Can You Really Coast to Retirement?

Can You Really Coast to Retirement?

Coast FIRE (Financial Independence, Retire Early) promises a tempting middle path between grinding until 65 and retiring at 40. Save hard early, let compounding do the heavy lifting, then ease into part-time work or a less demanding career without adding another dollar to your retirement savings. In Australia, the idea works a little differently because superannuation sits at the centre of the plan. Here is how the maths works, where super fits in, and the risks that the online calculators tend to gloss over.

What is Coast FIRE?

Coast FIRE is a simple framework built around one estimated figure, your ‘Coast number’. This is the amount you need invested today so that compound growth alone, with no further contributions, could grow into your target retirement nest egg by your chosen retirement age.

Once you reach that number, you can ‘coast’. You might move to part-time work or a less demanding career, as long as your income covers your living costs while your investments keep growing in the background. The rise of low-cost index funds and exchange traded funds (ETFs) has made this approach easier to follow.

The three ingredients

The calculation relies on three inputs.

  • Your FIRE number. Estimate your annual spending in retirement and multiply it by 25. This reflects the ‘4 per cent rule’, a guideline drawn from United States research. If you expect to need $100,000 a year, your target is $2.5 million.
  • Your time horizon. This is the number of years between your current age and your target retirement age.
  • Your expected return. Choose an annual rate of return and apply it consistently. If your FIRE number is in today’s dollars, use a real return, which is the return after inflation.

The Coast number is your FIRE number divided by (1 + the real return) raised to the power of the number of years. Online calculators do this step for you.

Consider a 35-year-old who wants to retire at 60 on $100,000 a year in today’s money. Over 25 years at a real return of 5 per cent, their $2.5 million target gives a Coast number of roughly $740,000. Treat the result as a guide only, because small changes in the assumptions move the answer a long way.

Choosing a realistic return

Returns are where many Coast FIRE calculations go wrong, because nominal and real figures get mixed up. Chant West data shows the median growth super fund has returned about 8 per cent a year since compulsory super began in 1992, which works out to roughly 5 per cent a year after inflation. The median growth fund returned 9.5 per cent in the 2025-26 financial year, but strong years like that should not be treated as the norm.

A real return of around 5 per cent is therefore a reasonable central assumption, and many planners prefer something lower for a margin of safety. Whatever you choose, be clear about whether it is before or after inflation.

Where superannuation fits

For most Australians, super is the main engine of retirement savings rather than an add-on. The Superannuation Guarantee (SG) has been 12 per cent since 1 July 2025. Employers pay it on top of ordinary time earnings, so it keeps feeding your account while you work, including part-time. Contractors and the self-employed do not receive it automatically, which matters if your coasting plan involves going out on your own.

There is also a catch. According to the Australian Taxation Office (ATO), you generally cannot access your super until you reach your preservation age, which is 60 for anyone born after 30 June 1964, and you must also meet a condition of release such as retiring (Accessing your super to retire – ATO). Retiring before 60 therefore requires savings outside super to bridge the gap.

In practice, that means two separate calculations. One covers whether your super is on track to support you from 60. The other covers whether your outside investments can fund the years before then. The 25x rule may also overstate what you need, as it ignores the Age Pension, which becomes available from 67 subject to the means tests, and the tax-free treatment of super withdrawals after 60.

Risks and realities

The maths is neat, but it is not a magic potion.

  • Lifestyle creep. The formula assumes your spending stays fixed. Children, buying a home or health problems can all push costs up.
  • Market fluctuations. The strategy leans on long-run averages. A prolonged downturn, particularly one that strikes close to retirement, can derail the plan.
  • Opportunity cost. Easing off during your peak earning years means forgoing pay rises and the larger SG contributions that come with them. Even part-time work attracts SG, but at lower income the amounts are smaller.
  • Income still matters. Coasting only works if your new income covers your living costs. Otherwise you will be drawing on investments earlier than planned.

The bottom line

Coast FIRE is a useful tool for encouraging early saving and showing how powerfully compounding works. But it is not a set-and-forget strategy. Your assumptions need regular review, and your plan should reflect your own spending, income and super balance. Real financial independence takes more than frugality. It calls for money literacy, an understanding of how wealth builds, and honest awareness of your own financial behaviour. As always, feel free to reach out to us if you have any questions.