How much money you’ll need will depend on a variety of things.
Have you got a plan in mind for when you retire? Is it to travel overseas, hit more balls on the golf course or spend time with family and friends? Whatever your goals, you’ll need to have a plan for how you’re going to get there financially.
Comfortable versus a modest retirement
Everyone’s idea of how much money they’ll need in retirement is different.
As a guide, the Association of Superannuation Funds of Australia (ASFA) suggests couples around age 65 will need $59,000 a year and singles will need about $43,000 in today’s dollars to live ‘comfortably’. i Now this is assuming you’re in relatively good health and that you own your own home.
On this budget, you should be able to afford things like a new car, private health insurance, to dine at quality restaurants and have local, and some overseas, holidays.
By comparison, a ‘modest’ yearly budget of around $34,000 for couples or close to $24,000 for singles would provide a more basic lifestyle. i This means you’d probably have to keep your older appliances and car for a bit longer, eat out less frequently and generally stay locally for holidays.
So how much is enough?
To work out how much money you’ll need in retirement, start by asking yourself these questions:
Do I have enough money saved in my super?
Try our super simulator to find out if you’re on track or if you have a gap in your savings
Am I going to have to rely on the Age Pension?
If you plan to retire before you get the Age Pension, consider what savings you’ll need to support you for those extra years in retirement
Will I have to work longer or do something else to generate an income?
How you could retire with more
Once you’ve considered these questions, think about ways to give your financial situation a boost while you’re still working.
Got more than one super account?
Think about consolidating your super into one account to save on fees and reduce paperwork.
Consider making extra before-tax contributions to your super through salary sacrificing. Use our salary sacrifice calculator to find out how much you could put aside.
If you’re eligible, think about making a personal tax-deductible contribution to your super, as these will typically only be taxed at 15% ii and you can claim these as a tax deduction. iii You’ll need to fill in a ‘notice of intent’ form and send it to your super fund before you submit your tax return.
If you decide to sell or downsize assets, such as your home, make sure you check what the tax implications are and whether it will affect your eligibility for the Age Pension. Find out about what changes are happening to the Age Pension assets test from 2017.
It’s also important to note you should seek financial advice before making any decisions regarding additional super contributions.
ii 30% if you earn over $300,000 per annum.
iii These contributions will count toward your concessional contribution cap. The concessional contribution cap is currently $30,000 (or $35,000 for those aged 49 and over on 30 June 2016).