Your retirement: How much money will you need?

How much money will I need in retirement?

This is the perennial question and the one that keeps lots of financial advisers in a job and many over 50s up late at night. Our visions, or fears about retirement are often driven by this question.

One answer is that everyone is different and there’s no “one size fits all” figure.

While I lean towards this belief, the reality is that a lot of smart people have done extensive research and produced figures which are generally accepted as a reasonable guide for most people.

According to the Association of Superannuation Funds of Australia’s Retirement Standard, to have a ‘comfortable’ retirement, single people will need $545,000 in retirement savings, and couples will need $640,000. You can use this guide to estimate how much money you’ll need to have a ‘comfortable’ or ‘modest’ retirement

Comfortable Lifestyle

Single: $42,764 per year

Couple: $60,624 per year

Modest Lifestyle

Single: $27,368 per year

Couple: $39,353 per year

Age Pension

Single: $21,222 per year *

Couple: $31,995 per year *

*These age pension figures assume that you own your own home, with no mortgage and no major debts.

As you can see from the above figures, there’s not a huge difference between a “modest” lifestyle and what someone on the full pension would receive.

We have said before that organising your finances in retirement so that you maximise your age pension payments and dividends from investments while minimising tax, is no simple task.

Most people need some expert assistance to get the balance right.

One of the unfortunate side effects of the Banking Royal Commission is that the reputation of the entire financial planning industry has been trashed and many people are reluctant to see a financial planner.

A good financial planner should be able to save you more money than you pay in fees.

If you are approaching retirement or have left full time work in the last year or two, our advice is to talk to an accountant, financial planner or someone who is competent in this area and organise a realistic budget and a basic financial plan. The “she’ll be right” strategy could cost you a lot of money in the long term.

If your investments or super fund are not going to give you enough, according to the above figures, it’s not the end of the world. There are lots of ways to stretch your money further.

Continuing to work for a few more years – either full or part time is one obvious solution.

You’ll find lots of useful information on planning your retirement on our web site at www.retirementbooks.com.au