When can you stop working?

FIRE stands for Financial Independence, Retire Early. In Australia, it means building enough investments outside super (and eventually inside super) to cover your living expenses without employment income. Australian FIRE planning must account for the tax-free threshold, Medicare levy, CGT discount, franking credits, and the gap between early retirement and superannuation preservation age.

A common starting point is 25 times your annual expenses, based on the 4% rule. For example, if you spend $60,000 per year, you would target around $1.5 million in invested assets. However, the right number depends on your age, super balance, whether you own your home, and your expected lifestyle costs.

The 4% rule suggests you can withdraw 4% of your portfolio in the first year of retirement, then adjust for inflation each year, with a high probability of not running out over 30 years. It was developed using US market data, so Australian retirees should stress-test with lower withdrawal rates (3-3.5%) to account for a smaller domestic market and different tax treatment.

Super is tax-advantaged but locked until preservation age (currently 60 for most Australians). Early retirees need a bridge portfolio of investments outside super to fund living costs until they can access their super balance. This two-bucket approach is central to Australian FIRE planning.

Coast FIRE is the point where your existing investments, left to grow without further contributions, will reach your retirement target by a traditional retirement age. Once you hit Coast FIRE, you only need to earn enough to cover current expenses and can stop saving aggressively, giving you more career flexibility.