Note: This article is updated regularly with the latest lifestyle/income data, and latest Age
So, the big question is: how much money do you really need for your retirement?
Lifestyle is a very personal thing —luxury living for one person is a modest existence for someone else. This article offers you some guidance on the amount of money you need if you want to cover your basic living costs and support a hobby or active social life. For example, do you expect to take frequent holidays and are you planning to enjoy regular glasses of wine or beer?
Choosing a lifestyle is simple — you live the life you can afford. If you want a more salubrious lifestyle, you save more, earn more, win the lottery or inherit lots of money from a rich relative. The same philosophy applies to your retirement lifestyle. If you want a comfortable life in retirement, then now is a good time to start thinking about what that type of life will look like.
Note: If you are reading this article for the first time, then continue reading the following text for important background information supporting the lump figures listed in Tables 1 and 2. The amounts listed in Tables 1 and 2 are expressed in today’s dollars (and have assumed annual inflation of 3%) to enable you to compare your potential retirement income with what you currently live on today. If you have read an earlier version of this article then head directly to Tables 1 and 2 (later in the article, or you can access the tables immediately by clicking on the bullets below) for the updated lump sums needed on retirement to finance a ‘modest’ or ‘comfortable’ lifestyle until the age of 87, taking into account the latest changes in the cost of living, and the latest Age Pension increases.
- Table 1 assumes your savings return 5% per annum during your retirement
- TabIe 2 assumes an investment return of 7% per annum.
Covering basic living costs, and more
Clearly, the one constant for every Australian in retirement is meeting basic living costs. Thanks to a groundbreaking study originally released in February 2004 and now updated every few months or so, I can tell you, with some authority, how much money you need to live on each year in retirement, depending on the lifestyle that you want to have. The study, known as the ‘
The ASFA Retirement Standard study is groundbreaking because Australians now have a tangible savings target with a clear idea of what type of lifestyle that amount of money can give them in retirement.
In 2010, the ASFA Retirement Standard was revamped to “give Australians a more comprehensive picture of how much they need to spend to support their retirement lifestyle. The Standard has been revised to reflect changes in living standards, new expectations of retirees and their evolving spending patterns. In particular, the budgets for Communications, Health, Energy, Clothing, Household Goods and Services, Recreation and Transport have been updated” (extract from ASFA website). I explain these recent changes to the Standard later in this article.
Living in comfort on $41,000 (or $56,000 for a couple) a year
The lifestyle costs in this article reflect the cost adjustments as at March 2013 (released on 9 May 2013), and the Age Pension rates are applicable from March 2013 (and the full Age Pension rates quoted below and elsewhere in the article are applicable until September 2013).
Assuming you own your own home, you need the following amounts of money, after tax, to give a single person, or a couple, a basic, modest or comfortable lifestyle:
- Basic lifestyle (Age Pension only — $21,018 a year for a single person, or $31,689 for a couple, including pension supplement and Clean Energy Supplement, as at March 2013 and applicable until September 2013). The single Age Pension now represents 27.7 per cent of Male Total Average Weekly Earnings. Are you willing to live on 27.7 per cent of an average Australian’s income? Living solely on the Age Pension gives you a basic income and access to discounts on health services and energy costs. While this figure is an amount you can survive on, many Australians don’t expect to live within this level of income by choice. (The full Age Pension rates are adjusted every six months, with next adjustment on 20 September 2013, and then 20 March 2014. The thresholds for a part Age Pension entitlement are adjusted 3 times a year – in March, July and September).
- Modest lifestyle ($22,641 a year, or $32,603 for a couple). Receiving an after-tax income that is slightly higher than the Age Pension obviously gives you a better lifestyle than living solely on social security, but you can only afford low-cost activities.
- Comfortable lifestyle ($41,169 a year, or $56,317 for a couple). Living on this level of after-tax income means you can enjoy more recreational activities. Also, you can afford to purchase private health insurance, higher quality household goods and travel regularly. Even so, a ‘comfortable’ lifestyle isn’t outlandish.
Note: If you take an income stream (pension) from a super fund or withdraw lump sums from the super system, you can expect to pay no tax on your income, provided you’re aged 60 or over (excepting some public servants, who may have to pay a small amount of tax). Even when you’re under the age of 60, with the help of good tax advice, you can earn the amounts necessary for a modest or comfortable lifestyle without paying a cent of tax. The current Labor government has announced that from July 2014, earnings on pension assets that are above $100,000 a year will be taxed at 15%. Super pensions that help fund the income levels listed above are unlikely to be hit with the new tax, and the tax is on pension asset earnings, not on amounts paid to fund members as pension payments. This proposed change to tax on pension earnings is not yet law, and it will not be introduced before the September
Comparing a modest with a comfortable lifestyle
What does a ‘comfortable’ lifestyle of just over $41,000 a year (for a single person), buy you that a ‘modest’ lifestyle ($22,641 a year) can’t? According to the ASFA Retirement Standard, a comfortable lifestyle enables “an older, healthy retiree to be involved in a broad range of leisure and recreational activities and to have a good standard of living through the purchase of such things as; household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, and domestic and occasionally international holiday travel.”
According to ASFA, the revised standard now takes into account additional expenditure in the following categories:
- Communications. More retirees want a mobile phone and broadband internet connection. In 2010, changes were made to both the comfortable and modest budgets.
- Private health insurance. The cost of private health cover is now included in both ‘modest’ and ‘comfortable’ lifestyles, because most retirees have private health insurance.
- Energy. Adjusted to reflect changing consumer patterns.
- Clothing. Adjusted to reflect more diverse shopping patterns.
- Household goods and services. This component now includes the cost of computer equipment upgrades, hairdressing and personal care items. The ‘comfortable’ lifestyle includes air conditioning, home alarm, and regular pest inspections.
- Recreation. This component was revamped in 2010 to include membership of social and sporting clubs, and the cost of eating out. The comfortable lifestyle allows for purchase of fishing gear or golf clubs.
- Transport. Adjusted to reflect the increased cost of owning and running a car.
What’s your savings target, then?
If you expect to live on more than the Age Pension ($21,018 for a single person, or $31,689 for a couple, effective from March 2013), you will need to find the extra income from your super and non-super savings.
Generally, the lower the investment return on your savings during retirement, the larger the lump sum needed when you start your retirement. Conversely, the higher the investment return you receive on your savings in retirement, the smaller the lump sum needed when you retire.
Note: If your target is a higher investment return, then you generally have to take more risk with your investments to deliver that higher return.
Four important facts to be mindful of when considering the figures in the tables below are:
- The lump sums listed in the tables are based on the assumption that you retire at the age of 65. You’re going to need smaller lump sum amounts if you’re eligible for the Age Pension and, in many cases, assuming an individual structures their finances appropriately, most Australians are likely to be eligible for at least a part-Age Pension.
- If you retire before
- The Federal Government has flagged that the Age Pension age is set to increase from age 65 to age 67, effective from year 2023. If you were born before 1 July 1952, then your Age Pension age remains at 65 (or 64, 64.5 or 65 years, if you’re a woman).
- If you were born on or after 1 January 1957, then you don’t have access to the Age Pension until the age of 67. For those born after June 1952 and before January 1957, Age Pension age is either 65.5, 66 or 66.5 years. For more information see the article Take note: Age Pension age increasing to 67 years.
A popular question: What if a ‘comfortable’ life of just over $41,000 a year (for a single person) or nearly $56,500 (for a couple) was not what you had in mind for your retirement. Perhaps you were expecting to enjoy an income of say, $100,000 a year. You can find out how much money you need for a $100,000-plus a year lifestyle in retirement in the article Setting a retirement target: Living on more than $56,000 a year. You can also check out the following articles:
Another popular question: What if you want a comfortable life AND you want to leave money to your children after you leave this earth? You can find an interesting discussion on this issue in the article How $1 million can last longer than you and in the comments section at the end of this article. For background reading to the ‘…last longer than you’ article you can also check out the SuperGuide article Retirement: Why can’t $1 million last forever?
Retiring – on investment returns of 5%, or 7%
The tables below lists the lump sum amounts that you need when you retire, and which you then need to invest on retirement (or your pension fund invests on your behalf) to deliver a ‘modest’ or ‘comfortable’ lifestyle.
Note: Due to reader demand, we have added an additional table to cater for those readers who will be opting for more conservative investments (long-term return of 5% per annum) in retirement.
Table 1 assumes your savings are invested and returning 5% per annum during retirement, while Table 2 assumes an annual investment return of 7% during retirement.
Table 1: What type of lifestyle do you want (investment return of 5% during retirement)?
| Couple | Single | |||||
| Lifestyle | Annual Income | Lump Sum Needed on Retirement |
Annual Income | Lump Sum Needed on Retirement |
||
| No Age Pension | Receives Age Pension |
No Age Pension | Receives Age Pension |
|||
| Basic (Age Pension) |
$31,689 | N/A | $0 | $21,018 | N/A | $0 |
| Modest | $32,603 | $610,000 | About $30,000 (+ Full Pension) |
$22,641 | $425,000 | About $36,000 (+ Full Pension) |
| Comfortable | $56,317 | $1.05 million | At least $550,000 but less than $1.05 million | $41,169 | $770,000 | At least $475,000 but less than $770,000 |
Table source and assumptions: see source and assumptions at the end of Table 2 later in the article.
Table 2: What type of lifestyle do you want (investment return of 7% during retirement)?
| Couple | Single | |||||
| Lifestyle | Annual Income | Lump Sum Needed on Retirement |
Annual Income | Lump Sum Needed on Retirement |
||
| No Age Pension | Receives Age Pension |
No Age Pension | Receives Age Pension |
|||
| Basic (Age Pension) |
$31,689 | N/A | $0 | $21,018 | N/A | $0 |
| Modest | $32,603 | $500,000 | About $25,000 (+ Full Pension) |
$22,641 | $350,000 | About $33,000 (+ Full Pension) |
| Comfortable | $56,317 | $865,000 | At least $455,000 but less than $865,000 | $41,169 | $635,000 | At least $400,000 but less than $635,000 |
Table source and assumptions: See text below.
Notes for Tables 1 and 2
1. The lump sum amounts are in today’s dollars and assume retirement at the age of 65. Annual inflation rate for years in retirement is 3%.
2. If you retire before you’re eligible for the Age Pension, or you’re otherwise not eligible for the Age Pension, then the lump sum you need to enjoy each lifestyle is a larger amount than if you were eligible for the Age Pension.
3. If you’re eligible for the Age Pension (see ‘Receives Age Pension’ column), the lump sum you need in retirement depends on how much Age Pension you expect to receive and the earnings you can achieve on your super and non-super savings. For the ‘comfortable’ lifestyle, part-Age Pension eligibility is likely for a couple, and a minimal part-Age Pension may be possible for a single person. The lump sum amount you need to invest for retirement is usually different for each person, depending on the size of the Age Pension entitlement. See sources below for assumptions.
4. Income tax isn’t taken into account in this table, although, in most cases, tax is irrelevant because of the tax concessions applicable to retirees.
Table sources: Table data compiled from sources as follows:
1. Modest and comfortable annual costs/incomes (as at March 2013) — Source: ASFA website (www.superannuation.asn.au). These March 2013 figures (namely, the latest figures available as at May 2013), are adjusted quarterly in line with the cost of living.
2. Lump sums needed when ‘No Age pension’, are calculated using
3. The lump sum amounts under ‘Receives Age Pension’ column are calculated using ASIC’s MoneySmart ‘retirement planner calculator’. Apart from investments and exempt assets (such as your home), assume have $25,000 in personal assets. For Table 1, calculations assume 5% a year return after fees and taxes (that is reinvested) on account balance of account-based income stream. For Table 2, calculations assume 7% a year return after
4. Age Pension amounts effective from March 2013, and apply until 19 September 2013. Age Pension is adjusted twice-yearly – in March and September.
Source: This article has been reproduced, with amendments and updated figures, from Trish Power’s book,
Hi Trish,
I’m 58 and will be retiring mid next year. I’m happy with my savings and expenditures and am not relying on the pension. Lucky me – probably. But there’s a lot of hard work (and current lifestyle sacrifice) gone into that and some of it doesn’t sit comfortably with this article.
Before I share my “pearls” let me say that I have been reading your articles for several years and I applaud the contribution you are making to superannuation awareness and education. Thank you. However, for those who want to be engaged and take a greater responsibility for their futures I think that there some refinements which I can suggest.
OK – where to start?
To me the only place to start was how much income will I need (note that means me and not ASFA or someone else). ASFA have provided some very useful guidance but, as you’ve said yourself, they may not have the same spending assumptions in mind as we do. For me to be comfortable I wanted to be able to live on roughly the same level of expenditures that I do now. So I itemized everything I spend money on and how much I spend. I then added the things we tend to ignore like fixing things or replacing them (the stove, the fridge, the TV all of which I expect to outlast at least once) and other maintenance expenditures. Then there are the special things – for me its overseas travel “in style” every few years while I can. It could also include a replacement car in a few years time. What I’m trying to address here are the things I have to save for (beyond my day-to-day spending). Call me a pessimist but then I added a safety margin because even the best laid plans go wrong. For example, it doesn’t take too much of an error in inflation assumptions and the comfortable life will start looking quite expensive in reality! Anyway I think you’ve got the picture that I was looking for a spending number that I could be happy with. In my case it was quite a bit more than ASFA suggests – but I’m really more happy with it because I understand it than because it was handed to me as a “one size fits all” solution.
That was a long paragraph! Sorry but there’s more to come.
With my budget worked out and itemized in a spreadsheet I keep reviewing and updating to reflect changes in costs etc. This is very important!
The next step in the process was to calculate my lump sum magic number.
Another of the points of disagreement I have with your article is how you work out your number. There are a few facts and a few assumptions which are needed to arrive at something that makes sense to me. One is my age now (meaning at any time I’m doing the calculation). The next is when I would like to retire (in my case the “full stop”). The gap between those two ages tells me two important things being -
1. how long I have to achieve my savings goal; and
2. in what year’s dollars my savings target should be expressed.
This last is often poorly understood. If I’m setting a savings target I don’t want it moving away from me as my time frame gets shorter. For example if I can buy a car now for $30,000 but I actually want to buy my new car in say seven years time I’d need about $37,000 (rounded) at that time to buy the same car assuming a modest 3% inflation. So if a 58 year old needs a lump sum of say $500,000 in today’s dollars to start their retirement at 65 then the age 65 savings target is really something more like $615,000.
Other important assumptions include the inflation factor to use. The “standard” is 3.5% and I note that Trish has used 3% in her calculations. But if we note the trends in the ASFA figures over time a rate of 4% or higher would seem to be justified. CPI statistics for retirees also support this view. Why? Well the basket of goods we need to buy (food etc) is likely to be a higher proportion of our post-retirement expenditure than pre-retirement (because we will have less discretionary income). Call me a pessimist but I have more comfort in using a higher inflation number. To explain, even if 3% proved to be right from the day we retired but inflation was 4% in the seven years leading up to retirement, that $615,000 would leave us short in “age 65 dollar” terms by some $43,000! So on day one of the rest of our lives we would already be behind life’s eight ball.
Other assumptions we need to make include the expected rates of return – I say rates because our accumulation phase is taxable but the pension phase gets something like a 15% return boost because it’s tax free. Remember too, the returns should be consitent with your risk profile. Don’t assume a 10%pa return id you’re not prepared to invest outside of bank deposits!
Finally (hooray they all say) you need to make some assumptions about how long you will live. This is real “finger in the wind” stuff. While average life expectancy tables can be useful we don’t all keel over according to an actuary’s table! You could live to 100 or more! I’m not saying that you need the same lifestyle at 100 as at 65 – perhaps the age pension would be quite comfortable by then. I’m just suggesting that you might like to assume that you will beat the odds and live a bit longer than average.
This is real work – but with a target that you understand you can then plan to achieve it. You might need to save more or work longer or rethink your lifestyle needs. But you’ll you won’t be trying to live someone else’s definition of a comfortable life.
Good luck and thanks for getting to the end of my rant.
Hi Peter
Thanks for your contribution to the discussion – a great read, and considered comments. I regularly update these articles and I hope that everyone applies their own experience and circumstances as you have done – everyone has unique circumstances but these articles can trigger these thoughts (and hopefully actions) for people.
In relation to inflation rate, you make compelling arguments, although another reader has suggested that my inflation assumption is too high. I have chosen to use 3%, and clearly state that as one of the assumptions.
In relation to today’s dollars, yes, it is tricky to look ahead but the safest approach from my point of view is to look at what is happening today – I do flag the complexity of today’s and tomorrow’s dollars in the SuperGuide article http://www.superguide.com.au/boost-your-superannuation/retirement-why-can%e2%80%99t-1-million-last-forever
Thanks again for your contribution.
Regards
Trish
It is a very simple calculation. Why do people complicate it so much?
Suppose your annual expense as of today is $ x. i.e. you can live comfortably this year if you get $ x.
Assume you would live for n years more.
In that case if you want to retire comfortably today, you need a corpus fund of $ x * n in your bank account today.
For example, if your annual expenditure as of today is $10000. Suppose you are 20 years old today and so might live for 80 more years.
So, if you have $10000 * 80 years = $800000 is your bank account today, you may retire immediately.
This formula can be applied at any individual at any age and any country and can never go wrong (since inflation rate in any country will always be lesser than bank interest rate offered on fixed deposits). It automatically takes care of inflation, taxes, insurance, medical and incidental expenses, etc.
However, it assumes the following about the person who intends to retire.
1. He/She already owns a house (since property prices are highly unpredictable and play havoc with your investments). Alternatively, if he/she is staying in a leased accommodation, then cost of rent should be accounted in annual expenditure.
2. He/She would always invest the balance corpus fund in fixed deposits offered by reputed banks which are safe. He/She would never risk money on equities or shares or anything else which does not guarantee fixed returns.
3. He/She would maintain his/her current standard of living and not indulge in unnecessary expenses such as buying a luxury car, expensive jewelry or foreign trips.
gee Yogesh – you can live on $10kpa when ASFA reckons the most basic lifestyle for a single person (Age pension only) costs $20kpa ? – good luck with that ! Using $20kpa your formula for 80 years needs $1.6m
my partner reckons she spends $10kpa – but she’s not paying any housing or car costs, just the odd food shopping.
My simple formula is the 4% rule – based on decades of analysis, one is most likely to be able to draw down 4% of your capital each year without it running out.
On my calculations that we spend $37kpa as a couple ($47kpa including a couple of overseas holidays a year) that would require capital of $925k (or $1175k).
Hi Trish!
Just read your updated article on how much super required for retirement based on the ASFA Retirement Standard and have a couple of observations:
1. The amount of $56,339 for “comfortable couple” may be incorrect. My summation of those data comes to $56,183.40. No significant impact on your analysis.
2. In your tables “Retiring – on investment returns of 5% or 7%, I think there is some mixup between nominal and real returns. I cannot reconcile the $1.05 million lump sum with a 5% real or nominal rate. However, if I use a real rate closer to 2%, the numbers start to align.
Is it possible that the annuity calculations were done with REAL rates? If so, what expected inflation rate did you use?
May be worth checking those numbers in the new table …
Regards
Norm Sinclair
Hi Norm
Thanks for your email and questions. I rely on data from the ASFA Retirement Standard for the lifestyle costs and they indicate $56,339 (it is not necessarily the total weekly costs by 52, rather it is worked out over 365 days I recall). If are referring to the lump sum amounts, I do use some rounding to keep the lump sum figures in a simple form.
In response to your 2nd question, yes the lump sum amounts are in today’s dollars, which I explain in the table notes and assumptions. I assume 3% inflation each year.
I will review, and perhaps flag the today’s dollar aspect earlier in the article.
Regards
Trish
In response to Greg’s comments about making provision for nursing home care at some level, this is a very valid point and not one I have discounted lightly (Excel spreadsheets notwithstanding!).
Many financial planners make a similar comment. However, when asked, “well, OK , exactly how much *should* I put aside?”, the answer is usually a resounding silence.
Simply said, there isn’t a simple dollar figure that will get you over the line. The issue of nursing home costs (entry fees – negotiable do you mind !), weekly fees (how much have you got ?), location, “quality” (quality – ie: urine smells bear absolutely NO relationship to the cost of care) and availability vary from the sublime (<$200k) to the ridiculous ($800k plus) – at least in Sydney.
With a modest Super pot of $400k to $600k and owning outright your PPR, I refuse to put aside 80% to 90% of these funds for a "rainy day". Our plan , should this come to pass – and believe me, I am fully aware that it's distinctly possible – is to sell our PPR (we have already downsized from Syd to Canberra) and downsize a second time to fund this event.
Even this process is fraught with financial pot-holes – both Centrelink & nursing home (business) owners have you by the proverbial short & curly's. Read up on Sydney nursing home entry criteria with a glass of fine red wine and weep. It's incredibly complicated with enough legal and financial "gotcha's" to make a QC turn in his/her grave. And having to make these kind of decisions in your dotage is even more worrying.
Frankly, I don't know what solution is acceptable – but to close off, I've yet to hear a cogent answer from a financial "sage" either.
In the meantime, 3 cheers to the SuperGuide and Trish for a super web site !
Kitski
Don’t want to cast doom and gloom on the “How Much is Enough” subject, but out of my two parents and 4 aunts and uncles, only 2 of them reached retiring age. I mention this just to keep everyone’s feet on the ground and certainly NOT to worry about not scoring millions!
Hi Trish,
Sorry for this long posting. I had to get it “off my chest” !
***************
Trish,
I feel compelled to comment on Moom’s figures. When you consider the USA Health care, taxation and Bond market rates, 4% drawdown may be appropriate.
I believe a strong case can be made here that the “FUD factor” – fear, uncertainty & doubt – is rampant. Many retiree’s fears are fuelled by the press and advisors with hidden agendas. With Australian CPI under control near 3% and term deposit rates of >6% available for 6 month to 2 year terms, why would anyone draw down only 4% of your Super assets per year ?
There seems to be 4 main areas of “disagreement” on how much is needed in retirement. Many retirement calculators and/or experts use some or all of these to advance their particular FUD-cause. These are:
1) failure to account for – and claim – the Pension
2) minimising drawdowns from their “Super pot” so upon death, they have same amount of funds in the pot as when they started (allowing for inflation)
3) ignoring that “almost all” retirees require more funds in early retirement years than in later years
4) assuming that CPI will again run rampant (like the good old days ?) beyond the benchmark 3-4% and so decimate your Super pot
And a sneaky 5th point:
5) Greed – or fear – in estimating how much you’ll need in retirement.
I would suggest that (1) is a lifestyle choice. The Pension – whether you receive 95% or 5% of the $28.5k Pension for a married couple – is your entitlement. It’s not “rorting the system”.
Likewise point (2). Spending and/or generously giving most of your Super on yourselves while leaving your PPR (family home) to either your kids or favourite charity seem like a worthwhile alternative.
Be well aware that Centrelink’s asset and income tests are designed to actively DISCOURAGE this kind of activity. If a couple has a total Super pot (or “assets”) of less than $991,000 (May ’11), you are entitled to the proverbial $1 pension. On the other hand, if you DO have more than $991,000 of assets, you should already be in deep and meaningful discussions with your financial advisor how to arrange your finances to minimise your exposure to these tests to maximise your Pension.
As for (3), guessing how much “graded income” you need over 20 years is just as difficult as figuring out a regular annual sum. Either way, it be calculated by any financial planner worth his/her salt and is worthwhile pursuing, if only to see the interesting results !
For point (4), I have confidence that Treasury (and Governments of both flavours) know how to avoid “rampant inflation of yesteryear” (10-15%). The mechanisms are understood and practised by most developed countries. If CPI wanders up to 10% again, we’re all in a pickle. This fear smacks of the “chicken-little” syndrome.
Which leaves only one real unknown – how much ? Assuming you wish to maintain, NOT IMPROVE your lifestyle in retirement, many Australian commentators suggest 60% of pre-retirement GROSS salary is a good starting point for retirement funds. (USA planners suggest 85-90% for reasons mentioned earlier.)
A median income of ~$65k pre-retirement suggests $39k pa for your halcyon days. A considerable percentage of this will likely be funded by the Pension.
Putting funds aside for future health-care or retirement home care costs is another cause for concern and I don’t believe there is a simple answer.
One things for sure – retirement (life ?) will be full of challenges but an interesting journey non-the-less !
I don’t hold a FP licence – these comments are a personal opinion. The old FIDO website (now MoneySmart) is a wealth of good, impartial information:
http://www.moneysmart.gov.au/superannuation-and-retirement
Just keep probing and asking questions until you’re comfortable with the answers !
Regards,
Kit Scally
If you want to make sure you won’t run out of money you shouldn’t spend more than 4% of the initial value of your super per year (you can adjust this up over time to allow for inflation). That means that to spend $54k per year you need $1.35 million, not $815k. 4% is the standard rule of thumb used in the US anyway. And remember that there could be a lot of inflation between now and when you retire so that you need to adjust all these numbers upwards for that too.
I propose the Government has tampered with the Westpac-ASFA retirement standard!
Most would agree this is an important piece of information, widely published and consumed by many. The figures for a modest retirement are incorrect – they have been doctored!
To put this another way they have watered down (devalued) the perception of “modest lifestyle” to age pension plus a few thousand bucks. For a couple going from $26,338 to $27,695 is NOT a lifestyle change.
To work out what they are doing requires a pile of butcher paper and some coloured markers.
I have been busy for a while now planning for retirement, I am 62 and intend to retire next July.
My independent research (do you like that!) indicates a modest lifestyle is around 36-38K.
Cheers
A comfortable lifestyle for one is extravagant for another. After I pay my mortgage, make my super contributions and pay my tax, I can live comfortably on about $30 000. So people need to make their own decisions, but saying the government tampered with the figures is just silly. You can go into the site and see the break up for a modest or comfortable lifestyle for singles or couples and then make your own decisions on where you are under or over in your spending habits for different areas.
Hi Kit, Many thanks for your comments and question. I have added your question the list of questions that I will be answering in due course. I won’t be able to answer immediately because of the number of questions that I receive. Regards Trish
Hi Trish,
I’m OK (!) with the lump sum required for a couple desiring a “comfortable” retirement – but there’s a catch.
I’m quite adept at working with Excel spreadsheets and prepared quite a complex worksheet for my impending retirement (I’m 62 …).
I break up retirement into 3 phases – early, middle & late (ie nursing home).
The issue is simple – your income needs vary dramatically in each phase. You arguably need more than $50771 pa (to use your exmaple) in the 1st phase, possible less in phase 2 and most certainly less in the last phase.
If you do the sums on the estimated lump sum at the start of retirement when factoring in this “lifestyle”, the total amount is considerably less ! (This assumes all the usual unknowns etc.)
I guess the question is – is this a legitimate way of looking at the super “pot” required – or is the logic flawed ??
Interesting …
Regards,
Kit
Kit,
One very serious flaw in your income needs being “most certainly less in the last phase” proposition:
Have you checked out the cost of medium care, or even worse, high care nursing home accommodation in a half-decent facility? Anybody who has been through this process with an aged parent will confirm that checking into the local Hilton is almost a cheaper option (not to mention considerably easier)!
A most depressing exercise, I can assure you, if the criterium is “half-decent” – i.e. where the odour of lysol to counter the smell of stale urine is not overwhelming, and demented patients are not wandering at large. And forget about a leisurely assessment of available vacancies – the issue is finding a vacancy: any vacancy.
Definitely not a case of reduced income needs, I can assure you. On the contrary it is the absolute opposite. I seriously suggest you check it out sometime if you plan to live into your 90s and self-fund your care.
Now THERE’S something to look forward to in our declining years, eh? :>
But rarely taken into account in actuarial charts (nor complex Excel spreadsheets).
Cheers,
…Greg Williams
Love the specific figures given in ‘How Much Super is Enough’. I know the figures involve generalisations, but the explanations of where the data is from and what assumptions have been made makes the information really usable. I just discovered this website through an AIA newsletter and have already marked it as a favourite. Thanks Trish.