Retirement Planning
Retirement feels distant when you are 25, but that distance is your greatest financial advantage. Every year you delay costs you more than the year before. Use these tools to find your financial independence number, build toward it, and understand when compound growth alone can carry you to the finish line.
Your Financial Independence Number
Your financial independence number is the portfolio size that, when you apply a sustainable withdrawal rate, fully covers your living expenses — indefinitely. The classic 4% rule (from the Trinity Study) says you can withdraw 4% of your portfolio per year without running out of money over a 30+ year horizon. Flip the math: your annual expenses divided by your chosen withdrawal rate gives you your financial independence number. Use the dropdown below to see how the target shifts based on how conservative or aggressive you want to be. The investment planning tools can help you model how consistent contributions build toward this number.
CoastFI Calculator
CoastFI is the amount of money you need saved right now so that, with no additional contributions, it will grow to your financial independence number by the time you want to retire. Once you reach your CoastFI number, every dollar you earn only needs to cover current living expenses. Retirement contributions become optional, not required. For most young investors, CoastFI is the first major retirement milestone worth targeting specifically. Building the right portfolio to reach it starts in the investing section, and our podcast episodes cover real-world CoastFI stories.
Key Concepts: What You Actually Need to Know
Before the calculators mean anything, it helps to understand what's happening underneath them. These three concepts explain why starting early with retirement savings is one of the highest-leverage financial decisions a young adult can make.
The core difference between traditional and Roth retirement accounts comes down to when you pay taxes. With a traditional 401(k) or IRA, contributions come out of your paycheck before taxes — you get a break now, but pay taxes on withdrawals in retirement. With a Roth account, you contribute after-tax dollars, so your money grows and comes out completely tax-free.
For most young adults in their 20s and early 30s, Roth is usually the better choice. You're likely in a lower tax bracket now than you will be at your peak earning years, so paying taxes now — while the rate is low — and letting the money grow tax-free is a strong long-term trade. Both account types have annual contribution limits set by the IRS each year.
If your employer offers a 401(k) match, contributing at least enough to capture the full match is almost always the right first move. A common match structure is 50% of your contribution up to 6% of your salary — which works out to an immediate 50% return on that portion of your contribution before any market growth.
Leaving that match on the table is the equivalent of turning down part of your compensation. Once you're capturing the full match, the general order of priority is to fund a Roth IRA (up to the annual limit), then return to your 401(k) for any additional contributions.
Compound growth means your money earns returns — and then those returns earn returns. Over long time horizons, this creates a curve that accelerates sharply in the later years. A 25-year-old who invests $5,000 and never contributes another dollar will end up with significantly more at 65 than a 35-year-old who invests the same amount, because the earlier dollar has 10 extra years of compounding.
The CoastFI calculator on this page shows the real-world version of this: at 25, your CoastFI number is much lower than at 35, because your money has more runway to grow without any additional help. Every year you delay retirement saving costs you compounded growth — not just one year's worth of returns, but all the returns those returns would have generated.
Frequently Asked Questions
How much do I need to retire? +
The most common starting point is the 4% rule: take your expected annual expenses in retirement, divide by 0.04, and that's your target. Spend $50,000 a year? You're aiming for $1.25 million. The rule comes from the Trinity Study and assumes a 30+ year retirement without running out of money. If you're planning to retire early, dial back to 3.5% — the longer time horizon requires more cushion. The calculator on this page lets you model it with your actual numbers.
What is a Roth IRA and how does it differ from a 401(k)? +
A Roth IRA is an account you open yourself — you fund it with after-tax money, and it grows and comes out in retirement completely tax-free. A 401(k) is through your employer, typically pre-tax, and often comes with a matching contribution. The recommended order for most people: 401(k) up to the full match first, then Roth IRA up to the annual limit, then back to the 401(k) if you have more to invest.
What is CoastFI and why does it matter? +
CoastFI is the savings threshold where you can stop contributing entirely and compound growth will still get you to your retirement number by your target date. You still need to earn enough to live on, but the retirement problem is solved. For people in their 20s, this number is often smaller than you'd expect — time does most of the work. It's also the milestone that makes the most psychological sense to target first, because it's actually reachable.
Should I use a Traditional or Roth 401(k)? +
It comes down to one question: will your tax rate be higher now or in retirement? Early in your career, you're probably in a lower bracket than you'll ever be again — which makes Roth the better bet. Pay taxes at today's lower rate, let it grow for decades, and pull it out tax-free. If you're in a high bracket right now and expect to earn less in retirement, Traditional flips the math in your favor.