How much money do I need to retire?

An age-old question that many Australians think about is how much money they need to retire. To find the correct answer that considers your financial and personal circumstances, there are a range of factors to take into consideration. To find out what these are, continue reading the article below.

To begin answering this question you also need to ask yourself the following questions.

When do you want to retire?

The first question concerns the timeframe in which you wish to retire. This will be different for every day and will depend on the stage of life you are currently in. However, if you are nearing retirement, it may be a good idea to determine at which age you wish to cease working. Deciding this will have an implication on the course of action you take from today.

How much super will you have?

Now you have a retirement age, the next step you can take is to estimate how much super you’ll have at this date. This can be found out by using an online retirement planner or seeking advice from a professional financial adviser that can conduct modelling based on how much you will have to spend each year and how the fees, various investment options and contributions will affect your balance.

How much super will I need?

Now you know when you want to retire and how much you are likely to have, it is important to ascertain how much you will actually need. This will be highly dependent on an individual’s lifestyle and expenses in retirement. To determine what this will look like you may wish to establish a spreadsheet or break down your expected expenditure.

Your major costs in retirement could include any debt that you still need to pay off such as a mortgage or other loans. If you do not own your own property you will need to continue paying rent or may have to pay for the cost of renovating or maintaining your family home. If you wish to travel throughout your retirement, it is a good idea to put a dollar figure estimate on how much you may need per annum. One of the most important costs to consider is the inevitable medical expenses you will face and hence it is essential that these are taken into consideration when deciding your yearly cost of living.

The Australian Government Moneysmart Website suggests that you are likely to require two thirds (67%) of your pre-retirement income to maintain the same standard of living in retirement. Please see below the industry retirement standards which estimates how much individuals may need depending on their lifestyle.

Source: Association of Superannuation Funds of Australia (ASFA)

 

How can I build up my super?

If you are worried about your super or are nearing retirement you may wish to look into making additional contributions. It is also important to consider the assets that you may hold including cash assets, other investments, property and other forms of income that can subsidize your living expenses. There are a few different avenues you can take to build up your super before retirement. If you are still a far way off retirement it is a good idea to look make sure you are in the correct super fund for you and the best investment option based on your time horizon so that you have the ability to maximise your potential returns.

If you are nearing retirement you may wish to consolidate your super to ensure that you are not exposed to additional costs and fees by having your super spread across many funds. You can also make additional contributions to your super in addition to the super guarantee that is made by your employer.

There are a range of extra contributions that are available which you may wish to make use of if you meet the eligibility requirements. This includes concessional contributions up to $27,500 and non-concessional contributions up to $110,000 each financial year. There are also other schemes that you may be able to utilise such as the bring-forward rule, catch up contributions and the downsizer contributions scheme.

If you would like further guidance or tailored advice on how to boost your super balance prior to retirement, please click the link to organise a complimentary 20-minute phone call with an EPG Wealth adviser.

 

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