I’m sorry to read about your circumstances. SuperGuide is an information site rather than an advisory site so I am unable to advise you on your best option. What I can do however is provide you with some information and pointers for seeking further assistance.

Who can help you?

The following services or professionals may be able to assist you with your decision:

• Financial Information Service. A free government-funded service run under the banner of Centrelink, but you don’t have to be in receipt of a Centrelink benefit to use this service. (click here for more information or telephone on 13 23 00)
• Financial Counselling. You can access free financial counselling to help you manage your day-to-day finances from a financial counsellor. The Australian Securities and Investments Commission (ASIC) has a list of the main services across the country. Click here to access the list. http://www.fido.gov.au/fido/fido.nsf/byheadline/Financial+counselling
• Retirement advice from an accountant or fee-based financial adviser. Although a full-blown financial or retirement plan can add up to thousands of dollars, I’d expect any adviser providing preliminary advice on your circumstances would charge no more than a few hundred dollars. If you’re fortunate, some advisers may provide you with a preliminary view for no charge, but that would be unusual.

If you retire, what are the implications?

If you do retire before the age of 60, you’re likely to have to pay some tax on your super benefits. If you retire on or after the age of 60, then you can expect to receive all of your super benefits tax-free (unless you’re a member of one of the older public sector funds). For more information on the tax implications of retiring check out the following articles:

• I’m 59 and I have $180,000 in super. Will my super be taxed?
• Retiring before the age of 60: the tax deal
• Retirement: Taking benefits before the age of 60
• Tax-free super for over-60s

Note: In some circumstances, an individual who retires may, at a later stage, reconsider his or her circumstances and decide to return to work. I explain this possibility in the article Super for beginners, Part 9: If I retire and take my super, can I return to work?

If you retire, your super fund will require you to complete a form that provides evidence of your intention to retire, and proof of your identity.

Note: If you’re suffering mortgage stress, you may be eligible to access some of your super benefits on compassionate grounds which may enable you to reduce debt without retiring, although the access rules are strict. I explain the rules in the article Super for beginners, part 10: Can I use my super to reduce my mortgage?

Related posts:

1. Accessing super early: Not for business debts
2. Super for beginners, Part 9: If I retire and take my super, can I return to work?
3. Retiring before the age of 60: the tax deal

I am very sorry to read about your husband and your current circumstances. Anyone aged 65 or over can access super benefits without retiring, and unless you’re in a public sector fund, such benefits will be tax-free. I explain the conditions of release in my article 12 legal reasons to cash your super. You can also visit the ‘accessing super’ section of this website for more articles on accessing super benefits.

A super fund simply needs evidence that you have reached age 65 or over, and you must complete a couple of forms. You need to contact your super fund for the appropriate forms and the process involved for accessing your super money. Check with your fund about any costs involved in withdrawing the amounts.

I am not permitted to recommend any super funds, but I do have some articles on ‘choosing a fund’ on our website that may assist you.

Note: I’m not aware of your late husband’s superannuation entitlements but if he was a fund member of an Australian superannuation fund, he may have had life insurance cover. You will need to contact your late husband’s super fund for more information.

Related posts:

1. Accessing super early: Temporary resident
2. Accessing super to buy property: part two
3. Accessing super early: Permanent departure from Australia

I’m sorry to read about your troubles. Generally speaking, the super rules don’t permit access to super benefits to pay business debts. I have written about this issue in the article No super access for business debts or tax bills.

Note that if an individual is unable to pay a mortgage, and the bank is planning to foreclose, then the individual may be able to access super benefits on compassionate grounds. I also explain this option in the above article. If the Australian Prudential Regulation Authority does permit access to your super benefits, then note that some tax may be payable on the super benefit.

Retirement: Based on my calculations, your age is 57. What this means is that you have reached your preservation age (anyone born before July 1960 has a preservation age of 55). If an individual has reached preservation age and chooses to retire, then such an individual satisfies a condition of release and can access super benefits. Retiring obviously is not an option based on the details of your question.

TRIP: Another alternative for an individual who has reached preservation age is to start a transition-to-retirement-pension (TRIP) which permits you to access up to 10% of a person’s super benefit each year as pension income. Again, after allowing for the costs of setting up a TRIP, the maximum amount that can be withdrawn is probably a drop in the ocean when considering the circumstances that you’re facing.

Note: Generally speaking, superannuation benefits are protected from creditors in the event of a business collapse. The one major exception is where fund members make substantial contributions when a business collapse or bankruptcy is imminent. For more information on this type of scenario, I recommend that you chat to your business adviser.

Related posts:

1. No super access for business debts or tax bills
2. Accessing super early: Living overseas and over the age of 55
3. Accessing super to buy property: part one

Before I respond to the question, for those readers who are not familiar with the term ‘preserved’ in relation to super benefits, the Government has rules in place to ensure that Australians don’t access super benefits before they retire or satisfy another condition of release, such as suffering permanent disability. You can read about ‘preservation’ and ‘preserved benefits’ and ‘conditions of release’ in the article 12 legal reasons to cash your super.

Your question has two parts – the tax treatment when taking a lump sum, and the tax treatment when taking an income stream, which in the UK is often referred to as an annuity. In Australia, the term ‘annuity’ has a special meaning –it generally relates to lifetime income streams offered by life insurance companies.

Generally speaking you can expect the following tax treatment for Australian superannuation benefits received on or after the age of 60:

1. Treatment of lump sums

In nearly all cases, an individual retiring from the workforce on or after the age of 60 can withdraw super benefits as a lump sum and no tax will be payable on those super benefits. The two main exceptions to this statement are:

• If you’re a long-term member of certain public sector funds, then some or nearly all of your super benefits may be considered ‘untaxed benefits’, which means no earnings or contributions tax has been payable on these benefits yet. When the super benefit is withdrawn from the fund, a benefits tax is payable on the taxable component of the benefit, even when taken after the age of 60.
• If you’re a long-term member of certain employer-run super funds (usually major companies), you may be required to take an income stream (pension) from the fund rather than a lump sum. I believe this exception also applies to a minority of defined benefit public sector funds. Most Australians are members of super funds that permit lump sum payments.

Note: By taking super benefits out of the super system, the concessional tax rate of 15% on fund earnings no longer applies – any earnings on the lump sum invested in a non-superannuation environment, after a person withdraws the super benefit, will be subject to the person’s marginal tax rate. Australian marginal tax rates can range from zero to 45% (plus Medicare levy). (I suggest you check with a tax expert the implications of an individual living in another country receiving income from an Australian source.)

If an individual starts a superannuation income stream (pension), then any earnings on those super benefits funding the income stream are exempt from tax. This exemption from tax on earnings is in addition to tax-free super benefit payments for over-60s. I explain this further in the next section.

2. Treatment of income streams (pensions)

If you’re aged 60 or over and retired, you can take your super benefits as an income stream (or as a lump sum – refer earlier) and pay no tax in Australia on your benefit payments. The major exception in relation to whether pension payments from a superannuation income stream are tax-free is where an individual is a long-term member of a certain type of public sector super fund.

The earnings on any investments financing a superannuation income stream are also tax-free, whether you retire before or after the age of 60.

Since the introduction of tax-free super benefits for over-60s from July 2007, retirement planning has definitely become easier but I suggest that anyone thinking about retirement, should check their personal circumstances with an accountant (and for our Aussie expats scattered around the world – an Australian accountant/adviser, as well as a local accountant/adviser).

Related posts:

1. Retirement: Taking benefits before the age of 60
2. Super for beginners, part 16: Tax-free twice
3. I’m 59 and I have $180,000 in super. Will my super be taxed?

Are you taking your super as a lump sum, an income stream or a combination of both?

Lump sum only

You pay your concessional rate of tax and leave the super system when you take all of your super as a lump sum.

Super benefits can be made up of two components – tax-free and taxable. If you receive a superannuation lump sum on or after the age of 55 (but before the age of 60), you can take advantage of the low-rate cap, an indexed lifetime limit that applies to your taxable component. You can receive up to $160,000 (for the 2010/2011 year) of your taxable component tax-free, provided your component is a taxed element.

If you retire on or after the age of 55, you can receive up to $160,000 (for the 2010/2011 year) of your taxable component tax-free. The $160,000 low-rate cap is in addition to any tax-free component making up your super benefit. If your superannuation lump sum includes a tax-free component, you also receive that part of the benefit tax-free.

Note: Note that the single low-rate cap applies to all benefits received over your lifetime, rather than a fresh limit applicable for each benefit payment. If you have withdrawn super benefits in the past, you may have used up some, or all, of your low-rate cap of $160,000 (for the 2010/2011 year), which means you may have to pay tax on the taxable component when you take additional lump sums.

Income stream only

By putting the right structure in place and choosing an appropriate income stream, you can avoid paying tax altogether when taking super benefits before the age of 60. Further, any earnings on assets used to finance your income stream are tax-free.

Lump sum and income stream

You can have the best of both worlds. You may receive tax-free lump sums from your benefit’s taxable component, totalling up to $160,000 (for the 2010/2011 year). You can receive even more super as a tax-free lump sum, if your benefit includes a tax-free component.

You can also start an income stream before the age of 60 (subject to satisfying the payment rules), which enables you to access a tax rebate on your pension income (assuming you’re aged 55 or over).

Note for public servants: If you are, or were, a long-term public servant, you may receive all or part of your super as an ‘untaxed benefit’. An untaxed benefit is a benefit that hasn’t been subject to contributions tax or earnings tax, while a ‘taxed benefit’ has been subject to contributions and earnings tax. Some public sector superannuation schemes (now closed to new members) haven’t paid these taxes on employer contributions that are in excess of Superannuation Guarantee contribution requirements. This is because the additional employer contributions aren’t paid by the Federal Government until the benefit is payable. Untaxed benefits paid from such schemes are then hit with a higher tax to recoup the super taxes when the Government finally hands over the cash. If you belong to an ‘untaxed’ super scheme, then check with your super fund about your entitlements.

Related posts:

1. Turning 55: Taking super, tax and timing
2. Retiring before the age of 60: the tax deal
3. Understanding the tax DNA of a super benefit

If you’re aged 60 years or over, any lump sum or income stream benefits you receive from a taxed super fund (90% of all super benefits) are tax-free. Further, fund earnings on assets in pension phase are exempt from tax – taking an income stream means no tax on fund earnings.

In contrast, earnings on assets in accumulation phase are subject to up to 15% earnings tax. If you choose not to draw a pension from your fund and leave your super benefit in accumulation phase indefinitely, then the 15% earning tax applies.

Related posts:

1. Tax-free super for over-60s
2. Super for beginners, part 15: Super tax – as easy as 1-2-3
3. Super for beginners, part 17: Four must-knows about super’s tax rules

Tax-free super has always been a feature of Australia’s retirement system but, before July 2007, you usually had to hire advisers and get involved in creative gymnastics to make it happen — not unlike what you still have to do to secure tax-free income when you retire before the age of 60. And before July 2007, how much super you could receive at concessional rates was limited. Not anymore.

The good news keeps on coming. Since 2007, you can earn non-super income in addition to your superannuation income and still pay little or no tax because your superannuation benefit isn’t counted as income for tax purposes and, also, isn’t included in your tax return. For example, you can, say, receive $100,000 income from your super fund, and $16,000 (for the 2010/2011 year) from part-time work and pay no tax. If you’re aged 65 or over, you can earn even more non-super income and pay no tax.

If you’re aged 60 or over and retired, your superannuation benefits from a taxed source are tax-free — most Australians are members of a taxed super fund.

If your super benefits are paid from an untaxed source (some public sector funds) then your benefits may still subject to income tax after you turn 60, but less tax than if you were under the age of 60.

The age of 60 is the new 65 in this exciting world of tax-free super for over-60s. In the past, the retirement age of 65 used to be the main focus in retirement planning because that was the official age of retirement for many companies, and it was only a few years ago that you weren’t permitted to work beyond the age of 65 if you were an employee.

More importantly, the age of 65 is the Age Pension age for Australian men, although Age Pension increases to 67 from 2023. The Age Pension age for women is currently 64 years (since January 2010) but that age will increase to 65 by 2014, and increase to 67 by 2023. The Age Pension is still a very important part of retirement planning for most Australians because around 80 per cent of retired Australians of Age Pension age currently receive a full or part-Age Pension.

Consider taking an income stream: Besides enjoying tax-free income in retirement, a compelling argument for taking an income stream is that the earnings on assets financing your income stream are exempt from tax. You receive tax-free income, and your tax-free income is sourced from assets that are invested in a tax-free environment. In comparison, if you invest your savings outside the super environment, the earnings on your savings are subject to income tax.

Note: If you choose, you can leave your super account in accumulation phase indefinitely: You’re not forced to take a lump sum or start an income stream. Accumulation phase means that you haven’t started an income stream with your superannuation account. By choosing such a strategy, however, your super account’s fund earnings on assets in accumulation phase continue to be subject to up to 15 per cent earnings tax.

Source: Updated extract from Trish Power’s book Superannuation: Planning Your Retirement For Dummies (Wiley) ($29.95). Reproduced with permission.

Related posts:

1. Super for beginners, part 16: Tax-free twice
2. Tax-free super: what happens when I start a pension just before turning 60?
3. Super for beginners, part 17: Four must-knows about super’s tax rules

If you’re willing to wait until you turn 60 before you retire, you can automatically receive your super tax-free.

Super benefits can be made up of two components — ‘tax-free’ and ‘taxable’. When you retire before the age of 60, the tax-free component is, as you’d expect, tax-free, while the taxable component is usually subject to tax. How much tax you pay on your super benefit when you cash your super before the age of 60 depends on:

• The size of your super benefit. The first $160,000 (for the 2010/2011 year) of your taxable component is tax-free when taken as a lump sum, except for certain benefits paid to some public servants. The tax-free limit of $160,000 is known as the low-rate cap.
• Whether your benefit includes a tax-free component, which you receive tax-free. The tax-free component represents your non-concessional (after-tax) contributions and, if you were a member of a fund before July 2007, several other elements of your super benefit. The tax-free component is always tax-free.
• Whether you take an income stream. A superannuation lump sum is taxed differently from a benefit that you convert into a superannuation income stream (a series of regular payments over a period of time). If you retire before the age of 60, you may receive a tax-free amount as part of your income stream, and also be eligible for a 15 per cent pension offset on the taxable component of your benefit. The pension offset reduces your tax bill, potentially to zero.
• Whether you receive a benefit from a taxed source or an untaxed source. You pay more tax when you receive a benefit from an untaxed source — about 10 per cent of all superannuation accounts are from an untaxed source, and relate to benefits from older public sector super schemes (now closed to new members).

Note: Do your research and get advice on your retirement options. You can discover a lot of helpful information by attending one of the many free retirement seminars held around the country. Your super fund may hold such seminars, and some financial planners looking for new business may advertise free seminars in the newspapers. An excellent resource is the Financial Information Service (FIS). FIS is a not-for-profit and independent financial education and information service (although funded by the Government) that is available to anyone.

Source: Extract from Trish Power’s book Superannuation: Planning Your Retirement For Dummies (Wiley) ($29.95). Reproduced with permission.

Related posts:

1. Understanding the tax DNA of a super benefit
2. Retirement: Taking benefits before the age of 60
3. Super for beginners, part 15: Super tax – as easy as 1-2-3

The rules that have applied since July 2007, are a lot simpler for Australians considering retiring on or after the age of 60. Here’s the short story of a modern-day superannuation benefit:

• The tax-free component is always tax-free, including when you retire before the age of 60.
• The taxable component is taxable under the age of 60, but tax-free when taken on or after the age of 60.
• If the taxable component of your benefit is from an untaxed source, tax is still payable on the benefit even after the age of 60.

Note: If you’re aged 60 or over and receiving a super benefit from a taxed source, the size of your tax-free component is irrelevant — you receive 100 per cent of your lump sum or income stream payment free of tax. The tax-free component only becomes important if

• You receive a benefit under the age of 60, OR
• You receive a benefit from an untaxed source, OR
• You leave your super to non-dependants when you die.

Source: Extract from Trish Power’s book Superannuation: Planning Your Retirement For Dummies (Wiley) ($29.95). Reproduced with permission.

For more information on how your super benefits are taxed, check out our Super and Tax section.

Related posts:

1. Retiring before the age of 60: the tax deal
2. SMSFs: What is the proportioning rule?
3. Retirement: Taking benefits before the age of 60

Background: The co-contribution is a tax-free super contribution from the Federal Government when you make a non-concessional (after-tax) contribution. If your ‘total income’ is $31,920 or less (for the 2010/2011 year), the Federal Government pays $1.00 for every dollar you contribute to your super fund in after-tax dollars, up to a maximum of $1,000 a year. If your ‘total income’ is more than $31,920, your co-contribution entitlement reduces by 3.33¢ for every dollar you earn over $31,920, until it cuts out at $61,920.

Generally speaking, an individual is eligible for the co-contribution where the individual has been an employee, or carried on a business during a financial year, even for part of the year, subject to satisfying the work test, income test and age test associated with the co-contribution scheme.

Retiring in a financial year will not necessarily preclude someone from claiming the co-contribution, but it may affect an individual’s ability to meet the co-contribution work test (10% or more of total income from employment or carrying on a business, or a combination of both).

I explain the eligibility rules in the article Cashing in on the co-contribution rules. The ATO website also has some useful information on the co-contribution rules: For example, quoting directly from the ATO website:

You may be eligible for the super co-contribution if all of the following apply:

• you make an eligible personal super contribution by 30 June each year into a complying super fund or RSA and don’t claim a deduction for all of it
• your total income (minus any allowable business deductions) is less than the higher income threshold
• 10% or more of your total income is attributable to eligible employment-related activities, carrying on a business or a combination of both
• you are less than 71 years old at the end of the year of income
• you are not the holder of a temporary visa at any time during the income year, unless you are a New Zealand citizen or holder of a prescribed visa
• you lodge your income tax return for the relevant income year.

Your super fund needs your tax file number (TFN) before it can accept your personal contribution or a super co-contribution from us.

Related posts:

1. Co-contributions: Can I claim the tax-free bonus as a property investor?
2. Cashing in on the co-contribution rules (2010/2011 year)
3. Super contributions: Turning 65 part-way through the year

A glib response to this question may be: Enough money for what? From the many times, though, that I’ve been asked this question, I know that when most Australians ask it, they really want to discover the answer to: How much money do I need to maintain (or improve) the lifestyle I currently have until the day I die? For some Australians, the question also includes: ‘And to leave enough money to help my family after I’ve gone’.

Wanting a cushy lifestyle

Your own answer to this question depends on four main factors:

• Level of income that you hope to receive each year, that is, your lifestyle expectations
• How long you expect to live, that is, your life expectancy
• Earnings you can expect to receive on your pension account in retirement
• Whether you intend to continue working and/or contributing to your super fund in retirement

In the article, A comfortable retirement: how much super is enough? I report on an excellent study that tracks the cost of living in retirement. The Westpac-ASFA Retirement Standard indicates that you need just over $39,000 a year in income for a comfortable retirement, or nearly $54,000 a year as a couple. Alternatively, you can enjoy a modest lifestyle on an income of around $21,000 a year (or around $30,000 a year for a couple) with minimal savings thanks to the Government-funded Age Pension.

Many people are relieved to finally know what target they need to be working towards in terms of retirement savings. A ‘comfortable’ lifestyle for some Australians isn’t what they had in mind. They were hoping for a ‘very comfortable’ life or even ‘lavish’ lifestyle when compared to the comfortable life that you can live on when receiving around $39,000 a year, or $54,000 as a couple.

If you fall into the ‘wanting more’ category then you’re probably seeking information on how much super is needed to finance much higher income levels.

The general rule when planning for retirement is: If you want a similar lifestyle to the one that you’re enjoying during your working life, you need a minimum of 60 to 65 per cent of your pre-retirement income in retirement. For example, if you live comfortably on $60,000 a year and you want a similar standard of living in retirement, you probably need an income of at least $36,000 to $39,000 a year. If your pre-retirement income is $120,000 and you want to maintain that lifestyle, then you probably need at least $72,000 to $78,000 a year.

Unlikely to receive Age Pension

The table below lists the lump sum amount of money you need invested on retirement to finance an income stream at higher levels of income. The lump sum amounts shown in the table assume no Age Pension, but a couple seeking $50,000 or $55,000 a year is likely to secure a part-Age Pension. Couples hoping to live off $65,000 a year and even up to $80,000 a year, may be able to secure a small part Age Pension, and could reduce the retirement lump sum necessary.

A single person may be able to secure a part-Age Pension when seeking $50,000 a year income, but he or she is unlikely to receive a part-Age Pension at $55,000 a year and higher income levels due to the amount of assets necessary to finance such levels of income. Eligibility for the Age Pension then means you need fewer savings in retirement. I discuss the Age Pension in more detail in other articles on the SuperGuide website, and in my book, Superannuation: Planning Your Retirement For Dummies (Wiley).

Note: The longer you live, the more money you’re going to need. Alternatively, you can just accept a lower standard of living in retirement. On average, women need to save more because they live longer than men.

Source: This article is an updated extract from Trish Power’s latest book, DIY Super for Dummies (Wiley, $39.95). Reproduced with permission.

Related posts:

1. A comfortable retirement: How much super is enough?
2. A case study: I’m 53. Is it too late to save for my retirement?
3. Moving targets: come on, how much do I really need?

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. I don’t intend to suggest the exact lifestyle you must choose for your retirement years but I can offer 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.

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 three 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 ‘Westpac–ASFA Retirement Standard’, measures the cost of a modest or comfortable lifestyle in retirement, in dollar terms, and adjusts these costs quarterly in line with the cost of living.

The Westpac–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 Westpac 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” (ASFA website). I explain these recent changes to the Standard later in this article.

Living in comfort on $39,000 (or $54,000 for a couple) a year

The lifestyle costs in this article reflect the cost adjustments as at 31 March 2010.

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 — $18,229 a year, or $27,482 for a couple, including pension supplement, as at 20 March 2010). 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 Age Pension is adjusted every six months, with next adjustment in September 2010).

• Modest lifestyle ($20,981 a year, or $30,399 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 ($39,159 a year, or $53,565 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 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.

Comparing a modest with a comfortable lifestyle

What does a ‘comfortable’ lifestyle of just over $39,000 a year (for a single person), buy you that a ‘modest’ lifestyle ($21,000 a year) can’t? According to the Westpac–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:

1. Communications. More retirees want a mobile phone and broadband internet connection. Changes were made to both the comfortable and modest budgets.
2. Private health insurance. The cost of private health cover is now included in both lifestyles, because most retirees have private health insurance.
3. Energy. Adjusted to reflect changing consumer patterns.
4. Clothing. Adjusted to reflect more diverse shopping patterns.
5. 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.
6. Recreation. This component has been revamped 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.
7. 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 ($18,229, or $27,482 for a couple, as at March 2010), you need to find the income from your super and non-super savings.

The table below lists the lump sum amounts that you need to invest on retirement to deliver a modest or comfortable lifestyle. The lump sums 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 you structure your finances appropriately, you’re likely to be eligible for at least a part-Age Pension.

If you retire before Age Pension age, that is, 65 (if you’re a man), or at least 64 years (if you’re a woman, from January 2010), then you need a bigger lump sum than those shown in the table because you have to finance a longer life in retirement, and you’re not going to be eligible to apply for an Age Pension until you reach Age Pension age.

Note: The Federal Government has flagged that the Age Pension age is 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.

A popular question: What if a ‘comfortable’ life of just over $39,000 a year (for a single person) or nearly $54,000 (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 $55,000 a year.

Source: This article has been reproduced, with amendments and updated figures, from Trish Power’s books, DIY Super For Dummies (Wiley) ($39.95) and Superannuation: Planning Your Retirement For Dummies (Wiley) ($29.95) Reproduced with permission.

Related posts:

1. Setting a retirement target: Living on more than $55,000 a year
2. A case study: I’m 53. Is it too late to save for my retirement?
3. Moving targets: come on, how much do I really need?