Financial Advice Blog

How much do you really need to retire?

It’s the question on the lips of almost every Australian who’s approaching retirement age: how much do you need to retire? We break it down for you here.

Knowing how much money you need for a comfortable retirement is a serious and often stressful issue impacting hundreds of thousands of Australians. The truth is, when it comes to retirement, size definitely does matter.

While the mandatory 9.5 percent superannuation contributions by employers is a positive step, for many self-employed Australians approaching retirement age, the prospect of a comfortable retirement is a pipedream. Add larger mortgages, increased life expectancy, higher costs of living and an increase in the pension age from 65 to 67 over the coming years, the amount of money needed for a comfortable retirement is higher than ever before.

So where do you start?

1. Begin with the basics

The first thing you need to consider is how much you’ll need to live off every week or month, depending on how you like to structure your budget. This takes into account everything from housing, food, petrol, entertainment, utilities, health insurance and so on. Breaking your everyday expenses down into specific sums will give you a baseline that you need to work off. Financial Spectrum’s budget calculator is an easy to use tool that can help you with this exercise.

2. Consider the future

Once you have your baseline calculated, it’s time to consider future expenses. Are you planning on selling your home to inject some funds into your super or do you need to rent or get another mortgage in the future? Do you want to travel? How many years do you need your funds to last and do you have any medical bills on the horizon?

These factors will affect your numbers moving forward and are crucial in the planning for a safe and secure retirement. Think about all your options and what works best financially, ideally seeking professional help from a financial adviser to make sure you’re on the right track.

3. Start calculating

Need help finding a figure? The table below provides you details on roughly how much money you need to support a modest or comfortable retirement. It applies for people retiring at age 65 who will live to an average life expectancy of about 85. It assumes you own your home.

ASFA Retirement Standard Annual living costs Weekly living costs
Couple – modest $39,353 $754
Couple – Comfortable $60,264 $1,154
Single – Modest $27,368 $524
Single – Comfortable $42,764 $819

If you’re an above-average income earner, you can use an alternative calculation that assumes you need 67% (two-thirds) of your income before you retire in order to maintain the same standard of living in retirement.

4. Seek professional help

Ensuring you have enough money for a comfortable retirement isn’t something you need to calculate on your own. Seeking the help of a financial advisor can help you feel more secure, so don’t be afraid to ask for assistance.

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