We all have a vision of our perfect retirement. But whether it’s travelling around the country in a luxurious motor home, playing golf every day or spending more time with the grandkids, how do you accumulate enough to pay for the longest holiday of your life?
How much do I need to live my lifestyle?
Lifestyle is a personal choice. The big question is: How much do you need to save while you’re working to pay your preferred retirement lifestyle?
A good place to start is to calculate how much you need to meet basic living costs. You could use your current expenses as a guide, but keep in mind that these may be quite different during retirement.
What about the age pension?
The age pension is designed as a safety net for those who can’t self-fund their retirement. The payment for a single person represents less than 30% of average male weekly earnings. A person receiving the base maximum single-rate age pension will receive $1,026.50 each fortnight, or $26,689.00 annually, while a couple entitled to the full rate will receive a combined amount of $1,547.60 each fortnight, or $40,237.60 annually.
This may be enough to cover basic essential expenses, but most retirees want a better standard of living and are more active in retirement than previous generations. For these people, the age pension won’t be enough. Take this for example.
Living a modest lifestyle
The Association of Superannuation Funds of Australia (ASFA) Retirement Standard provides an insight into the cost of different lifestyle options. First prepared in 2004, it benchmarks on a quarterly basis the annual budget Australians need to fund either a comfortable or a modest standard of living in retirement.
The Standard defines a modest retirement lifestyle as “better than the age pension, but still only able to afford fairly basic activities”. The June 2022 ASFA figures suggest that a single person would need $30,063 a year to achieve this, while couples would need a combined income of $43,250.
Upgrading to a comfortable lifestyle
The Standard defines a comfortable retirement as one that enables “…an older, healthy retiree to be involved in a broad range of leisure and recreational activities and to have a good standard of living through the purchase of such things as: household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, and domestic and occasionally international holiday travel”.
The June 2022 ASFA figures suggest that a single person would need $47,383 a year to have a comfortable lifestyle, while couples would need a combined amount of $66,725.
Obviously, these figures are just a guide, and the actual amount needed to fund your preferred retirement lifestyle will depend on the choices you make about the things you want to do. Your financial adviser can help you more accurately determine the amount needed for your retirement based on your goals, needs and preferences.
How much is enough?
Looking at the figures above, it’s clearly apparent that if you want more than a basic lifestyle in retirement, you’ll need more than the age pension to live on. Your superannuation and non-superannuation savings will need to supplement the difference, and in some cases, fully fund your retirement.
The ASFA website also suggests that to achieve a comfortable retirement, a single person should have about $545,000 and a couple should have over $640,000.
These are generic figures, and your financial adviser can provide more detailed calculations for your specific situation.
What’s the best way to save?
Superannuation is the most tax-effective way to save for retirement. You can build your super through employer contributions (including salary sacrifice), your own contributions, spouse contributions and government co-contributions.
There are certain restrictions on superannuation contributions and withdrawals, so you may need to supplement your superannuation with other investments such as managed funds, term deposits or property.
In conclusion
Worrying about money can cause stress and anxiety, working with a Financial Adviser will provide you with much greater likelihood of achieving your financial gaols, rather than pushing on ahead without a plan.
We can work with you so you don’t need to guess or take high unnecessary risks, we can develop strategies that suit your individual circumstances, so you can have peace of mind knowing that you’re on track to live a wonderful life without having to worry if you’ll have enough.
Christine Swanson is qualified professional adviser so you can ensure all your decisions are well-informed and that your personal needs and goals are considered.
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Notes:
- Assumption for calculation: value is based on today’s dollars and retiring at age 65. It does not take into account the Age Pension.
- Age pension figures quoted include supplements.
