As financial advisors, many people ask as how much money they will need in retirement. The answer really depends on a number of factors:
- what sort of lifestyle do you want in retirement
- how many years you expect your retirement funds to last (i.e. how many years after you stop working do you expect to live for – your life expectancy)
- whether you want to leave any money behind for your loved ones, and if so, how much
Living a Basic or a Comfortable Lifestyle in Retirement
To give you an idea of the amounts you need (after tax) in retirement, here are the expected amounts per annum (as of September 2011) that you will need depending on the type of lifestyle you’d like:
1. Basic retirement lifestyle – Age Pension Only
The basic retirement is exactly as it sounds - covering only the bare basic living costs with no spare funds at all for any extra expenses. As of 2011 (figures taken from 20 Sep 2011), the aged pension provides an annual income of $17,914 for a single, and$26,988 for a couple ($689 for a single, and $519 each for a couple per fortnight respectively). These small amounts represent only around 25% of the average Australian’s income! Whilst many Australians survive on this small amount every year, many don’t expect to live on this amount of income by choice. It is important to remember that the age pension only provides a very basic income and is unlikely to provide a comfortable retirement. If you have the opportunity, you should consider preparing for your own retirement through superannuation and investment savings to assist you in supplementing your retirement income.
2. Living more comfortably in retirement – Annual Income of Over $50,000 a year
If like most people, you envisage your retirement looking more like the glossy brochures, it’s almost a given that you’re going to have to take the initiative to prepare early for a self-funded retirement through savings, superannuation and investments. To fund an annual income of $50,000 for an individual (or around $100,000 for a couple) you’re going to need a lump sum amount of close to $1 million on retirement in today’s money. Be aware though that the longer you live, the more money you’re going to need and that on average women will require more retirement savings due to a longer life expectancy. Whilst you may be eligible to supplement your annual income with the age pension
Free Ebook Offer – Transition to Retirement (TTR)
Did you know that once you reach your preservation age, you can access your superannuation without having to retire? A Transition to Retirement strategy can also be a great way to boost your superannuation savings for retirement in the latter part of your working life. For more information on the benefits of Transition to Retirement, download our free Transition to Retirement ebook.
Planning for a Comfortable Retirement with Financial Planning Advice
If you’d prefer to live out your golden years of retirement with the freedom to enjoy travel and many of life’s comforts, it’s imperative that you seek professional financial planning advice from a financial planner experienced in retirement financial planning. The earlier you seek professional guidance for retirement, the greater your chances of success in meeting your retirement savings goals. For further information, contact a Financial Spectrum financial adviser on 1300 886 018 for a free financial planning in Sydney meeting to see how we can help.