10 Apr 2017
What does a comfortable retirement look like?
How much money you'll need will depend on a variety of things.
Have you got a plan in mind for when you retire? Is it to travel overseas, hit more balls on the golf course or spend time with family and friends? Whatever your goals, you’ll need to have a plan for how you’re going to get there financially.
Comfortable versus a modest retirement
Everyone’s idea of how much money they’ll need in retirement is different.
As a guide, the Association of Superannuation Funds of Australia (ASFA) suggests couples around age 65 will need $59,000 a year and singles will need about $43,000 in today’s dollars to live ‘comfortably’.i Now this is assuming you’re in relatively good health and that you own your own home.
On this budget, you should be able to afford things like a new car, private health insurance, to dine at quality restaurants and have local, and some overseas, holidays.
By comparison, a ‘modest’ yearly budget of around $34,000 for couples or close to $24,000 for singles would provide a more basic lifestyle.i This means you’d probably have to keep your older appliances and car for a bit longer, eat out less frequently and generally stay locally for holidays.
So how much is enough?
To work out how much money you’ll need in retirement, start by asking yourself these questions:
- Do I have enough money saved in my super?
- Am I going to have to rely on the Age Pension? If you plan to retire before you get the Age Pension, consider what savings you’ll need to support you for those extra years in retirement
- Will I have to work longer or do something else to generate an income?
How you could retire with more
Once you’ve considered these questions, think about ways to give your financial situation a boost while you’re still working.
- Got more than one super account? Think about consolidating your super into one account to save on fees and reduce paperwork
- Consider making extra before-tax contributions to your super through salary sacrificing.
- If you’re eligible, think about making a personal tax-deductible contribution to your super, as these will typically only be taxed at 15%ii and you can claim these as a tax deduction.iii You’ll need to fill in a ‘notice of intent’ form and send it to your super fund before you submit your tax return
- If you decide to sell or downsize assets, such as your home, make sure you check what the tax implications are and whether it will affect your eligibility for the Age Pension. Find out about what changes are happening to the Age Pension assets test from 2017 by talking to your advisor.
It's also important to note that the Federal Government proposed a number of changes to superannuation in the 2016 Federal Budget, which may progress to legislation.
If you have questions regarding your retirement planning, superannuation or the changes to legislation, please contact us here and we will put you in touch with a Financial Advisor.