When can I afford to retire? How much do I need?

Many Australians are asking themselves, ‘When can I afford to retire? How much do I need?’

The purpose of superannuation is to help Australians maintain an adequate and comfortable standard of living in retirement. A comfortable retirement lifestyle enables a retiree to be involved in a broad range of leisure and recreational activities and to have a good standard of living.

In comparison, a modest retirement lifestyle means that the retiree is only able to afford fairly basic activities and have a basic standard of living. The difference between the modest and comfortable lifestyle includes being able to drive a reasonable car, eat out from time to time, purchase magazines and CDs, being able to update the kitchen or the bathroom at some stage, make gifts and travel occasionally.

When planning for retirement an individual needs to consider the amount of capital he/she will require to support the level of desired income in retirement. The reality is that many people don’t know what would be the level of income and the amount of lump sum they would require.

The national figures released by the Association of Superannuation Funds of Australia (ASFA) for the June 2013 quarter and a specialist Actuaries and Consultancy Firm* indicate the level of income and the lump sum amounts that would be required by Australians if they retired (at age 65) as follows:

The report also looks ahead to younger Australians who will have received the compulsory employer contribution for a full lifetime and considers a worker currently aged 30 with a salary of $60,000 p.a. with an average current superannuation balance of $27,000.

The projections estimate that this person will have $1.1 million on reaching age 65 in 2048 in future dollars, which is expected to last to age 94 under the modest retirement standard and to only age 77 under the comfortable retirement standard.

To afford a comfortable retirement, a current 30 year old male would need a retirement benefit in 2048 of $1.58 million and a female, $1.76 million.

To achieve this, they would need to:

a) Make additional contributions to super during their working life (on top of compulsory employer contributions); or

b) Delay retirement.
Delaying retirement may not be an option depending on their health and other commitments.

Making additional contributions to super would provide an individual with certainty and better retirement opportunities.

Perhaps you or someone you know should consider talking about your unique circumstances and future plans with a professional Fiducian Financial Planner. Call today!

*Deloitte Actuaries and Consultants