How much do you need to retire?
How much do you need to retire?
Working out how much is enough for retirement depends on a plethora of factors, such as your lifestyle, plans for the future and the number of years you’ll spend retired.
Additionally, estimating how much you’ll have when you plan to retire depends on factors such as your current salary, super balance, mortgage and assets. With so many factors, it’s easy to see why you might need support to get an idea of your retirement savings needs
How much is enough?
The Association of Superannuation Funds of Australia (ASFA) estimates that Australians age around 65 who own their own home are in relatively good health, will need the following amount of money each week & each year in retirement;
A modest lifestyle is considered better than living on the age pension. While a comfortable lifestyle means someone can afford a good standard of living, be involved in a broad range of activities, travel domestically & occasionally internationally.
For Australians on above average incomes, another rule of thumb to estimate how much money you will need in retirement is to assume you will require 67% of your pre-retirement income to maintain the same standard of living
What are your retirement lifestyle expectations?
Ultimately, how much money you will need for your own retirement is very personal, and will depend on your own situation, wants, needs and lifestyle expectations. It may help to factor in your day to day spending habits, your activities, hobbies and whether you will be entering retirement debt free.
How long will you work for?
The age at which you retire can have a significant impact on how much money you have & how much money you need in retirement. It can depend on factors such as your health, debts, super balance, age you can access your super, whether you have dependants, and your partner’s retirement plans.
How long will you be retired?
Keep in mind that if you’re planning to retire at around age 65, it’s likely you’ll live for another 20 years or so. Men aged 65 can expect to live to 84 years, while women can expect to live to 87 years.
How much money will you have in retirement?
The money you use to fund your life in retirement will likely come from a range of different sources including the following;
Superannuation - Knowing your super balance is a crucial part of planning for retirement, as it’s likely to form a substantial part of your retirement savings.
Age Pension - Depending on your circumstances & assets, you could be eligible for a full or part age pension.
Investments, savings & inheritance - You may be planning to downsize your house, sell shares or an investment property, or use money you have saved in a savings account/term deposit to contribute to your retirement. Or perhaps an inheritance or the proceeds from your family’s estate may help you out in your later years.
What do you do if you won’t have enough to retire?
If you are facing a shortfall in retirement, there are several things you can do to get your retirement on track. You could consider boosting your super through additional contributions, delaying your retirement, adjusting your retirement lifestyle expectations or selling assets.
Simply by having an idea of your current and projected retirement savings, will provide you with an opportunity to improve your situation. The earlier you start, the easier it may be for you to reach your retirement goals.