What does a comfortable retirement look like?
Produced by AMP Life Limited and published on 18 August 2016.
By AMP Life Limited, originally published on 18 August 2016 on amp.com.au/insights
How much money you'll need will depend on a variety of things.
Have you got a plan in mind for when you retire? Is it to travel overseas, hit more balls on the golf course or spend time with family and friends? Whatever your goals, you’ll need to have a plan for how you’re going to get there financially.
Comfortable versus a modest retirement
Everyone’s idea of how much money they’ll need in retirement is different.
As a guide, the Australian Superannuation Funds of Australia (ASFA) suggests couples around age 65 will need $59,000 a year and singles will need about $43,000 in today’s dollars to live ‘comfortably’1
. Now this is assuming you’re in relatively good health and that you own your own home.
On this budget, you should be able to afford things like a new car, private health insurance, to dine at quality restaurants and have local, and some overseas, holidays.
By comparison, a ‘modest’ yearly budget of around $34,000 for couples or close to $24,000 for singles would provide a more basic lifestyle2
. This means you’d probably have to keep your older appliances and car for a bit longer, eat out less frequently and generally stay locally for holidays.
So how much is enough?
To work how much money you’ll need in retirement, start by asking yourself these questions:
- Do I have enough money saved in my super? Try AMP’s super simulator to find out if you’re on track or if you have a gap in your savings
- Am I going to have to rely on the Age Pension? If you plan to retire before you get the Age Pension, consider what savings you’ll need to support you for those extra years in retirement
- Will I have to work longer or do something else to generate an income?
How you could retire with more
Once you’ve considered these questions, think about ways to give your financial situation a boost while you’re still working.
- Got more than one super account? Think about consolidating your super into one account to save on fees and reduce paperwork
- Consider making extra before-tax contributions to your super through salary sacrificing. Use AMP’s salary sacrifice calculator or to find out how much you could put aside
- If you’re eligible, think about making a personal tax-deductible contribution to your super, as these will typically only be taxed at 15%3 and you can claim these as a tax deduction4. You’ll need to fill in a ‘notice of intent’ form and send it to your super fund before you submit your tax return
- If you decide to sell or downsize assets, such as your home, make sure you check what the tax implications are and whether it will affect your eligibility for the Age Pension. Find out about what changes are happening to the Age Pension assets test from 2017.
- It's also important to note that the Federal Government proposed a number of changes to superannuation.
We’re here to help
Deciding on how much money you’ll need to achieve your retirement goals and how you’ll get there may be easier if you have professional advice.
If you’d like to explore your goals, please call us today.
1, 2 http://www.superannuation.asn.au/resources/retirement-standard
30% if you earn over $300,000 per annum.
These contributions will count toward your concessional contribution cap. The concessional contribution cap is currently $30,000 (or $35,000 for those aged 49 and over on 30 June 2016).
© AMP Life Limited. This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.