How much do you really need to retire comfortably?
- WYZA Life
What do you really need to retire comfortably? For many people this may be a ‘how long is a piece of string’ type of question. Of course we all want to retire on as much as possible and never have any money worries. However, limiting your retirement planning to wishful thinking may leave you with a shock when it comes to the crunch. It pays to plan ahead and get advice from the experts.
It is all too easy to put retirement planning in the ‘too hard basket’, but the stakes are simply too high to leave it to chance. The good news is that once you get started it can actually become an exciting process, as Michael Dundon from VicSuper explains.
“When it comes to giving your retirement the attention it deserves, making that first step is often the hardest one. But once you start to put your goals and ideas down on paper, the whole process of planning retirement gathers momentum. It’s exciting to paint a picture of your ideal retirement lifestyle and this then flows naturally into planning how the financial aspects can be planned in advance to make those retirement goals reality”, he says.
We asked VicSuper for their top tips on what to consider when planning a successful and fulfilling retirement.
What is on your ‘bucket list’?
What would be your perfect holiday? A round Australia trip in a five star motorhome? Exploring the delights of Paris? An odyssey to the Mayan temples of Mexico? Whatever your dream trip is, your retirement can be the time to make it happen. Start clarifying your ideas, including what overseas travel you’d like to do. Would you ideally like to take an annual domestic holiday? Or even consider buying or renting a holiday homes or a specialised vehicle you may need to purchase. You may even decide you want to take kids and grandkids with you to an exotic location. Once you have these ideas on paper you can start to prioritise and put dollar figures next to each.
How much will you need to live on week to week?
Of course, retirement isn’t just about travel and holidays. Once you take the leap out of the workforce you may need to live for decades on your own resources, so it makes sense to plan a comfortable budget for daily living. Whether you are a couple or a single will affect the cost of living and will also impact your entitlements to age pension benefits. Michael offers some sage advice when it comes to planning your ongoing lifestyle costs. “Don’t just leave your weekly living costs as just an amount to cover the basics. Make allowance for discretionary spending, such as dining out once a week, gifts, costs for sports and hobbies etc. After all, you want to enjoy daily life in retirement and not be watching every penny”.
Where do you want to live?
If you currently live in a home that is larger than you need, you may well want to downsize to something more manageable when you retire. Downsizing may provide extra funds that can be factored into your calculations for your retirement savings.
What about ‘age related’ costs?
It is a fact of life that as we age there will be different needs that will naturally come into play and will create extra expense outside of normal living costs. This can include medical costs, specialised equipment and home renovations to aid mobility and comfort and bringing in external services such as cleaning, cooking or personal care. These costs should be factored into retirement savings calculations.
Plan to take care of the big ticket items
Remember, being retired for 20, 30 years or more means that you will probably outlive many of your possessions! It makes sense to have allowances in your calculations for periodic replacement or upgrading of items such as cars, appliances, technology, carpets and furniture.
A handy reference to get you on track
The peak super industry body, ASFA, has put together a handy guide to getting some realistic figures needed for retirement living costs on their ‘ASFA Retirement Standard’ website. This takes into account many of the items mentioned above and is based on detailed budgets for achieving either a ‘basic’ or a ‘comfortable’ standard of living. For example, their calculations arrive at a figure of $58,784 per year to fund a comfortable standard of living for a couple, compared with $34,051 for a basic standard of living.
You can explore this further at superannuation.asn.au.
Do you want to provide a legacy for your family?
Michael also raised the issue of providing a legacy for your children and grandchildren. “Many people like the idea of having a separate allocation in their retirement funding plans to leave for their family. This should be calculated outside of what is put aside for your own lifestyle needs, so it is worth considering when putting figures on paper”.
How do you put it all together?
The range of issues mentioned here gives some indication of how important it is to get to grips with what you need to enjoy a long and happy retirement. Rather than trying to work it all out for yourself, it can be reassuring to get some professional advice to assist in planning properly.
VicSuper is a profit-to-member superannuation fund with offices located across Victoria. Appointments come at no additional cost to members (in most instances) and are only $200 for non-members. We think you’d be hard-pressed to find such great value superannuation advice anywhere else.
So get super active and visit vicsuper.com.au/getpaid or call 1300 366 216 to make an appointment.
What are your retirement dreams? What are you most looking forward to in retirement? Share your ideas below.