How Much Will You Need in Retirement?

By: Tommy Jackson


Most Australian’s look towards their retirement will a feeling expectation- a time when they can enjoy the fruits of seemingly endless years of labour. But how will you fare in retirement? For many, this question can pose a sense of trepidation- will they have enough to live a comfortable retirement?

The recent ASFA Retirement Standard (December 2011 – updated quarterly) indicates that a couple looking to enjoy a ‘Comfortable’ retirement lifestyle will require income of $55,249 per annum. A couple looking for a ‘Modest retirement lifestyle’ will require $31,675 per annum. Both these figures assume that the couple is a home-owner.

A ‘Modest’ lifestyle is described as being able to afford fairly basic activities; whereas a ‘Comfortable’ lifestyle includes a broad range of leisure and recreational activities, including domestic and occasional international travel, private health insurance, reasonable car etc.

When we consider that the current Age Pension for a couple is $29,614 (as at 20 March 2012), we can see that whatever retirement lifestyle you are hoping to achieve, you will require further income in addition to that supplied by the Government. This is fair enough – the Age Pension is intended as a safety net to supplement retirees other income.

So where will this other income come from? For most, this is where their superannuation savings are vitally important. The intention of superannuation is to provide a balance at retirement that can be converted to an account-based pension, whereupon you will draw a tax-free income stream. The balance of your account-based pension will be invested according to your instructions, with any earnings/capital growth also tax-free.

So assuming your superannuation balance is sufficient, this should provide a level of income to match your desired retirement lifestyle. But what balance is sufficient?

As a rough guide, the following has been estimated as an illustration of what would be required for a couple to live a ‘Comfortable’ retirement:

To Last 15 years: $587,492

To Last 20 years: $710,799

To Last 25 years: $809,414

Please note that these figures were prepared by Colonial FirstState, using a range of assumptions that may or may not be applicable to your situation. It is also important to note that the level of Retirement savings (and other assets) can have an impact on your Age Pension entitlement, and this needs to be factored into any calculation.

This is where retirement planning comes in. A financial adviser will be able to determine your requirements, and assess these against your current position and period until retirement. They will be able to calculate this figure based on assumptions accurate to you. By getting advice, you will be advise whether you are currently on track; or whether you need to make changes now in order to enjoy the retirement you desire.

This is where retirement planning comes in. A financial adviser will be able to determine your requirements, and assess these against your current position and period until retirement. By getting advice, you will be advise whether you are currently on track; or whether you need to make changes now in order to enjoy the retirement you desire.

If you would like to discuss how you look to fare in retirement, please contact Andrew Moore of Specialised Business Solutions on 07 3221 1100. SBS is a Brisbane Accounting Firm that also specialises in Retirement and Centrelink advice. Andrew is a qualified Financial Planner who can help you tailor a suitable financial plan to help you reach your financial goals in retirement.

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Prasanth is an author for Specialised Business Solutions(Sbs.net.au) site, Best accounting firm based in Brisbane. He has been writing articles on Accountants Brisbane and Brisbane accountant specialising in property for accounting firm.

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