![Capricorn beach boardwalk](https://cdn.futureassist.com.au/app/uploads/2024/05/09121540/1140x641_0004_CapricornYanchep1.jpg)
Retirement – that exciting time when you finally get to relax and enjoy life. But here’s the thing: Will you have enough money to retire comfortably?
Figuring out how much money you’ll need for retirement can be tricky, but it’s super important for a worry-free future.
Calculating Your Retirement Costs
Your retirement spending will depend on your lifestyle, if you are married or single, whether you own your home and where you want to live.
Maybe you want to holiday overseas every year while you are still physically active or buy a van and tour Australia. Do you want to eat out regularly, play golf, and lead an active social life; or are you a homebody who enjoys gardening, craftwork or pottering in the shed?
Also think about the cost of creature comforts, such as the ability to upgrade cars, computers and mobiles, buy nice clothes, enjoy good wine and pay for private health insurance.
It’s often suggested you will need around 70 per cent of your pre-retirement income to continue living in the manner to which you have become accustomed. That’s because it’s generally cheaper to live in retirement, with little or no tax to pay and (hopefully) no mortgage or rent.
Planning Your Retirement Budget
Figuring out your retirement budget is the first step. The Association of Superannuation Funds of Australia (ASFA) Retirement Standard may be helpful. It provides sample budgets for different households and living standards.
ASFA suggests singles aged 65 would need around $51,630 a year to live comfortably, while couples would need around $72,663. Of course, comfort is different for everyone so you may wish to aim higher.
To put these figures in perspective, the full age pension is currently around $29,082* a year for singles and $43,753* for couples. As you can see, this doesn’t stretch to ASFA’s modest budget, let alone a comfortable lifestyle, especially for retirees who are paying rent or still paying off a mortgage.
Then there is the ‘known unknown’ of how long you will live. Today’s 65-year-olds can expect to live to an average age of around 85 years for men and 87 for women. The challenge is to ensure your money lasts the distance
Can I afford to retire?
Once you have a rough idea what your ideal retirement will cost, you can work out if you have enough super and other savings to fund it.
Using the ASFA benchmark for a comfortable lifestyle, couples would need a lump sum of $690,000 and singles would need $595,000.
Add up your savings and investments inside and outside super. Subtract your debts, including outstanding loans and credit card bills, to arrive at your current net savings. Then work out how much you are likely to have by the time you hope to retire if you continue your current savings strategy.
There are many online calculators to help you estimate your retirement balance, such as the moneysmart.gov.au/how-super-works/superannuation-calculator
Closing the gap
If there’s a gap between your retirement dream and your financial reality, you still have choices.
If you have the means, you could make additional super contributions up to your concessional cap of $25,000 a year. You may also be able to make after-tax contributions of up to $100,000 a year or, subject to eligibility, $300,000 in any three-year period.
You might also consider delaying retirement which has the double advantage of allowing you to accumulate more savings and reduce the number of years you need to draw on them.
If securing your retirement future is on your mind, don’t wait. Reach out to us today. Our expert team is here to offer personalised solutions that bring you peace of mind and confidence in your financial journey.
*These figures are based on the recent increases in March 2024.
The information contained in this webpage is general in nature and has been provided in good faith, without taking into account your personal circumstances. While all reasonable care has been taken to ensure that the information is accurate and opinions fair and reasonable, no warranties in this regard are provided.Â