Author Topic: Not there yet, but does this seem like a good COAST plan?  (Read 815 times)

ontheway2

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Not there yet, but does this seem like a good COAST plan?
« on: December 18, 2019, 09:09:48 AM »
I think I can hit 450k in the next 5 or so years and want to semi-coast fire then. If I just cover expenses (3 days/week or 7 months year), then I should have 1.1m in today's dollars by late 50s/early 60s (20 years of coast). I would occasionally still contribute, but no more than a couple thousand a year. That would give me a spend of 35k/year plus 5k for sinking funds and ~10% to taxes. Any SS would cover medicare and healthcare costs. Without a budget breakdown, does this seem reasonable?

FIRE 20/20

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Re: Not there yet, but does this seem like a good COAST plan?
« Reply #1 on: December 18, 2019, 10:36:15 AM »
Just to make sure I understand, are you saying you expect to have $450k in 5 years, then you begin the 20 year coast?  If so, then it would just take about a 4.6% real return (i.e. return after inflation) to get to $1.1M in today's dollars in 25 years (5 years to $450k, 20 years at 4.6% growth).  4.6% real growth is a reasonable low estimate for the S&P 500, but it would depend on your asset allocation and the performance of those investments.  Real returns for the S&P 500 have historically been somewhere around 6.5%-7.0%, depending on which source you believe.  That's why I think 4.6% is a reasonable low estimate.  CAPE valuations seem to suggest a lower real return than 6.5%, so I think 4.6% is a reasonable guess - and hopefully will be conservative. 
NOTE:  If you choose a "safer" investment then your likely returns will be lower and that could put your plan at risk.  With long time horizons - and I think 25 years qualifies - "safe" investments like bonds are less volatile but highly likely to underperform "riskier" investments like equities. 

I'm sure you're well aware of this, but increasing your assets just a little bit would significantly cut your total working life.  For instance, getting to $515k would cut approximately 3 years off the end of your working career, and I'm guessing you could save up $65k in well under 3 years at the rate you're going.  You'd also increase your SS benefits significantly as well because of the progressive nature of Social Security.  For me (and this may not apply to you) the idea of being forced to work in my late 50s and early 60s was much worse than the idea of working hard in my 30s for an extra couple of years.  But I can definitely appreciate the CoastFIRE approach to maximize your happiness when you're younger - it's not the path I took but it's a valid one as long as you understand the downsides. 

ontheway2

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Re: Not there yet, but does this seem like a good COAST plan?
« Reply #2 on: December 18, 2019, 01:32:32 PM »
Just to make sure I understand, are you saying you expect to have $450k in 5 years, then you begin the 20 year coast?  If so, then it would just take about a 4.6% real return (i.e. return after inflation) to get to $1.1M in today's dollars in 25 years (5 years to $450k, 20 years at 4.6% growth).  4.6% real growth is a reasonable low estimate for the S&P 500, but it would depend on your asset allocation and the performance of those investments.  Real returns for the S&P 500 have historically been somewhere around 6.5%-7.0%, depending on which source you believe.  That's why I think 4.6% is a reasonable low estimate.  CAPE valuations seem to suggest a lower real return than 6.5%, so I think 4.6% is a reasonable guess - and hopefully will be conservative. 
NOTE:  If you choose a "safer" investment then your likely returns will be lower and that could put your plan at risk.  With long time horizons - and I think 25 years qualifies - "safe" investments like bonds are less volatile but highly likely to underperform "riskier" investments like equities. 

I'm sure you're well aware of this, but increasing your assets just a little bit would significantly cut your total working life.  For instance, getting to $515k would cut approximately 3 years off the end of your working career, and I'm guessing you could save up $65k in well under 3 years at the rate you're going.  You'd also increase your SS benefits significantly as well because of the progressive nature of Social Security.  For me (and this may not apply to you) the idea of being forced to work in my late 50s and early 60s was much worse than the idea of working hard in my 30s for an extra couple of years.  But I can definitely appreciate the CoastFIRE approach to maximize your happiness when you're younger - it's not the path I took but it's a valid one as long as you understand the downsides.

Thanks for the feedback. I was thinking a conservative return since I'd have to work until my internal deadline; I really don't want to have to stay on past 60. Hopefully, returns will be higher and I can get out earlier.  The biggest reason I want to stop in about 5 years is because my son will age out of daycare/camps and I don't really want him home alone all summer, school breaks, etc. I would really like to cut back before summer of him turning 13. Otherwise, I could push hard until my kids are out of the house but then retire to being by myself which doesn't fulfill one of my reasons for fire.

I could always pick hours back up 5 or so years after cutting back and maybe get out in my mid 50s vs late
« Last Edit: December 18, 2019, 01:35:44 PM by ontheway2 »