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November, 2013 - How much for a Comfortable Lifestyle? Tips for your Financial Future


Consider these numbers around superannuation and your future:

For a comfortable lifestyle, a couple will require about a $510,000 super balance at the start of retirement.

A single retiree will require about a $430,000 super balance at the start of retirement.

How are you tracking?

And what does it take to end up with a super balance of that size, if relying solely on the 9.25% compulsory superannuation contributions?

Assuming 30 years of 9.25% contributions, a wage earner on $50,000 per annum is likely to have a super balance at retirement of $220,000.

Someone earning twice that amount, $100,000, will still only end up with $435,000.

That's what we call 'a very material gap' between the required super balance and the likely super balance.

And what that really means, is a HUGE DIFFERENCE in lifestyle for the retiree.

For a couple on a single wage of about $100,000, this gap will be $75,000 and their likely super balance will be about 85% of the required balance.

Clearly, there are three options:

1.     Increase their contribution rate above 9.25% for the couple's working life (say about 30 years); or

2.     The couple significantly downsizes their retirement lifestyle expectations; or

3.     The couple will have to extend their working life. 

A useful reference for planning your level of retirement savings

To know whether your retirement savings will give you a comfortable or a modest standard of living, refer to the ASFA Retirement Standard.

This benchmarks the annual budget needed by Australians to fund either a comfortable or modest standard of living in the post-work years. It is updated quarterly to reflect inflation, and provides detailed budgets of what singles and couples would need to spend to support their chosen lifestyle.

You'll see on that page that the ASFA Retirement Standard describes a 'Modest retirement lifestyle' as, "Better than the Age Pension, but still only able to afford fairly basic activities." 

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