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Retirement – How much money is enough?

By Damian Gibson Financial Adviser, Elevate Wealth Solutions

ARE you worried you won’t have enough money to retire?

Do you worry when you hear terms thrown around like ‘The Million Dollar Retirement Myth’?

If so, you’re not alone.

Hearing that you need one million dollars saved for retirement will leave most Australians feeling worried about their future.

Truth be told, many Australians are far from having a million dollars saved, whether that is in super, property or other investments, but the good news is that, for many, their concern may be unnecessary.

 

How much income do I need?

The best place to start is by writing down your non-discretionary expenses (essential) and discretionary expenses (non-essential) to understand how much income you need in retirement.

As a guide, the Association of Superannuation Funds of Australia (ASFA) provide estimates on the income you will need to support a comfortable lifestyle or modest lifestyle in retirement.

Comfortable retirement
ASFA estimate an income requirement of $61,909 a year for a couple and $43,687 a year for a single.

Modest retirement
ASFA estimate an income requirement of $40,380 a year for a couple and $27,902 a year for a single.While every retirement is different, comparing your income needs with ASFA guidelines can help to see how you compare.

 

How much money do I need?

The amount of money you need saved heading into retirement depends on your own situation, lifestyle expectation, wants and needs.

ASFA has also estimated the amount of money you should have saved to support a comfortable lifestyle or modest lifestyle in retirement.

Comfortable retirement
ASFA estimate a lump sum requirement of $640,000 for a couple and $545,000 for a single. This also assumes a part Age Pension.

Modest retirement
ASFA estimate a lump sum requirement of $70,000 for a couple or a single to live a modest lifestyle in retirement. This also assumes a full Age Pension.

 

The lump sum estimates from ASFA do vary quite significantly.

Ultimately, the amount you need or have for retirement is very personal.

No matter the balance of your retirement savings, there are always things you can do to put yourself in a better financial position.

 

Your savings aren’t your only option

While superannuation is a common way to help fund your retirement, not everyone has the comfort of a healthy super balance.

It is quite common for someone who has performed stay-at-home duties or has been self-employed for a larger part of their working life to have a lower super balance.

Even if you are still years away from retirement, you might be concerned about your super balance.

Don’t worry too much, as super is not your only option.

Alternatively, you may help fund your retirement using income from an investment property or even by downsizing your house to free up some money.

Do not forget the Age Pension.

Depending on your situation, the Age Pension can go a long way to help meet your income needs in retirement.

For example, the maximum Age Pension for a homeowner couple is currently $711.80 per fortnight each.

That is $37,013.60 per annum being contributed to your income needs.

 

Retire once, retire right

There are many things you can do to prepare for a comfortable retirement, and there are many things you can do once you retire to make things a bit more comfortable.

Retiring is one of the biggest financial changes you will go through, so why would you go it alone?

Engaging a financial adviser to help plan your retirement will uncover things you would not normally consider, could save you thousands of dollars down the track and give you peace of mind.

As the age-old adage goes, if you fail to plan, you plan to fail.