How much is enough? How much money do I need to live a comfortable retirement? We often get asked this at Sage and the answer sometimes surprises people as it's probably not as much you think (or have been led to believe).
Many articles published in the media quote the ‘$1,000,000 figure’ as the ideal number. Given the average super balance, the $1,000,000 mark is a long way off for most people. However a recent article “superannuation” published on news.com.au caught my attention because it finally brought some balance to the discussion.
The Australian Institute of Superannuation Trustees has released a new paper, titled “Busting the $1 Million Retirement Myth” which finally (in my opinion) brought some balance to the discussion. The reality is that the majority of Australians will not need $1 million in their retirement nest egg to retire on.
Where does the $1m figure come from? Well it’s based on someone fully self-funding themselves and takes no account of any Age Pension or other associated benefits provided to pensioners.
So how much do you need? Well that is a difficult question to answer as everyone is different. But there are a number of things you need to consider. Firstly and most importantly, what does retirement look like to you? What will it cost to fund the basic cost of living? The ASFA Survey of retirees considers approximately $35,000 for couples as a modest lifestyle and up to $60,000 for a comfortable lifestyle.
Most of our clients find that the first 10 years of their retirement are their peak spending period. So whilst you might start out requiring a higher level of income, after a period of time most people generally start to slow down and thus tend to require less funds.
But what about holidays, a new car or house repairs? Do you want to leave anything behind for the kids or S.K.I (as they say – Spending the Kids Inheritance)? As you can see there are many different factors that come into play when considering the question of how much do I need?
So how can you find out how much you need?
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