How much do I need in retirement?

How much you need to save for a comfortable retirement is a question many of us ask.

While we all hope for a simple answer, how much money you need in retirement differs for everyone. Additionally, a comfortable retirement is based on a whole range of factors including:

  • When you retire
  • How long you’ll spend in retirement
  • Whether you’ll sell assets to fund your lifestyle
  • How your assets are invested.

There are a number of guides that are useful to consider when working out how much you need to save for your retirement.

A modest or comfortable retirement

The ASFA Retirement Standard is published each quarter by the Association of Superannuation Funds of Australia (ASFA). It provides approximate figures for the level of income required for a modest or comfortable lifestyle, assuming you own your own home.

The current ASFA comfortable lifestyle standard is $45,962 per annum for a single person and $64,771 per annum for a couple, while the modest lifestyle standard is $29,139 for a single and $41,929 for a couple respectively.

A modest retirement lifestyle assumes you are able to afford basic activities. A comfortable retirement lifestyle enables an older, healthy retiree to be involved in a broader range of leisure and recreational activities and to have a good standard of living.

You should be able to afford to buy household goods, private health insurance, a reasonable car, good clothes, electronic equipment and to travel overseas and in Australia.

Determining what you need as a lump sum

It’s also useful to understand how much money you need to live a modest or comfortable retirement as a lump sum.

ASFA estimates that the lump sum needed at retirement to support a comfortable lifestyle is $640,000 for a couple and $545,000 for a single person. This assumes a partial Age Pension.

A different approach is to look at your pre-retirement income and consider how much of it you will need in retirement.

Assume, for example, you will need 65 per cent of your pre-retirement income, so if you earn $50,000 now, you might need $32,500 in retirement.

Another method to calculate a lump sum

Another method is to take your current annual expenses and multiply this amount by the number of years that represent the difference between the age you retire and average life expectancy to calculate the lump sum you may require in retirement.

In Australia, average life expectancy is 83.5 years. If you take the $32,500 figure and assume you retire at age 65, this would equate to a lump sum target of $601,250.

This is a guide only. Keep in mind the investment returns you generate and your actual expenses in retirement will impact the amount you need to fund your retirement.

No matter how much you assume you need, the more time you have to plan, the greater your chances of achieving your retirement income goal.

There are many steps you can take to help you achieve your retirement savings goal. First, understand your current financial position including your income and expenses, what you own and what you owe.

You may consider strengthening your financial position by repaying debt, building up your savings and investments or making additional contributions to super.

Start considering how best to use your financial resources to support your income needs in retirement. Make sure you monitor your plan on an ongoing basis.

The idea is to make the most of the retirement planning opportunities available to you. And remember you don’t have to go it alone.

Seeking financial advice can help you achieve the retirement you hope to achieve.

 

Source: BT

Discover the benefits of a privately owned Licensee.

PAUL BRONSON

Bronson Financial Services

“At a time of industry upheaval, the support of Capstone has been a godsend. Everything they promised they delivered.If you are looking for a new licensee you cannot beat the Capstone service offering."

JASON DUDENAS

Canyon Financial Planning

“Capstone Financial Planning should be at the top of your list for a Licensee. Grant and his amazing team give a down to earth and personalised approach to supporting practices.”

HELEN STEVENSON

Strategic Retirement Solutions

“I recommend Capstone to any adviser seeking to 'go out on their own'. They are a fabulous licensee!”

BOB CHEN

Everalls Wealth Management

“With Capstone I can operate my business free from conflict. They have no in-house products, a flexible APL, and an extensive list of SMA solutions. I recommend Capstone highly.”

JEANETTE SCHRAM

Nett Assets

“I can highly recommend Capstone for planners seeking an independent licensee that’s not in your face but provide quality support services. Their service and support is second to none and has allowed us to concentrate on providing our clients with a premium level of service.”

BEN DREW

Paradigm Principle

“Having been with Capstone for a number of years, one thing that really stands out is their willingness to help and can do attitude. These are qualities we really appreciate.”

JOEL BONES

IEC Advisory

“The team at Capstone are all genuinely really good people. They are remarkable with their service culture. They really do care what you think, and they are genuine about our joint success into the longer term.”

FIND A CAPSTONE ADVISER