Coast retirement via super

If you hang out in the finance spaces online, you may have heard of FIRE (financial independence retire early). The aim is to reduce your expenses, save a shit ton for some time and live off the investment returns from all of your hard work.

This is not personal financial advice and you should seek out a professional if you’d like to learn more.

Ah yea, retiring on the beach. Is this the dream?

I personally don’t like the retire early notion. I imagine I’ll be doing some sort of work until I kark it because I don’t like to sit still. However the financial independence part is really appealing.

Coast FIRE

I watched a video about Coast FIRE recently, the premise being you don’t need to retire early but you can build up savings now such that you can coast financially in retirement.

Goal: 300k in super by the age of 40

I’m currently 31, turning 32 in June. I have 80K in my super fund (superannuation is Australia’s retirement savings scheme). Say I want to have 300K in my super by the age of 40. I would need to add $1400 per month over 8 years to achieve that goal.

Money Smart savings calculator

If I maximize the concessional contributions of $27,500 each year I’d contribute $2,290 a month which would easily exceed this target. This would be $1,945 a month after the 15% tax on concessional contributions into super.

Here’s Money smarts key for for what the colors mean

Why 300K by 40?

If I had 300K in super by the age of 40 and did nothing else (no more contributions and took work pretty easy), it could be $1.3 million by the time I’m 65 or 1.8 million by the time I’m 70.

300K to 1.3 million over 25 years (by the time I’m 65). Source: Stockspot investment calculator

This is assuming 8% growth and 2% inflation, hence the overall 6% growth projections.

300K to 1.8 million by the time I’m 70

1.3 million at 65

1.3 million could last 50 years if drawing down 60K a year in retirement (assuming 6% investment return and 2% indexation rate). That’s definitely a very comfortable retirement for me considering my current lifestyle expenses are around 52K a year.

Source: Noel Whittaker Retirement Drawdown Calculator

Coast FIRE Calculation

I don’t need to add that much extra to super over the next 8 years to coast financially in retirement. The coast calculator indicates I need to add $3500 a month to hit my coast target by 39.

Source: Coast Fire Calculator

To get to 60K annual income in retirement, this calculator indicates that I’d need $340K to coast to retirement. If I change that to 52K I’d need just under 300K.

Note: FIRE calculators often assume not eating into your capital in retirement hence why it recommends saving 3.5K a month, however I think above the age of 65 it’s fine to draw down more than the investment return if the money is likely to out live you.

So as long as I saved anywhere from 1.4K to 3.5K a month into super over 8 years, I should be pretty set? The 3.5K might be a stretch but maximizing concessional contributions for those sweet tax benefits is definitely the to way to go for me.

Summary

Coast FIRE is a lot more realistic than a full FIRE and might be more achievable for the average person out there who isn’t on a 6 figure salary. Is coast FIRE a reasonable financial goal for yourself?

How much income do you need in retirement? Read this blog post if you’d like to read a deep dive into more of this analyst.

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