How much money do you need to retire comfortably?

Lifestyle is a very personal thing —luxury living for one person is a modest existence for someone else. I don’t intend to suggest the exact lifestyle you must choose for your retirement years but I can offer you some guidance on the amount of money you need if you want to cover your basic living costs and support a hobby, travel or active social life. For example, do you expect to take frequent holidays or are you planning to enjoy regular days dining out?

Covering basic living costs

Clearly, the one constant for every Australian in retirement is meeting living costs.

The Age Pension for singles is $894.40 per fortnight (or $23,254 a year) and now represents 29% of Male Total Average Weekly Ordinary Earnings ($1,543.80/week; source: ABS, May 2017). For couples, the maximum age pension is $1,348.40 combined per fortnight (or $35,058 a year, including pension supplement, as at 2 February 2018).

Are you willing to live on less than a third of your average Australian income in retirement? Living on the Age Pension gives you a basic income and access to discounts on health services and energy costs. While this figure is an amount you can survive on, most Australians don’t expect to live within this level of income by choice.

Living comfortably

Assuming you own your own home, the minimum after-tax income required to live a “comfortable” lifestyle in retirement is:

  • $44,011 a year for singles or $60,457 a year for a couple (ASFA Retirement Standard, September Quarter 2017). It’s slightly less for those over age 85.

Living on this level of after-tax income means you can enjoy more recreational activities. Also, you can afford to purchase private health insurance, higher quality household goods and travel regularly. Even so, a ‘comfortable’ lifestyle isn’t luxurious.

Comparing a “basic” with a “comfortable” lifestyle

What does a ‘comfortable’ lifestyle buy you that a ‘basic’ lifestyle can’t?

According to the ASFA Retirement Standard, a comfortable lifestyle enables “an older, healthy retiree to be involved in a broad range of leisure and recreational activities and to have a good standard of living through the purchase of such things as household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, and domestic and occasionally international holiday travel.”

A popular question: What if a ‘comfortable’ lifestyle of $44,011 a year (for a single person) or $60,457 (for a couple) was not what you had in mind for your retirement. Perhaps you were expecting to enjoy an income of say, $80,000 a year.

So what’s your savings target?

If you expect to live on more than the Age Pension you need to find the income from your superannuation, other investments and savings.

To find out the lump sum amounts that you need to have accumulated by retirement to deliver a comfortable lifestyle, please download the White Paper.

If you would like advice on the best strategies to help you reach your retirement goals, contact Prudentia Financial Planning today for a free initial consultation.

Sofie Korac is an Authorised Representative (No. 400164) of Prudentia Financial Planning Pty Ltd, AFSL 544118 and a member of the Association of Financial Advisers.

Financial Advice Sydney and the North Shore Office based in Gordon NSW

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