How much super is enough super?
This morning we received this beautiful postcard from the Arctic Circle which over our morning coffee got us thinking about our dreams for retirement. Retirement can give us an opportunity to see the places and do the things we may not have had the time to do whilst we’re caught up in the busy schedule of balancing work and life.
The amount of super you need to accumulate before retirement will depend on various factors including; how long you will live, the type of lifestyle you want and preparing for future medical costs. The couple who sent the postcard are fortunate to be able to afford to travel to amazing places that are on many people’s bucket list due to their hard work and savings. This leads us to look at our super accounts and to ask big questions... What will the future look like? How long will we live? What do we need to afford this?
How long will you live?
We shared an interesting video with you last week in relation to this. By 2055 the average life expectancy in Australia will be 95 for men and 96 for women. We still want to retire around the age of 65 so this means our super needs to last longer.
What type of lifestyle do you want to have?
We hear a lot of talk about modest vs comfortable retirement but what does that mean? What’s the difference between the two?
A modest retirement lifestyle is considered better than the Age Pension, but still only able to afford fairly basic activities.
A comfortable retirement 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.
The table below will give you a rough idea of how much money you will need to support a modest or comfortable retirement. It applies for people retiring at age 65 who will live to an average life expectancy of about 85. Both budgets assume that the retirees own their own home outright and are relatively healthy.
|ASFA Retirement Standard||Annual living costs||Weekly living costs|
|Couple - modest||$34,051||$653|
|Couple - Comfortable||$58,784||$1,127|
|Single - Modest||$23,662||$454|
|Single - Comfortable||$42,861||$822|
Another way to estimate how much money you will need in retirement is to assume you need 67% (two-thirds) of your income before you retire in order to maintain the same standard of living in retirement. This estimate is only suitable for high income earners.
ASFA estimates the lump sum needed to support a comfortable lifestyle for a couple is $640,000 (or $545,000 for a single person) assuming a partial Age Pension. ASFA also estimates that because a modest lifestyle is mostly met by the Age Pension the lump sum required to support it for a couple is $35,000 ($50,000 for a single person).
So what does your future look like? There’s no time like now to start planning for retirement (we love planning at Minerds Bell) and to have a super health check with one of our team. No matter how long you have until retirement there are simple ways to boost your super such as; salary sacrificing, transition to retirement and personal contributions.
PS. We really enjoy helping people realise their dreams no matter what they are and we love receiving photos and postcards from clients.