How much do we need to retire?
The question of how much a person needs to have saved before confidently launching into their retirement years very much requires an individual answer. Each one of us lucky enough to reach the brink of those golden years will feel a lot better doing so with some assurance that we’ve squirrelled enough away to be comfortable in retirement.
The answer to the above question is made all the more complicated by several unknown factors, as no-one knows, for example, how long they will live or what medical necessities could surface to strain the coffers.
Some guidance is available however from Super Guru, a website run by the non-profit Association of Superannuation Funds of Australia (ASFA). Super Guru releases a “retirement standard” every quarter. This is a benchmark for the annual budget needed by Australian individuals and couples to fund either a “comfortable” or “modest” standard of living in their post-work years.
The updated quarterly figures reflect inflation and provide an objective outline of the budgets that singles and couples would need to spend to support their chosen lifestyle.
Super Guru’s release of figures up to 30 June 2018 shows that the super accumulation balances needed for a “comfortable” retirement are $545,000 for singles and $640,000 for couples. In annual pension payout terms, this equals $42,953 and $60,604 respectively. Details of what these amounts mean for spending capacity are shown in the table on the following page.
By way of comparison, note that the government Age Pension base rate (before payment of supplements) is $21,222 for singles and $31,995 for a couple. “The Age Pension is designed to provide a ‘safety net’ for those who do not have enough superannuation or other financial resources to provide an adequate retirement income. So the Age Pension works in conjunction with superannuation,” Super Guru says. “Most people – women in particular – will continue to be eligible for a full or part Age Pension, supplemented by whatever superannuation benefits they receive.”
ASFA notes that as people age, their spending requirements also change. It estimates the net impact of the various factors at play mean that by age 85 annual budgets would reduce by around $1,000 a year for “modest” lifestyles, and $5,000 a year for “comfortable” lifestyles.
As far as measuring what these different lifestyles entails, Super Guru has produced the following comparison table (and includes a retiree taking the Age Pension only)
ASFA’s estimate for retirement savings
|Comfortable lifestyle||Modest lifestyle||Age pension|
|Single||$42,953 a year||$27,425 a year||$21,222 a year|
|Couple||$60,604 a year||$39,442 a year||$31,995 a year|
|Maintenance||Replace kitchen and bathroom over 20 years||No budget for home|
improvements. Can do repairs
but can’t replace kitchen or
|No budget to fix home
problems like a leaky roof
|Appliances||Better quality and larger|
number of household items
and appliances and higher
|Limited number of household|
items and appliances and
|Less frequent hair cuts or
getting a friend to cut your
|Air Conditioning||Can run air conditioning||Need to watch utility costs||Less heating in winter|
|Eat Out||Restaurant dining, good range & quality of food||Take out and occasional cheap restaurants||Only club special meals or inexpensive takeaway|
|Internet||Fast internet connection, big|
data allowance and large talk
and text allowance
|Limited talk and text, modest|
internet data allowance
|Very basic phone and internet
|Clothing||Good clothes||Reasonable clothes||Basic clothes|
|Travel||Domestic and occasional overseas holidays||One holiday in Australia or a few short breaks||Even shorter breaks or day trips in your own city|
|Health||Top level private health insurance||Basic private health insurance, limited gap payments||No private health insurance|
|Vehicle||Owning a reasonable car||Owning a cheaper more basic|
|No car or if you have a car
it will be a struggle to afford
|Leisure||Take part in a range of regular leisure activities||One leisure activity infrequently, some trips to the cinema or|
|Only taking part in no cost or
very low cost leisure activities.
Rare trips to the cinema
For more information or to speak to one of our Financial Advisers – please contact TNR Wealth Management on 02 6621 8544.
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances