How much money do I need in retirement?
Understanding Retirement Needs
A key aspect to consider is your desired annual income during retirement, which should ideally cover your living expenses, health checks, and allow for occasional leisure activities. Generally, aiming for around 70% of your pre-retirement income is recommended. For example, if you're earning $50,000 per year before retirement, you might need about $35,000-$40,000 annually in retirement, excluding the Age pension.
Retirement Savings Guidelines
The Association of Superannuation Funds of Australia (ASFA) suggests that for a comfortable retirement, singles will need an annual income of about $50,000, while couples might need about $70,000. To achieve this, ASFA estimates that singles need a superannuation balance of $650,000 and couples need $790,000 at retirement.
Superannuation Balances by Age
It's also helpful to know the average super balances needed by age to aim for a comfortable retirement. For example, by 55, an individual might aim to have around $495,000, and by 60, around $580,000. However, these are just estimates and your specific needs may vary.
Boosting Your Super
There are several strategies to consider for boosting your super balance, including consolidating super accounts to save on fees, participating in a salary sacrifice scheme to reduce taxable income, and making voluntary contributions, such as downsizer contributions or tax-deductible contributions.
Modest vs. Comfortable Retirement
It's important to note that the figures above aim for a "comfortable" retirement, which includes activities like socializing, occasional travel, and maintaining a reasonable quality car. For a "modest" retirement, the annual income required would be lower.
Key Takeaways
Aiming for 70% of your pre-retirement income can be a good starting point.
For a comfortable retirement, ASFA estimates that singles need around $595,000, and couples need about $690,000 in superannuation at retirement.
Superannuation balances should be adjusted based on your age, aiming for set milestones by 55 and 60.
Strategies to boost your super include consolidating accounts, salary sacrificing, and making voluntary contributions.
Remember, these figures are general guidelines, and your specific needs may vary depending on your lifestyle, health, and other factors.
It's always a good idea to consult with a financial advisor to tailor a retirement plan that suits your personal circumstances and goals.
Sources:
MoneySmart.gov.au
Take a Tumble
The Sydney Morning Herald
Canstar