How Much Money Do You Need for A Comfortable Retirement?

This question is one of the most popular for would-be retirees. And the answer? Well, it depends.

You could see that coming. But it’s probably not as much as you think.

We see bold headlines quoting upwards of $1.5 million for a comfortable retirement. This is not the case.

Sure, if you want a plush holiday apartment in Noosa and annual overseas trips to Europe then yes, maybe, you need a million bucks or more.

But for a modest retirement with holidays factored in—plus other costs—then the actual figure is nowhere near $1.5 million.

So How Much Do You Need to Retire in 2020?

Your retirement income today will depend on three main factors: 

  1. How long you live
  2. How much you plan to spend in retirement
  3. How much your money grows during retirement 

And the only factor you can quantify from the list above is number two: how much you plan to spend in retirement?

A peak body called the Association of Superannuation Funds of Australia (ASFA) has a ‘Retirement Standard’ to help you answer this question.

The ASFA Retirement Standard lumps retiree’s lifestyle needs into two buckets:

  • Bucket 1 – A Modest Retirement lifestyle shows expense requirements just above the amount provided to Age Pension recipients.  It is suitable for those wishing to enjoy necessary leisure activities and incorporates household expenses, clothing, living costs, transport, and medical services.
  • Bucket 2 – A Comfortable Retirement lifestyle suitable for those seeking to enjoy a broad range of leisure and recreational activities.  The spending projections allow for the purchase of such things as household goods, private health insurance, a reasonable car, clothes, a range of electronic equipment, domestic and occasional international holiday travel.

Choosing Bucket 1 or 2 will depend how much you’ve saved retirement or your own personal preferences. But here are ASFA’s budget estimates in today’s dollars:

* NOTE: The figures in each case assume that retirees own their own home and relate to expenditure by the household.

Remember this too…

As average life expectancies continue to increase, most older Australians will require BOTH superannuation savings and financial support from the government to support their spending needs.

But overall, you can see the cost of living decreases ever so slightly with age. Older retirees tend to spend less on eating out, lifestyle purchases and holidays as they direct more money towards healthcare. 

Take comfort knowing these numbers are subjective too. It should only serve as an indicative measure. In our experience, it is not unusual to see retirees with costs well under the Retirement Standard from ASFA.

Of course, there is a temptation to blow the budget in the other direction. That’s where a professional adviser can help guide you on a safe journey through retirement.

If you’d like to know more about Muirfield Financial Services and how we can help you plan for retirement, then we’d love to hear from you.

Schedule a friendly chat TODAY with one of our trusted financial advisers by calling 1300 242 700 or contact us directly via our website to find out more.

DISCLOSURE: The ASFA Retirement Standard methodology was last updated in April 2018, and figures are updated quarterly to reflect changes to the Consumer Price Index (CPI). More information on the calculation of Retirement Standards is available here. The ASFA Retirement Standard for those aged 85 and over was first introduced in 2015. More details on the calculation of Retirement Standards for those aged 85 and over is available here.

Leave a Comment