Probably the most important thing that determines how much money you’ll need in retirement is...well...you! While there always seems to be magic numbers and formulas discussed in the media, it really just comes down to what sort of things you’ll need, or want, to spend your money on.
You’ve probably given some thought (or a lot!) to what you’d like to do in retirement – travel, hobbies, family, house renovations and so on. So how can you translate this into an indication of a retirement budget?
There are a couple of rules of thumb or tools that might help you start thinking about what level of retirement income is right for you:
A recent piece of advice from one our members summed this up perfectly: “You’re potentially another lifetime in retirement!”
According to data from the Australian Bureau of Statistics, males and females currently aged between 45 and 65 can expect to live to around their mid 80s. So, If you’re thinking of retiring around 60 or 65, that’s potentially around 20 to 25 years (or hopefully more) that you’ll need to fund.
Once you know what sort of retirement income you’re likely to need, the next step is seeing how close to that figure you’ll get based on your current super position.
Here are a few calculators and tools that can help:
If everything is looking on track – that’s great news.
If things aren’t looking quite as good as you’d like them to be, it might not be bad news. There are nearly always some options to help bridge any gaps between the two!
There are generally 3 factors that you can influence to help change your potential outcomes:
Changing one or more of these factors will generally have a flow-on effect to the others, so even if you’re not in a position to change one aspect, you may have the potential to adjust the others to still arrive at the same desired outcome. For example, if you can’t top up your super with extra contributions but still want a retirement income that your current super savings don’t allow, you may be have to retire a bit later than originally intended, allowing some extra time to continuing growing your super.
You may be able to continue working for longer and/or adjust your expectations for the annual income that may be available to you in retirement.
You may be able to adjust your expectations for the annual income available to you in retirement and/or top up your super with extra contributions.
You may be able to top up your super with extra contributions and/or remain working for longer in order to accumulate more super to meet your income goal.
Australians enjoy one of the highest life expectancies in the world. Here's how to make sure your super lasts. (Source: Colonial First State)
Try this handy calculator to see how you can help maximise your retirement savings. (Source: ASIC MoneySmart)