How much money do you need to retire on?

Mar 30 2017 by Vogue Financial

We get asked this question a lot and like many other financial issues the answer will depend on your circumstances.

Although the retirement age is 65, many people choose to retire later. For some the goal is to retire earlier. While the answer is purely financial in content, motivations for retirement and the stage of life may vary greatly.

You should sit down and discuss with your spouse what retirement means to you. Ask yourself a series of questions.

Why do you want to retire?

Is it because you should? Is it mandatory in your workplace? Or are you looking forward to finally not having to go to work? Some people find themselves a bit lost after retirement, some feel a bit less fulfilled, and some even find themselves returning to work. Others slam the door on the way out and never look back!

What does your retirement look like?

Have a long think about what choices you have, and what your retirement looks like to you. Do you want to travel more? Or are you happy to potter around the garden? Spend more time with the family? Take up painting?

Where will you live in retirement?

Have you thought about where you might live? Are you still in a family home that is now too big? Would downsizing and moving to an apartment, make your life easier? Will this free up more funds?

How will you fund your retirement?

Super has been great for forced saving vehicle. But is this enough to sustain you? Should you be adding more to your super to ensure you have sufficient funds into the future? Do you own investment property?

All these options and how you see your retirement will affect the amount of income you will need to sustain your lifestyle into the future.

So how do you calculate how much you will need?

There are a number of publications and guides people consider and obviously it will depend on whether you prefer Gucci’s over Nike’s. The Government’s ASIC Moneysmart website has a number of useful guides and tools that you mind find useful.

Below is a copy of their table which outlines what they feel a typical couple, or single, will need in retirement.



The above may seem either plenty or nowhere near enough. Depending on your circumstances, another good guideline to follow is that you will need roughly 67% of your current income to sustain your lifestyle after retirement.

If you and your spouse have a combined income of $100,000 right now and you want to keep the same lifestyle, you will need approximately $67,000 in retirement.

But retiring may also provide you with options in reducing your expenditure. Do you really need two cars now you have retired? And how much capital is locked up in the family home? Is it time to sell it?

Are you saving enough to your Super?

So let’s do the maths. Let’s say for argument’s sake there are two of you and you will both retire in 10 years’ time at age 67. Again, let’s suppose you will need $67,000 in retirement. On average men live to the age of 80.5 and women to 84.6 years. So for at least 12.5 years, you will need $67k.

All of the above does sound a bit depressing but don’t forget the travel and the freedom! So for at least 12.5 years you will need $837,500 to get you through, assuming any income you receive keeps up with inflation, and you, or your spouse, will need another $268,000. And that’s assuming you both die at the average allotted time.

Is your super on track to provide for your retirement? Have a look at your Super provider’s website as most of them have a projected benefits tool that will give you some idea of what you can realistically achieve  at your retirement age.

Start early – get advice

The earlier your start saving the better off you will be in retirement. There are numerous benefits in making pre-tax contributions to your super, not to mention the power of compounding interest as discussed in a previous blog post.

Getting super right and planning it can be complex and sometimes it’s best to seek the assistance of a professional. If you would like to have an obligation free discussion about your super let us know.

We can help you whether you are just starting out, working out when you could retire or believe you are ready to retire.

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