Everyone has a different idea of what their retirement might look like.
How much money you will need really depends on many things, but the first thing you must decide is what a retirement looks like for you.
You might envisage a retirement, where you dine out once a week and take that overseas trip you’ve always dreamed of or take off on a short break with no money worries. It is therefore vital to start thinking about your retirement now, not waiting until you turn 60.
According to the ABS, one in five Australians intend to retire from the workforce at 70 years old, although the average intended age of retirement is 63.4 years. The average Australian’s life expectancy rates are 80.4 years for men and 85.1 years for woman, which means if you retire at 65 you will need a retirement income for at least 20 years or more.
Cost of living in retirement
As stated by Association of Superannuation Funds of Australia, to live a ‘comfortable’ retirement, a single person needs $545,000 and a couple $640,000 in retirement savings. We have detailed the types of retirement living, and the estimates of cost required.
Comfortable single lifestyle is $44,183 a year and $849 a week.
Comfortable couple lifestyle is $62,435 a year and $1,200 a week.
A Comfortable retirement, is a decent retirement lifestyle that allows freedom to make improvements on your home, go on domestic and occasional overseas holidays. Participate in a range of leisure activities and purchase household goods, top level private health insurance, a reasonable car and range of electronic equipment.
Modest single lifestyle is $28,220 a year and $542 a week.
Modest couple lifestyle is $40,719 a year and $783 a week.
A Modest retirement, is a basic retirement lifestyle, no budget for house improvements, limited travel with only one holiday in Australia or a few short breaks. Also, with only basic private health, owning a basic older car and one leisure activity infrequently and you’ll need to watch utility costs.
Two-Thirds Rule of Thumb
Another common way to plan for retirement, is using the two-thirds (or 67%) rule of thumb. If you own your own home, you will need to save enough to provide you with at least two-thirds of your current annual income to continue enjoying your current lifestyle.
Additional large costs in retirement
Everyone’s circumstances are different; it is therefore a good idea to plan out and estimate any additional large costs you will need to account for.
Paying off your mortgage
Retirement Village move
Building up your retirement savings
There are many ways to set yourself up for retirement. To help achieve your retirement goals, we have compiled some tips and options to consider:
Start today – prepare a retirement budget and set short term targets. Well before retirement, it is crucial to prepare a realistic budget based on what your actual income and living expenses will be once you’ve left the workplace.
Set medium & long-term goals – knowing how much you need will not only make it easier to save and track, but it will also make it more rewarding.
Reduce spending – by examining your budget, you might be able to identify and save on unnecessary costs e.g. identify available lower rates on your car insurance or loans.
Extra debt payments – heading into retirement debt free can provide extra peace of mind. Consider paying off non tax deductible debt with the highest interest rates first.
Boosting your super – superannuation is a very tax effective retirement savings avenue. By adding more to your super you amplify this benefit.
Consolidating your super – combining your super into one account may result in fewer fees allowing you to build in a more cost efficient way.
Review your chosen super fund – through your working life it is common to end up with a super fund chosen by your employer. It is recommended you review the appropriateness of your super fund, its fees, investment options, and insurance offering on a regular basis.
Establish a regular savings plan – by establishing a reoccurring transfer into a savings or investment account, this increases the efficiency of earnings on your surplus income resulting in a large balance at time of access.
There are a number of pros, cons, and consideration in undertaking any of the above options. As such, it is strongly recommended you receive expert advice from a qualified financial adviser before undertaking.
Planning for retirement is a complex task and everyone’s situation is different.
Get in touch with our financial advisors to help you plan.
The information contained on this website is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.