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Our daydreams about retirement usually begin with thinking what we’ll do with all of our time once we retire: traveling around the world, campervanning around Australia, taking up a new hobby, or just spending time with friends and family. After this first blissful round of daydreaming subsides, most people start wondering if their retirement savings will be enough to support the daydreams.
This is good. Asking questions like this before you actually retire will help make your daydreams come true. If you’re not saving enough right now, you can make adjustments to your super contributions or work with your financial adviser to create a plan to boost your savings.
How much super you’ll need in retirement depends on you. What are your plans? What are your financial obligations? What kind of lifestyle do you hope to live during retirement? What kinds of aged care costs do you need to consider?
The ASFA Retirement Standard Tool
The ASFA has a tool to help people know how much super they’ll need to live certain standards of living. They’ve divided the standards into “Comfortable,” “Modest,” and “Age Pension,” and calculated how much super you’ll need to achieve each standard. This tool is very helpful in calculating how much super you’ll need.
|
|
Comfortable |
Modest |
Age Pension |
|
Single |
$43,184 a year |
$23,797 a year |
$20,555 a year |
|
Couple |
$59,236 a year |
$34,226 a year |
$30,989 a year |
|
Food |
Able to regularly eat out at restaurants. Nice range and quality. |
Infrequent eating out at restaurants that offer affordable food. |
Expect to only afford club special meals. |
|
Travel |
An annual holiday. |
Short breaks near home. |
Day trips in your own city. |
|
Transportation |
Own a reasonable car. |
Own an older car. |
If you have a car, you may struggle to pay for repairs. |
|
Leisure Activities |
Able to participate in a range of leisure activities. |
Take part in occasional leisure activities. |
Take part in no cost or low-cost leisure activities. |
|
Electronics |
Expect to afford a range of electronic equipment. |
May not be able to afford much air conditioning. |
May have less heating in the winter. |
|
Health |
Private health insurance |
Private health insurance |
No private health insurance |
As you can see, there are significant differences between these standards of living, and the choices you make regarding your super today will have a large impact on your life after you retire. Now, these prices may be ok for a starting goal, however, this really is the minimum you will need. We suggest that you should probably be aiming higher (particularly if you live in Sydney with the associated costs of living).
Once you’ve decided which standard of living you’d like to shoot for, multiply the annual expense (at the top of the table) by the number of years you expect to be in retirement. Life expectancy is currently 89 years for women and 86 years for men in Australia, but it’s expected to rise to 93 for women and 91 for men by the year 2050.
Work with your financial adviser to determine whether or not your current savings rate will help you to achieve your retirement goals. If you’re not on track, make changes to your current budget and saving rate to increase your super contributions.
We’re here to help. Don’t hesitate to get in touch with your Altus Adviser.
