How much do I need to retire?

Woman looking at phone

Claire, our Financial Best Friend - FBF, has been thinking about how much money she may need in retirement.

Claire: How much money I need in retirement has been on my mind a lot lately, especially in these unsettling times. I have also been speaking to my friends who are also worried about their super balances. It seems, few know how much they actually need to save in order to live a comfortable retirement.

To help provide some guidance, the Association of Superannuation Funds of Australia’s Retirement Standard (ASFA) has provided an estimate of how much money is required to support a modest or comfortable retirement depending on whether you are in a couple or single.

To estimate living costs of a ‘comfortable’, ‘modest’ or ‘pension’ based lifestyle, ASFA considered expenses like: clothing, electricity usage, food, transport and holidays. To understand more about the definition of these different lifestyles, check out this useful table.

My revelation - it’s almost never too late to boost your retirement savings.

One of my recent revelations is the fact that my super balance is what will make the biggest difference between achieving a comfortable or a modest lifestyle in retirement.

Therefore, to help with this, I’ve chosen to make additional  contributions to my Child Care Super account. This is in addition to the Superannuation Guarantee (SG) contributions made by my employer. For me, contributing small amounts over time is easier than trying to find a spare 'lump sum' of money.

Another great way of topping up my super over time is by using Child Care Super’s award winning SUPERSUPER scheme. By completing my everyday shopping with SUPERSUPER I am continually adding to my super account. And when it comes to my super account, a little extra can go a long way - thanks to the magic of compound returns.

Why have I made these changes?

Claire: The Money Smart website  states that if you own your own home, a rule of thumb is that you'll need two-thirds (67%) of your pre-retirement income to maintain the same standard of living in retirement.

Couple this with the fact that Australians are living longer and that many of us will spend more than a quarter of our life retired. Did you know that life expectancy is expected to rise to 91 for males and 93 for females by 2050?

So, (just like me), you might need a lot more money for your retirement than you think. The amount of super YOU need to retire will depend on your personal circumstances, financial resources both inside and outside super, and your lifestyle.

Most of us dream of comfortable easy days after decades of work. But if your finances aren't in good shape, then you may find yourself dependent on the government pension. And that leaves little room for life’s luxuries.

What are the big costs in retirement?

Claire: I’ve been thinking about my big costs in retirement that should be part of my retirement plans. For example:

  • paying off my mortgage
  • rent
  • Renovating the home
  • travel
  • medical costs

If a ‘comfortable’ life of roughly $60,000 a year for a couple (or roughly $43,000 a year for a single person) was not what you had in mind for your retirement, then check out the useful SuperGuide website articles Retirement income: Living on more than $60,000 a year and Retirement income: Want to live on $100,000 a year? They give some great examples of the lump sums you may need with different retirement goals in mind.

Claire’s tips to help you get super savvy.

Claire: The good news is that there are a range of tools available to help folk like us work out how much we may need for retirement. Check out this ‘Super to income reckoner’. This tool can help you quickly and simply understand approximately how much retirement income your super savings might be able to generate.

Another of my favourite tools is the ASIC’s MoneySmart Retirement Planner calculator. These tools help estimate how much retirement income you will receive based on your current super balance, future contributions, retirement age, length of retirement and estimated future investment returns.

Don’t forget you can always call one of Child Care Super’s super friendly team members on 1800 060 215.