How much do you need to live comfortably in retirement?

When thinking of the golden years, it’s nice to picture ourselves relaxing on a sun lounger on a yearly holiday or living near the grandkids and being able to treat them once in awhile. That’s definitely retiring comfortably. But how much do you actually need to do that? Here are the things you need to consider.

How much do you need to live comfortably in retirement?
It’s a common question but one that can be quite difficult to answer! How much you will need in retirement depends on many things including the lifestyle you choose, any unexpected costs that crop up, and how long you live.

Living longer
Due to medical advances, Australia’s population is ageing. And, living longer means there’s more time to be spent in retirement.

With more time in retirement, you’ll need to have a plan in place not only to make sure you can do the things you want, but to ensure that your money lasts as long as you do.

Did you know... 
A woman aged 65 years could expect to live another 21.8 years while a man aged 65 years could expect to live another 18.9 years. 

What lifestyle will you choose?
Many people don’t put a retirement plan in place because they think they can rely on the age pension. However, the age pension is unlikely to provide the lifestyle that you’d choose for yourself. For example, the age pension payment is equivalent to $421.40 per week for a single person and $635.30 per week for a couple. Compare this to the cost of a modest or comfortable lifestyle below.

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Source: ASFA retirement standard survey March 2014. The figures in each case assume that the retiree(s) own their own home and relate to expenditure by the household. This can be greater than household income after income tax where there is a drawdown on capital over the period of retirement. Single calculations are based on female figures.

1 Source: ABS January 2012 (based on the period 2008-2010).

What does your retirement dream look like?
Do you want to be able to afford and maintain a reasonable car, a wardrobe of nice clothes and the latest electronic equipment? And what about being able to participate in a range of leisure and recreational activities or treating yourself to domestic, or occasional overseas holidays?

How much is enough?
The answer depends on what you want to do in your retirement. As a guide, a couple needs around $58,444 a year1 (assuming they own their own home) for a ‘comfortable’ retirement that allows a broad range of leisure and recreational activities, electronic and home appliance upgrades, occasional dining out and travel. In comparison, the maximum age pension amount for a couple is only $33,7172 – or just over half.
Which amount of income would you prefer to receive?

Super strategies to help
Because of the concessional tax treatment that superannuation receives, it is one of the most tax-effective ways you can save for your retirement. If you are over age 50 your concessional contributions cap will be $35,000 and for anyone under 50 it will be $30,000. It’s important to maximise your limits each and every year in the lead up to retirement.

There are many super strategies you can use to boost your super. A salary sacrifice strategy, for example, will not only boost your super, but reduce the amount of tax you pay. If you are making after tax contributions, while the annual limit is higher, using the ‘bring forward’ rules you can contribute up to three times the annual limit.

Are you on track for a comfortable retirement?
To find out how you can boost your super, make an appointment with a Bridges Financial Planner. 

[1] ASFA retirement standard March 2015
[2] As at 20 March 2015.

Here are some handy tips on how to choose a financial planner.