Smith Wealth Smith Wealth

Want to retire in comfort or modesty? Start planning now

We all want to retire happy, but working out if you will have enough to retire comfortably means some retirement planning now.

It may seem a long way off, but if you start thinking about planning your retirement early you can identify whether you may have enough in your kitty to survive financially for the rest of your life.

Better still, you can plan to have enough funds to do some of those things you always wanted to – go on that round-the-world trip, buy your dream beach house, take up sailing…

What the experts say you will need to live on

It’s estimated that a single person needs to generate $41,169* per annum to live a comfortable lifestyle in their retirement, while for a couple the figure is $56,317* per annum.

The Government-funded aged pension maximum entitlement is a mere $31,689 per annum (including the pension supplement) for a couple (combined). If your income and assets exceed certain limits, it may even be less. This clearly does not match the figures the experts have calculated are needed for retirement.

When you consider that the age pension is intended only to be a retirement ‘safety net’ rather than a main source of retirement income, it will often likely fall short for most people to live comfortably once they retire – another reason why considering some retirement strategies is important.

Here is an example that we have put together to help illustrate what you might need in retirement, based on the figures provided by ASFA, to live comfortably in retirement:1

To last 15 years:

$470,360 single

$643,427 couple

To last 20 years:

$576,189 single

$788,196 couple

To last 25 years:

$663,662 single

$907,854 couple

These figures, of course, will depend on your personal needs, and the type of lifestyle you would like to have.

Retirement strategies to start now

To help you start preparing for the day you stop work, it may be wise to implement some retirement strategies now. This may include:

Consolidating your super:

Instead of having several different super funds from various employers you may have worked for, consolidate them into one account. This can save significant money on fees over a period of time. But before you do, make sure you consider things like loss of insurance cover and exit fees.

Take advantage of government help:

If you or your spouse is a low income earner, the federal government has a superannuation co-contribution scheme that may give you a helping hand.

Remember your spouse’s super:

Whatever retirement strategies you adopt, consider whether they would apply to your spouse’s fund as well.

Consider a pre-retirement pension:

If, after you do your sums, you decide you can’t afford to retire yet, you may need to consider strategies to help increase your retirement balance. If you’re over age 55 you could think about transitioning to retirement by starting a pre-retirement pension and contributing surplus income back into super. Super’s tax breaks mean this can help build your super without reducing the income you live on.

*Data from the Association of Superannuation Funds of Australia (ASFA) Retirement Standard, March 2013

1 Assumptions: earning rate 7% pa after fees and taxes with inflation of 3% and paid via an indexed income stream. A change to any of the assumptions and variables can produce significantly different results. This is for illustrative purposes only. Figures are not guaranteed in any way. Investment performance may go up and down.

Share this post

← Back to all posts