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How Much Do You Actually Need To Retire In Australia?

How Much Do You Actually Need to Retire in Australia?

Most Australians dream of the day when they finally leave the office for good. Whether it’s to hop on a cruise around the world, live in a campervan through Australia, or simply grow a garden in your backyard, the more important question is: How much do you need to make your retirement dreams into reality?

The Association of Superannuation Funds of Australia (ASFA) has crunched the figures. 

ASFA predicts that at age 65, a single person hoping for a “comfortable” lifestyle (with yearly living expenses of $43,901) would require a lump sum of $545,000 while couples need around $640,000.

The lump sums required for a moderate lifestyle, on the other hand, are surprisingly low, at $70,000 for singles and couples. This is because the base rate of the Age Pension (plus different pension supplements) is said to cover a significant portion of the spending necessary at this budget level.

Four Factors to Think About When Planning Your Retirement

A modest lifestyle is usually preferable to living on the age pension. Still, a comfortable lifestyle entails being able to afford a high quality of living, participating in a wide range of leisure and recreational activities, and travelling locally and occasionally worldwide. Here are some things to think about while putting up your retirement fund.

  1. What Lifestyle Do You Expect After Retirement

The amount of money you’ll need for retirement is highly personal. You can determine it by accessing your particular position, goals, requirements and lifestyle expectations. It may be helpful to consider your daily spending patterns, leisure interests and hobbies and if you will approach retirement debt-free.

Consider how you want to spend your retirement funds. If you own your own house, you’ll need two-thirds (67%) of your pre-retirement income to maintain the same quality of life in retirement.

  1. Determine Your Eligibility for the Age Pension

If you have inadequate financial resources, such as super, to pay your retirement, the Age Pension can help. The Age Pension is a government payout — a “safety net” – for persons who satisfy the age and residence conditions. Approximately 62 per cent of Australians over the age of 65 get a full or partial government pension.

The amount you get is determined by various criteria, including your assets, the amount of super you have, and any additional income you may earn in retirement, such as rental returns.

  1. How Long Will You Stay in the Workforce?

The age you choose to retire can significantly influence how much money you have and how much you’ll need in retirement. It can vary depending on your health, debts, super balance, the age at which you can access your super if you have dependents, and your partner’s retirement plans (if you have one).

  1. How Long Will You Be In Retirement?

Keep in mind that if you aim to retire around the age of 65, you’ll most likely live for another 20 years or more. According to the Australian Institute of Health and Welfare (AIHW), Men over the age of 65 may expect to live for an average of 84.6 years, while women can expect to live for 87.3 years.

Final Thoughts

If you think your retirement nest egg is falling short, there are various things you can do to get your retirement back on track. You might explore increasing your super by adding your contributions, deferring retirement by a few years, altering your retirement lifestyle expectations or selling other assets to increase your super.

Living the retirement of your dreams starts with one fundamental step: planning. Our financial advisers in Central Coast can help you talk strategy on what you can do to get on track to achieving your financial goals and retire peacefully. Get in touch with Central Coast Financial Planning Group today!


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