Skip to content

Upcoming Events

Cashflow Crunch-ed! Workshop

Cashflow Crunch-ed! Workshop: Where does the cash go, and how to find it in your business faster

Wed, 1 May 2024

SMSF Seminar - New rules, new strategies. What do I do?

Self-Managed Superannuation Seminar – New rules, new strategies. What do I do?

Wed, 29 May 2024

Sign up to b-Mail!

Want to hear the latest news as it happens? Simply fill out the form below and we'll send you regular updates so you can stay in the loop.

Setting yourself up for a successful retirement Posted on October 9, 2018

Retirement

During the wonderful period of life that is your retirement, the bills unfortunately do not stop rolling in. Of course there are various ways to reduce the financial cost of living but each typically comes with a lifestyle sacrifice, meaning specific levels of desired retirement lifestyle also come with particular levels of cost.

The amount of this cost is rarely considered until it is too late, mainly because it is perceived as being difficult to figure out. But these days several tools exist to give investors a better idea of what amount they might have to target in terms of retirement savings. What these figures reveal is that compulsory super from an employer often won’t be enough.

Financial advisers, sometimes report that their clients have a belief that in retirement, if they find themselves without enough money, the Australian Government will step in and save them. This is a dangerous consideration, especially considering the economic challenges that our Government will face over the next few decades as the population becomes top heavy with the aged.

The loud clear message being relayed to the Australian business world by the current Government is that from now on you have to look after yourself. Those considering saving for their retirement might do well to heed the same warning.

With financial independence in mind, what are the current measures of how much superannuation is enough? The Association of Superannuation Funds of Australia (ASFA) updates its ASFA Retirement Standard, which provides detailed budgets and estimates for singles and couples, on a quarterly basis. The Retirement Standard provides figures for annual costs for a ‘modest’ or ‘comfortable’ lifestyle.

A ‘modest’ lifestyle is defined by ASFA as “better than the Age Pension but still only able to afford fairly basic activities”. 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”.

The latest update at the end of 2013 says a couple looking to achieve a comfortable retirement will need to spend $57,665 annually. But a single person seeking a modest lifestyle would require $23,175. Here is the full table, assuming relatively good health and home ownership:

Annual Cost 

Single, modest lifestyle

               $23,032

Couple, modest lifestyle

               $33,120

Single, comfortable lifestyle 

               $41,830

Couple, comfortable lifestyle 

               $57,195



What does this mean in relation to a final lump sum required to pay out such annual incomes until the age of 85 (the ASFA figures apply to those retiring at the age of 65 and who will live to an average life expectancy of around 85).


Lump sum required at retirement 

Single, modest lifestyle

            $300,000

Couple, modest lifestyle

            $431,000

Single, comfortable lifestyle 

            $544,000

Couple, comfortable lifestyle 

            $744,000


Of course, the term ‘comfortable’ means different things to different people. The how-much-do-I-need-in-retirement question will never have a one-size-fits-all answer. For high-income earners wishing to continue to experience the lifestyle to which they have become accustomed, ASFA recommends planning for an annual cost of living equal to 67% of your pre-retirement annual income.




Click here to book a complimentary financial discovery to find out how best to approach your current situation.

ac-logo-whiteArtboard 1@3x

Discover the difference that the right advice can make

Get in touch with our team today and learn how you and your business can grow to the next level. 

be better off.

talk to us Discover the difference that the right advice can make

Get in touch with our team today and learn how you and your business can grow to the next level. From structuring to sustainability, we'll help you reach your financial goals and live the lifestyle you deserve.

be better off.