budget) is an impressive app that's laser focused on budgets and very customizable. They have a REALLY loyal following, and people swear by it. It's not free (but also not expensive) - there's a free trial if you want to try it out and play with it. Use our affiliate link to get started.
A financial advisor who works with physicians can help you develop a comprehensive financial plan to keep you on track for your Coast FIRE goals.
Additional Resources for Financial Independence and Investing
You can also explore related PSG retirement education:
Dive even deeper into retirement and investing with:
Sign-up for our free financial grand rounds educational series (recordings of previous events are available as well)
Read some of our favorite personal finance books