How to calculate how much you need to retire

how much money you need to retire

Thinking of retiring early? 

Many people mistakenly think they could live within their means and retire early. It’s nothing but a fairy tale. 

Most people these days need to keep working well beyond their retirement age.

If you want to be at a comfortable place with money, you need sound financial planning and proper goal setting, and you need to start at the earliest. 

The following article has identified that the percentage of people who have determined a specific amount they need for an early retirement, is decreasing.

Here is what you need to know about retiring without stressing about money.

Choose Your Lifestyle

Retirement Standard is a quarterly publication released by the Association of Superannuation Funds of Australia (ASFA). 

It indicates the amount of money people need to retire comfortably. The publication covers modest and comfortable lifestyles including estimates for people and couples who are retiring on their own.

While the information might change every few months, the publication still gives an excellent outline covering the amount of money people might need for a comfortable retirement. As per this publication, people around the age of 65 will annually need:

$24,000 – A single person maintaining modest living standards.

$34,000 – A couple maintaining modest living standards.

$43,000 – A single person maintaining comfortable living standards.

$59,000 – A couple maintaining comfortable living standards.

Keep in mind that these estimates assume the ownership of their home by retirees.

These figures may increase, explains Melbourne beauticians Ink Cosmetica, when you factor in micro-lifestyle changes. They add “we see many retirees come into our salon once every few months, and they’ve told us that they have to limit these non-essential activities because money is tight. If you do want to enjoy the extras in your golden years, you’ll need to account for those costs.”

how much money you need to retire

As per ASFA, the cost of a comfortable retirement starts declining when one gets closer to 85. As this data shows, your retirement financial planning goal will vary wildly depending as per your lifestyle. 

The amount you need for your retirement will also depend on the time period for which you expect it to last. If you expect retirement to last for several decades, you will probably need to save a few millions to live a comfortable lifestyle.

Western Sydney’s renovation team at Richmond Kitchens explains that future lifestyle choices must be planned in the present. They say “many people work out the basic sums and consider this the job done. But what happens if you want to transform your home? Do you have enough put aside to upgrade your lifestyle if and when you want to? Planning for these events is key.”

How Do You Plan for This?

In 2013/2014, the average superannuation balance was $138,150 for women and $292,500 for men. 

The retirement age is assumed to range from 60 to 64 years. These numbers mean that many recent retirees will have to substantially rely on the Age Pension during their retirement years.

Careful Wealth Management

Everyone is going to have a different wealth management strategy as per their financial circumstances and needs. 

There are a number of ways to start generating wealth when planning for retirement and everybody’s going to have a different strategy as per their own financial needs and situation. 

This is where an experienced financial planner can be of great help. They have a lot of experience in helping people figure out the right Wealth Management plan for their retirement.

People also have several other options to build their retirement fund such as:

  • Investment with a superannuation provider
  • Utilising a home loan for building equity in the property
  • Age pension
  • Investments in shares or targeting capital growth

These are only a few ways to create wealth for retirement and nothing is as simple as it seems. Each of these have their own merits and demerits. 

For instance, you will save money on the funds invested in a superannuation fund but you will have to pay much more tax in case you have to withdraw the funds before you reach the age of 60.

how much money you need to retire

Planning for a Rainy Day

Having an emergency fund can pay huge dividends.

You not only need to have enough for a comfortable retirement but it is also recommended to have an emergency fund or at least a plan for an emergency. The Australian Securities and Investments Commission recommends people to take into account any changes in the economic markets, changes to the current tax legislation or some big life events that can derail a carefully crafted retirement strategy.

As per the AFSA figures provided above, it won’t be wrong to assume that as a couple, you might need almost half a million dollars to have a comfortable retirement over a period of 10 years. If you are already saving for a holiday or a home loan, half a million dollars might seem like a big number but starting early is the key.

Want to know more about various options for developing your personalised wealth management strategy and to get started with your retirement planning?

Call your Wealth Path representative today!







    Make better financial decisions with our newsletter packed with tips and
    information about trends and opportunities.

    Call Us Today! 07 5444 0675