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Do you know how much you will need for retirement?

Recently, we’ve seen the figure of $1 million thrown around as the magic number for retirement. Realistically there is no perfect number needed for retirement.

How much you need will differ from person to person depending on a person’s ideas and wishes for their retirement lifestyle. Figures from the ABS show that at retirement age, women have $180,000 in super and men an average of $322,000.

This is well short of the $1million figure, however, ignores the existence of the Government Age Pension. 7 out of 10 retired Australians receive some form of pension; whether part of full Government Age Pension. It is very likely that if you are in a situation of low super you will have this additional source of income to rely on.

So how much will you need for your ideal retirement?

Consider all your expenses:

Will you want to continue to maintain a holiday lifestyle and travel the world? What is your weekly supermarket spend? Will you want to keep your sporting membership? These and more are all important things to consider when understanding what your magic retirement number will be.

Another growing consideration is the number of Australians who are retiring with some form of debt. Almost half of all homeowners aged 55 to 64 are still paying off a mortgage. 30 years ago this number was 14% still repaying their mortgage.

Australia’s Response:

In a push to increase the level of super Australians retire with, legislation is in place to see an increase from 9.5% to 12% superannuation by 2025.

The plan is highly contentious with many employers arguing the increased burden on them to pay their employees super will restrain not only wage growth, but their ability to hire more employees to grow their businesses in the future.

The plan will help bolster Australians superannuation accounts, especially in those coming through their working lives entirely under the superannuation system since its introduction in 1992. Remember, many retirees have not had the benefit of being paid super for their whole working lives.

How long you’ll spend in retirement.

If you’re wondering why superannuation is such a hot button issue, then you need look no further than the average life expectancy.

At retirement age, Australians can expect to enjoy more than 20 years of retirement, on average (19.9 years for males and 22.6 years for females). This places us fifth best in the world (Switzerland has the #1 spot). Sounds great, but it also places an enormous strain on the Australian economy to support its ageing population in longer and longer retirements.

Remember this number is only an average. It may be more appropriate to consider you will live longer than the average when determining your retirement needs. For instance, how much will you need if you live until 95 years of age?

What lifestyle do you want to lead in retirement?

This is the question you need to ask yourself, and then crunch the numbers and see how much you will need to cover those expenses. It might be one of the more valuable thought exercises you ever do.

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Testimonials

I highly recommend Dallas and his team of experts at Dollars with Sense to everyone out there who wants to be more adept at financial matters. They provide great insights about investing and planning for the future. With their sensible tips, my super fund is on track to giving me the ideal lifestyle I look forward to. I have security and peace of mind, which is priceless!

SARAH F

One of the things I appreciate the most about the Dollars with Sense team is how they are so honest about financial matters. They are not after promoting a certain kind of investment, but rather, they always emphasise what an average person should consider before jumping into a financial commitment. Dollars with Sense truly opened my eyes towards property investment, and I am so grateful that I get no-nonsense tips from these experts. I hope that Dallas and the team will continue to guide us in all money matters!

LEANNE J