Clearly, this number is not going to be the same for everyone. Some people want to retire later or earlier, some have adult dependent children to care for, and some have ambitious plans for travel or hobbies. Whatever your situation and plans, settle on a savings target, and start working toward that goal.
Starting Place
- Basic Lifestyle ($22,365 for a single person, $33,717 for a couple). This is the amount you can expect from the Age Pension. It gives you a basic income and access to discounts for energy expenses and health services. Most Australians don’t live on this level of income by choice; it can be difficult.
- Modest Lifestyle ($23,662 for a single person, $34,051 for a couple). The modest lifestyle amounts described by the ASFA study are only marginally higher than the Basic Lifestyle. You would only be able to afford very low-cost activities.
- Comfortable Lifestyle ($42,861 for a single person, $58,784 for a couple). With savings equalling the recommended target for the comfortable lifestyle, you can afford higher level private health insurance, regular travel, and higher quality household goods.
Now, these prices may be ok for a baseline, but, this really is the minimum you would require. We suggest that you should probably be aiming higher (particularly if you live in Sydney with the associated costs of living).
Debt
Unfortunately, more and more Australians are retiring with unpaid debts. The best thing you can do for your retirement savings is to pay off those debts before you retire. If you don’t, you’ll need to add debt repayments to your retirement expenses or take a lump sum out of your super to pay off your debts. Either way, your retirement savings won’t go as far as they could have if you’d paid off your debts earlier.
Personalisation
Once you’ve figured out your starting place and whether or not you’ll have to face debts, it’s time to consider personalisation to your retirement plan. Do you plan on staying in your current home or moving to a place with lower housing costs? Do you plan on pursuing new interests that require additional funds?
It’s wise to meet with an adviser to help you put together all the pieces of your retirement plan. The real cost of living in retirement varies widely from person to person, and expert advice can be enormously helpful.
Making a Plan
After you have reached a target amount to save for retirement, you need a plan. This may include salary sacrifice to increase the amount of money you save each month. Salary sacrifice may be helpful to your current financial state as well as your long term retirement plans because of the tax savings involved.
Face the future head on by finding out your real cost of living in retirement. Then make a plan and put it into action. Your future awaits!
