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How much money do you need to retire?

Updated: Sep 19, 2023

As we get closer to retirement the most common question our clients ask is “how much super do I need in order to retire”? It is a question that the Association of Super Funds of Australia has attempted to answer with the publication of their ASFA Retirement Standard.

Based on current age pension rules, the ASFA retirement standard estimates that you are likely to need $595,000 in super for a single person or $690,000 for a couple wanting a comfortable retirement. On the other hand, if you are happy with a more basic standard of living, ASFA estimates you only need $100,000 in super, and this holds true for singles and couples due to the impact of the age pension.

While these figures can be a helpful benchmark to use as a guide, the truth is that how much money you need in order to retire in Australia is going to vary a lot depending on your specific circumstances.

In this article we will outline some of the factors that you need to consider in order to identify your magic number.

Where you will live when you retire

The cost of living in Australia can vary greatly between different cities and states. There is a big difference between wanting to retire in Sydney, wanting a quiet country lifestyle or wanting to move overseas. So before you tackle the question of how much you need to retire, give some serious thought to where you are likely to want to live when you reach retirement age.

Your cashflow needs

Once you have an idea of where you want to live, you can begin to do some research into the cost of living in that area, so that you can put together a budget. An easy starting point is to start with your current living expenses and to adjust them accordingly.

Consider what expenses can be removed from your current budget – for example children’s school fees, rent or mortgage repayments (if you plan on owning your home outright when you retire).

Consider also what expenses need to be factored in – for example medical bills and home maintenance.

How long you plan to work

It’s pretty simple – the longer you plan to work, the less you will need to rely on your super during retirement. But don’t let the numbers make the decision for you. Take some time to give serious thought to how likely you are to be willing (and able) to continue working well into your 60s or 70s.

Your health and family circumstances

Planning for retirement is a good time to talk to your doctor about your health and consider your heritage. How long did your parents, grandparents, aunts and uncles live? Are there any medical conditions that run in the family? Although unpleasant to think about there is no escaping the fact that as we get older our health requires more ongoing attention, so the best thing you can do for your physical and mental health is to plan for these expenses as best as you can.

How you plan to spend your retirement

Whether you prefer to spend your days at home or have a long list of travel destinations to explore, these lifestyle choices can make a big difference to your retirement needs. So it is important to spend some time thinking about what leisure activities you would like to be able to pursue in retirement and how much money you are likely to need to fund these.

How far away you are from retirement

The further away you are from retirement, the harder it can be to accurately determine your retirement number. This is because not only is the cost of living likely to change, but so are the age pension rules. Keep in mind that the current ASFA guidelines are based on existing rules regarding who is eligible for the age pension and how much you are entitled to receive. If in the future the age pension rate is reduced and eligibility criteria tightened, this can mean that you will likely require more money in super in order to achieve your goals.

How your super is invested

Depending on when you choose to retire, your retirement is likely not just to last years, but decades. This means that how your money in super is invested will also directly impact how much you need to have saved up before retirement. Typically speaking you will earn less money in interest than you will make from dividends and capital growth. How much of your super is invested in each of these asset classes will depend largely on your personal preferences and comfort with taking risk. The less money your super is earning and the longer it needs to last, the more super you are likely to need when you retire, and vice versa.

Financial Advice makes a difference

The impact of having an ongoing financial advice relationship is genuine and real.

A recent Rice Warner study into the future of advice stated that investors who received advice over four to six years accumulated 60% more assets than those investors who had no advice.

In addition, where advice exceeded 15 years, households accumulated 290% more assets than comparable households.The intangible benefits are also real.

A white paper produced by Fidelity International in late 2019 into the Value of Advice found that 74.3% of Australians who currently receive advice say it has improved their financial wellbeing. An additional 49.9% say their mental health has benefited.

Most importantly, 77.1% of respondents receiving advice were able to achieve their personal goals.

Planning for retirement can be both daunting and exciting as there are so many different options and opportunities to consider. But the good news is, you don’t have to do it alone. A good financial planner can help you to understand how different choices can impact your retirement outcome and support you with strategies to help you maximise your super balance before you retire. If you would like a helping hand with planning for your retirement, click here to book a 15 Minute Clarity call to see if we can work together.

What you need to know

This information is provided and produced by Lush Wealth - Financial Planning Advice Newcastle & Sydney. The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.


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