One year of Coast FI as a Late Starter

Big Sur at sunset

I achieved my Coast FI milestone this time last year. As a late starter.

For those not familiar with the concept of Coast FI, it refers to a point where your investments can grow by compound interest WITHOUT you investing an extra cent, to the figure you need for Financial Independence at traditional retirement.

For the youngsters, traditional retirement can be another 30 years away and therefore they don’t need much to reach Coast FI. Ah … the beauty of compound interest and having time on your side.

Therefore it also means that for the youngsters, they can slow down – take a lower paying job or shift to part time hours. They only have to worry about earning enough to support current living expenses. They no longer have to sock away huge chunks of their income towards investing for eventual retirement.

It’s just a matter of sitting back now and coasting to traditional retirement.

Is it different for a late starter?

Well, for one, we don’t have time on our side. Sorry, but that is the hard truth.

Traditional retirement is only years away, not decades away.

So our Coast FI number has to be much larger.

And depending on how many years we have to traditional retirement, we may not have the luxury of working part time or taking a less well paying job.

But what is the same is how freeing it is to reach Coast FI.

I know for me, it felt like a weight off my shoulder.

There is evidence now that I am heading in the right direction, not just floundering around in the choppy sea.

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Recap on how I reached Coast FI as a late starter

I turned 50 last year. Therefore I have 10 years before I can access my superannuation (retirement account).

When I looked at my balance last year in mid April, I calculated that I would reach my FIRE number at age 60 IF it could double in value in 10 years.

To double in 10 years, the annual rate of return needs to be 7.2% every year for the next 10 years. This is referred to as the Rule of 72.

I understand that past performance is not a guarantee of future performance. But it is a guide.

My superannuation fund is invested mainly in equities. And I was confident that an annual rate of return of 7.2% was achievable as shares have performed better than this on average in the past decade.

So I declared that I was at Coast FI. Woohoo!

But just in case ...

I am a cautious (or anxious?) person. Have always been.

It’s hard to just trust the math, you know?

After all, it feels very much that I am at the mercy of the share market. What if the next 10 years is terrible? And the balance doesn’t have enough time to recover? Reminder here again that time is not on our side as late starters.

So I have contingency plans.

Because I am still working, my superannuation will benefit from a mandatory employer contribution of 10% of my wage.

To arrive at Coast FI, I salary sacrificed for two and a half years to make sure I contributed the maximum (including employer contributions) allowed in a year. At the time, it was $25k a year.

Salary sacrificing is contributing gross income ie an amount is deducted from my pay each week and deposited into my superannuation before it is taxed at my marginal rate of 32.5%. Instead, that amount is taxed at 15% in superannuation.

As part of my contingency plan, instead of stopping this altogether, I reduced it. By quite a it. But I am still salary sacrificing something every week.

In other words, I continue investing into my retirement account. Just in case.

Back view of deck chair and umbrella on a beach

What happened to retiring at 55?

Before the idea of Coast FI occurred to me, I had planned to retire fully at 55 in a 3 phase plan.

Now that I reached Coast FI, has anything changed?

Yes … my brain started to f*ck with me.

Let me explain.

I work in healthcare. Unless you were not born in the last two and a half years, you’d know that working in healthcare in a pandemic is stressful.

My job is no exception.

I oscillate between feeling that my job is at risk because we have no customers to being stressed out with the extra work. It comes in cycles or poorly thought out public health policies announced at press conferences.

So the idea of working less hours is sooooooooooooo SEDUCTIVE.

And this is what I have struggled with in my first year of achieving Coast FI.


To work less or not?

I am very conflicted.

It seems I have two choices.

One is to work full time until I retire fully at 55.

And the other is to work part time and delay full retirement till 60 or at the earliest, after 55.

Because I can’t access my superannuation until 60 and my original plan is to retire at 55, I have been investing heavily outside of superannuation in order to build a ‘bridge the gap’ fund.

This ‘bridge the gap’ fund is what I will live on for the 5 years between age 55 and 60.

And I am confident that I will be able to retire fully at 55 if I continue investing at this rate.

The sad truth is that I can’t invest the amount I want to if I reduce my working hours and as a result, earn less income.

And that means the ‘bridge the gap’ fund will not have enough to support me if I fully retire at 55.

I do so want to retire fully at 55 and just NOT. Work. Anymore. Full stop.

So I suppose the choice is clear – I will have to continue to work full time for the next 5 years.

But the stress …. is killing me.

Long service leave to the rescue

Luckily I have long service leave.

Thanks to working for the same employer for nigh on 30 years, this is my second round of long service leave.

At first, it was really precious and I was taking a day off every fortnight. But then no one including me took it seriously. So if it was going to be a busy week, I’d skip the day off. In the end, there was no pattern and it was too ad hoc for my brain.

After the horror of a very stressful January (when Omicron struck), I decided that from February I would take a day off EVERY WEEK. That is, I would only work 4 days a week and take Wednesdays off, no matter what. I told all my colleagues that my day off was not negotiable and that I needed it for my mental health.

I can report that I absolutely LOVE working 4 days week, every week.

I spend Wednesdays reading on the couch, writing a blog post, sometimes doing laundry so I don’t have to do it on the weekend, meeting friends for lunch, running errands, getting a haircut …

There is NO ONE at the shopping centre on a Wednesday. Who knew??

And thanks to long service leave, the day off is paid. So my income is still the same, working 4 days.

What happens when my long service ends?

All good things must come to an end, right?

I will run out of long service leave in mid June.

Do I go back to working 5 days a week? Or take the pay cut and work 4 days a week?

Initially I will work 5 days a week until my planned holidays in late July.

After I return from my holidays … who knows?

My brain is trying frantically to come up with a solution to work 4 days a week at the same pay.

That involves either negotiating to work longer hours on 4 days to make up for the day off. Or negotiating a pay rise. Both options have pros and cons.

Working longer hours means less free time at nights – to walk or garden or recuperate for the next day. But I will have a day off.

I know the pay rise will be an issue – that is a 20% pay rise if I work 4 days without extra hours per day. Even though we are busier and more stressed these days, our revenue hasn’t increased considerably. But if I don’t ask, I definitely won’t get it.

The other option is to earn the 20% with a side hustle such as monetising this blog. Thanks to ASIC, it is not as possible as before.

The elephant in the room

Of course the elephant in the room is that I can reduce my expenses further.

But can I?

Living costs have increased. My grocery bill can attest to this fact. I am thankful that I drive a work car and don’t have to pay for petrol.

I’m not sure I can reduce my expenses by that much to make it significant. At this stage, a 20% cut in expenses is A LOT.

Final thoughts

Reaching Coast FI is amazing, even as a late starter.

You can slow down. You do have the option of working less and coasting to financial independence at traditional retirement.

The question for me though, is … do I still want to fully retire at 55?

The answer is a resounding YES which means I need to maintain my current income. Because I need to invest a significant amount to build my ‘bridge the gap’ fund.

And this is the significant difference between younger folk and us late starters. They have the luxury of investing a little bit and let time and compound interest do the work. We just don’t have that luxury.

In the meantime, I will enjoy my Wednesdays off – only 8 left …

Oh and I nearly forgot to tell you – after one year, my superannuation has grown by more than 7.2% despite all the ups and downs of the last 12 months. So I am currently on track … one year down and only 9 years to go, haha!

What would you do in my situation? Stick it out working full time for 5 more years and retire fully at 55? OR shift to part time, working 4 days a week and retire later than 55?

10 Replies to “One year of Coast FI as a Late Starter”

  1. I would try every possible option to keep working part time and still retire at 55. If you get to a point where you’ve tried all the options but can’t make it work, I’d try to see if I could make it work by only delaying retirement by a year or something while only working part time. It doesn’t sound like it’s worth being miserable until you’re 55 just so you can retire.

    1. It’s all a trade off, isn’t it? I do think there’s no point in getting to 55 and fully retire but in a state where I’m physically and mentally exhausted. But yeah, I also don’t want to delay full retirement for any more than one year after 55.

  2. Could you do what I’m currently doing?
    Retire when you choose, but then after a long rest, pick up a few days’ casual work here and there? It’s a whole different way of working when you’re only there on a casual basis. Not nearly as stressful.

    1. I’ve been following your casual work progress with much interest, FDJ 🙂 I will definitely keep my registration going for a few years after retiring, just in case. And in order to do that I will need to work a few shifts to have some hours. But I can’t retire just yet – still need to build up that ‘bridge the gap’ fund.

  3. Great questions and as you and I are in similar financial positions, excl mortgage paid off I have been pondering this as well. In your position, I would ease up on work, reduced income or not. If you are that stressed you are doing harm to yourself. It may not be visible yet, but your heart is impacted by the level of stress you experience. The recent deaths of people in their 50s has shaken me to the point where I see stress is not worth the higher income. As to lower wage, you will adjust. It may be a challenge, but I have faith that you could still make a fantastic life with a reduced wage.
    Please, please, please consider easing up. You may find that you reach your target with only 1 year of working beyond 55 with the reduced hours.

    1. Stress is 100% detrimental to our health! I have experienced it myself 🙂 Yeah, the more I think about it, the more I’m leaning towards the work less part but it may change tomorrow, haha. Maybe I have to learn to deal with stress better in my old age. I was certainly more capable of dealing with stress in my younger years. If it only delays full retirement by one year, I can live with that.

  4. I’m doing something different from your two options! I too am now coast FI. I started filling up my ‘bridge the gap’ fund 14 months ago, planning to work about 6-7 more years and then quit.

    Buttttt I’m tired NOW so instead I am going to take a year off. This will let me find out what it’s like to not work (what will I do with myself?? unclear, though I’m making a lot of travel plans), how much I really need to live on/how big my bridge fund needs to be, and MAY mean I get some insight and inspiration for the last part of my working years. Otherwise I’ll go back to a job similar to my current one (I have a recognizable job title, a good network, am very good at my job, and it’s a pretty robust employment sector right now).

    The down sides: I’ve been saving money forever and it feels so strange to plan to spend quite a lot of it in one go. And I’m fairly sure I will not be excited about going back to work (though perhaps structure will feel good), and I fully understand that this will likely mean I have to work a year later than my initial plans.

    But all in all, I’m tired now, it became very clear to me in the last year that life is not guaranteed, and I really want to have some adventure.

    Here’s hoping Future Me isn’t wildly furious about these choices!

    1. Ohhh, you are so brave! I so relate to your being tired NOW and wanting a decent break. A year is a good time to work it all out and you can always go back to work before the year is over if you want to.

      I’m with you that if I don’t do something about my stress, there may not be much of ‘me’ left in 5 years when I fully retire. There are no guarantees in life.

      Thank you very much for sharing your plans and perspective – I have much thinking to do (and work on some numbers which I’d been loathed to do)

  5. Hi again Latestarterfire,

    Coast FI is such a wonderful accomplishment, but at the same time, it sounds like full FI is what you really want/need right NOW. It’s great that you get long service leave until June, and it’s also great that you’re thinking ahead for what to do when it’s over.

    May I suggest something that could be life-changing? (I know you probably won’t like it, but I’m suggesting it anyway because you’ve already done all the things and still want to reach FI earlier!)

    In 2018, we pulled some of the equity out of our home and invested it. Doing so shaved at least four years off of our FIRE plan.

    I see it this way: the equity is just sitting in your house, being rather unproductive. But you can pull it out and make it work harder by investing it in the stock market, thus helping your reach FI sooner!

    Here in Canada, there’s another benefit—we can deduct the interest on the loan since it’s being used for investing. This lowers our taxable income, which means we pay less in taxes. (I’m not sure if it’s the same in Australia.)

    This strategy can be risky and isn’t for everyone. But if you can educate yourself and understand how it works (and possibly seek out professional help to implement it), you may find that it’s not as scary as it seems!

    I know you gained a lot of security and peace from paying off your home, so feel free to disregard my suggestion if I’m totally off-base! Just thought I’d throw it out there in case you wanted another tool to reach FI earlier. 🙂

    1. Thanks for your suggestion, Chrissy 🙂

      I think what you’re suggesting is called debt recycling here – and yes, the interest on the loan would be tax deductible here too.

      Because of my age, banks are not keen to lend money for investment properties – that was back in 2018 so I’m not sure if that has changed or whether it’d be different if I were to use it to invest in shares.

      Knowing myself though, I want to be debt free when I retire. I have been largely unconcerned at the moment with all the talk of rising interest rates because I don’t have a mortgage. But if I did? I’d probably not sleep well at night 🙂

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