RETIRING? HOW MUCH IS ENOUGH?

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How much money do you need to retire comfortably?

This is a common question that many people ask, especially once they hit their 50s.

There are lots of opinions on the dollars required for a comfortable retirement.

But first, what is a comfortable retirement, and what does that mean in cost per year? The Association of Superannuation Funds Australia (AFSA) says that a comfortable retirement means being able to:

  • Afford private health
  • Drive a reasonable car
  • Dine out regularly
  • Afford good clothes and a range of electronics
  • Travel within Australia and occasionally overseas

In other words, a comfortable retiree can enjoy a broad range of leisure and recreational activities and still have a good standard of living. So, what is the cost?

According to ASFA, a 65 year old couple needs $59,971 per year and a 65 year old single person needs $43,665 (as at March 2017).

These figures assume that the retiree(s) own their own home. Peter Farrar and Cindell Baker deal with the issues of retirees every day.

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They agree that this is a good starting point, but the amount that people live on varies a great deal. Peter Farrar says we have some people who can live on close to half of the above figures, so they manage on a modest income of $500 to $600 per week, and they are surprisingly happy.

At the other extreme, there are some who easily spend $80,000 to $100,000 each year.

Peter Farrar says people can retire with a relatively small superannuation balance, say $250,000, and still be comfortable.

But they would need to be old enough to access an age pension, or other income support.

Assuming they qualify for a full age pension (or close), then a couple receive the following:

  • Age pension $34,814 per annum (combined)
  • Top up required $25,000 per annum
  • Total income $59,814 per annum

The top up of $25,000 could be generated from, for example, an account based pension, a simple investment account or, less sustainable, from a bank drawdown.

Need financial planning help?

Call Cape Financial Planning on 9751 2022.