How much do I really need to retire?
One of the most common questions I get from clients is “how much money do I need to retire?”
The answer? Well, It depends on your situation.
The Association of Superannuation Funds of Australia release a Retirement Standards Report each year. Their most recent report said that a couple should ideally have $640,000 in super for a comfortable retirement and a single person should have $545,000.
Their definition of ‘comfortable’ could be different to yours (and doesn’t necessarily take into consideration things like holidays and any ongoing medical bills) but these amounts equate to a couple living on about $1,150 a week (or $60,000 a year) and a single person on $1,000.
This amount will be made up of the money in your own superannuation accounts, as well as potentially accessing the age pension, either simultaneously (to help supplement your super), or in the future. If, however, your superannuation savings were on the lower end, the age pension equates to about $600 a week (or $32,000 a year) for couples.
When I work with clients on planning for retirement and deciding whether they’ll have enough super and how much they really need, we look at three different things:
1. Creating a budget
Looking at how much you’re spending now will give you a good idea of what you’re going to need in your retirement years. Are you living on $500 a week? $1000? Is that what you want for your retirement or do we need to change that to afford you a different lifestyle, or provide for things like travel?
2. Knowing what you’ve got
Finding out exactly how much you’ve got in super is another good place to start, and once we know that, there are some really great calculators we can use to tell you what that equates to per week. If what you’ve got equates to $700 a week and that’s not quite enough, there’s a few things we can do to help bridge that gap.
3. Evaluating your entitlement eligibility
There might be ways to reduce some of your current or future expenses through different Government entitlements, so it’s worth checking if any of the entitlements on offer apply to you. You may for example be eligible for different healthcare subsidies, or there may be ways we can increase the amount going into your super through co-contributions, spouse contributions or supplementing your super with the age pension.
So the question of how much you need to retire really is different for everyone. When we meet with our clients about planning for their retirement, we use some really cool software to see exactly how much money they’re going to have and when it’s expected to run out, regardless of what types of investments they have in their super portfolios, and what the markets are doing.
We review this annually and it’s a great way to not only help you plan for the future, but to address your current needs, like whether you can afford to do those renovations or give some money to your kids or whether you would be better off investing more into your super.
If you’re interested in having a conversation about how much you might need to retire, get in touch and we’ll be happy to sit down with you. You can also keep an eye on our Facebook and YouTube for even more information and advice.