How much money do I need to retire comfortably?

Monday, July 06, 2015

How much is enough to retire on- “How long is a piece of string?”

The English language is a filled with wonderful idioms one of my favourites being the sub-title to this discussion. When it comes to the question of how much money one needs to be able to retire comfortably today there has probably never been a better answer except perhaps the old stalwart of the legal profession “it depends”.

The question is of course on what does it depend

The answer to this is simple; it begins with the kind of lifestyle you wish to have or maintain in retirement. 

  • Where you want to live, 
  • what you want to do, 
  • Right down to what you want to eat or drink. 

Of course you also need to build in a big enough buffers for uncertainties such as illness and the replacement of major lifestyle assets like cars and homes. 

It’s an intensely personal question and can only be answered through a structured process with a professional of thinking through what you really want and how this relates to what you are able to afford based on your assets and savings patterns.

That said one of the most important outcomes we look for when working with our clients is to ensure that they understand how the eventual move into retirement works in practical terms including how the various elements of our retirement system work together. This includes not only the personal wealth that they have accumulated in superannuation and other investments but how these relate to Government benefits and how you move from growing your wealth to living on your wealth. The all important question being how long what will you have accumulated in retirement last?

Often we find that working through the process with clients yields many surprises for them in terms of what they are able to afford to retire on when what they have accumulated with is pared with the available Government benefits.

With the full aged pension now set at $33,035 pa for a couple and $21,912.80 pa for a single home owner even with superannuation benefits of only $250,000, it is possible to enjoy a fully indexed income in retirement of around $48,200 per annum for 20- 27 years depending on investment performance etc, from a combination of your own resources and the aged pension. In the following table we have shown the potential income available to three retiree couples based on various levels of retirement wealth and assuming that they have a 20 year life span in retirement from aged pension age:-

Retirement wealth Annual income (Combined)


  Retirement Wealth Annual income (combined)
Couple 1  $250,000  $48,200
Couple 2 $500,000 $59,500
Couple 3 $1 Million $79,000

When it is considered that the above incomes will essentially be tax free and that many other valuable concessions are available to assist in retirement it is clear that a comfortable retirement is within reach of most Australians. The key element though is to plan early to accumulate as much as possible in the most efficient way over your life times and to understand how the financial aspects of retirement all fit together. When it comes to planning for the future you really need to guidance of experts.

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