According to the person I stole this from, it does adjust for inflation. I'm assuming it's the 7% that does it.
I suck at algebra, but just using a simple compounding calculator, it's now pretty clear that it doesn't include inflation.
Take the inputs of
Age: 25
Target: $1,000,000
Current: $100,000
The output will be approximately the age of 59.
$1,000,000 34 years from now would probably be worth a third of what it means today.
If you "coasted" till 59, you would not be able to afford your inflation adjusted expenses.
I still think the equation is cool because it does let you know that, without any extra investment, you can hit a certain target value after so many years - but I don't think it's valuable (in its current form) from a "coast-to-retirement" perspective.