How much you need

How much does a comfortable retirement cost? The answer will depend on your own personal circumstances. Here are some basics to get your started, but you’ll need to look at your own situation.

The basics

Basic #1 – your life expectancy

The average life expectancy in Australia is 80.4 years for men and 84.6 years for women. So, if you’re a man and you retire at 65, your retirement savings may have to last 19.6 years. And, you could turn out to live longer than the average.


Basic #2 – your net worth

This is what you own, less what you owe (if the number you come up with is negative, it might be a good idea to get some advice about turning this around).

As you get older, you’ll generally want to pay down debt and grow your assets with the magic of compound interest. The greater your net worth, the more likely you’ll be able to afford a comfortable retirement.


Basic #3 – the cost of living

A spending plan is probably your biggest clue as to how much it costs to maintain your lifestyle. Another guide might be the ASFA Retirement standard. This provides a good guesstimate of what a modest versus a comfortable retirement might cost.

The figures are updated quarterly on the ASFA website.

Need a shortcut? The old rule of thumb says you may need around two thirds of your current income for each year of retirement.


Your special situation

What’s your idea of a comfortable retirement?

We asked around and here’s some ideas:

  • A life by the beach brimming with meditation, organic vegan food, spiritual reading, yoga, and exercise.
  • I might cut down my hours but I love my job. I’ll never retire. (My wife’s pretty glad about that!)
  • Travel – anywhere and everywhere.
  • I can’t wait to mind my grandbabies!
  • Woodwork is my obsession.
  • I’m going to make furniture all day, every day, starting with an eight-seater dining setting for my house.
  • Keeping our huge, lovely but feral garden under control! I’ve worked in banking my whole life but I’ve always wanted to care for disabled kids.
  • I’ve started an online course already. Hubby and I are kicking off my retirement with a trip to Guatemala, next year. Why not?!

As you can see, retirement is very personal. Your individual retirement dreams will likely affect the amount of savings you need to fund them.

You need to think about where you plan to live, how you’ll spend your time and who you’ll spend it with. Once you have a picture of your ideal retirement lifestyle, you can start planning the steps between where you are right now and financial independence.

Plus, don’t forget to factor in the unexpected and have a ‘plan B’.


So how much do you need?

How much you need for a comfortable retirement will depend on a bunch of things from your retirement age to your habits. It’s a good idea to work out the basic facts and then tweak them to fit your situation.

If you need advice, we can help you further fine tune your plans by maximising your Centrelink entitlements, checking your risk tolerance, making sure you have enough of the right insurance and even helping you with your estate plan.


Fast figures

As a fast guide to how much retirement income you may need, apply the rule of 15. This rule says that if you want to retire at 60, you multiply the annual income you plan to live on by 15.

For example, if you plan to retire at 60 and you decide you need a retirement income of $53,000 each year, multiply that amount by 15 to figure out how much money you will need to retire. That is: $53,000 x 15 = $795,000

Of course, not everyone wants to retire at 60. If you want to retire at 55, use a factor of 17 and if you want to retire at 65, multiply by 13. You should note that using this formula means that by the end of your retirement, you will be using some of your capital to live on.


Next steps

Find out if you’re on track for a comfortable retirement with our Retirement $ projector.

Need advice? We can provide you with general advice on your Tasplan account, free of charge. If you need personal advice, you can meet with a Tasplan financial planner. Our planners have set fees for advice and you may be able to pay for this out of your Tasplan account. For an appointment, email us at info@tasplan.com.au or call us on 1800 005 166.

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