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The Association of Superannuation Funds of Australia (ASFA) has recently released their latest Retirement Standard, which is a guide to how much income you might need in retirement. It calculates that, for people aged between 65 - 85, a single person who owns their own home would likely need a retirement income of $43,538 a year and a couple an income of $59,808 to live a comfortable retirement.1
But what does this mean? What is a comfortable retirement? What does it include? Rather than keep bombarding you with questions, we’ll look at some of the answers instead!
First up, you’ll find all the details about the Retirement Standard on the ASFA website, which includes figures for incomes for comfortable and modest lifestyles for both singles and couples both early and later in retirement, and the assumptions they used. What we’re going to delve into a little more closely here is their definition of a comfortable retirement, and how much you need to enjoy one.
Questions don’t really come much more subjective than this, as one person’s luxury is another’s making do. However in the context of the ASFA Retirement Standard, it means you can “be involved in a broad range of leisure and recreational activities and to have a good standard of living through the purchase of such things as; household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, and domestic and occasionally international holiday travel.” 2
So far, so good, but to establish whether the ASFA Retirement Standard is a good guide for your own retirement needs, we need to take a look at the figures used to get to the $59,808 a year a couple would likely need according to the ASFA figures and assumptions. Essentially if you think you’d be spending more than their assumptions, you’re likely to need a higher income, or if you’d be spending less, you can revise your income estimate downwards. We won’t go through every line item here – ASFA provides the detailed budget breakdowns on their website – but instead focus on some of the bigger ticket items.
General household bills are the first thing to factor into future budget, as for the most part they are non-negotiable. They are also the easiest to compare to your current expenditure, especially if you don’t have kids living at home.
The table below shows the weekly costs used in the Retirement Standard for those aged 65 - 85 wanting a comfortable retirement for some of the most common bills. Please note that all figures are rounded to nearest dollar.
When it comes to discretionary spending, it gets a little more personal. The ASFA figure covers a range of expenses, some of which might be vital to you, some of which you might never spend any money on. It assumes for example that a couple will spend just over $3 per week on cosmetics and personal care items, around $8 per week on newspapers and magazines and just over $57 on clothing. Around $135 a week is allocated to car transport and running costs, and around $5 for public transport.
When it comes to leisure, the Retirement Standard looks at things like eating out, holidays and activities. So for example it assumes around $82 per week on lunches and dinners out and $14 for cinema, plays, sport and day trips. It assumes $79 for domestic vacations (which is $4,108 to spend on local holidays a year), and $55 for overseas holidays.
The clear take away from this is that although the Retirement Standard is great for getting a ballpark idea of what kind of income you want to be aiming for in retirement, it’s ultimately a very subjective amount. When it comes to your own situation, working out your own, personal budget is a great idea. The Retirement Standard is one example of a good template to use, as it does list a whole heap of things you might not otherwise think to include.
Of course figuring out how much income you’ll need in retirement is just the first step – the next is to establish whether you’re on track to reach it. Our Retirement Income Calculator will show you what super balance you’re tracking towards and what income that will likely give you based on the detailed set of assumptions (and you can include your partner’s super in that, and Age Pension you may be entitled to – though that would be subject to eligibility criteria). Another option is to try the ASIC Money Smart calculator and website.
If it seems as though your retirement savings are not going quite to plan, the calculator will let you play with a few scenarios to show how you could boost your super. And of course we’re always here to offer support, help and advice to help you reach your goals – just call 1300 360 750 to have a conversation with us today.
1 All figures quoted sourced from the ASFA Retirement Standard, December quarter 2016 report.
2 ASFA Retirement Standard.
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