Whether you’re already retired, planning to retire next year or in 20 years, knowing the kind of lifestyle you want in retirement and having a sound financial plan in place will help make your retirement dreams a reality.
When will you retire? How long will you spend in retirement? How much money will you need in retirement? What will your retirement lifestyle look like? If you’re already retired, what should your budget look like and what will you need to plan for as you get older? Your financial adviser can also assist with the complexities of aged care and help you select the preferred option for your individual situation. Answering these questions now can give you real peace of mind, and lead to a satisfying, fulfilling and financially secure retirement.
Retirement lifestyles – which one suits you?
Beer or bubbly? Caviar or chips? Harbour front mansion or sea-change shack? We all have different hopes, dreams and lifestyle requirements. Defining yours is an important step in planning your retirement. In order to help define how much you’ll need to spend each year in retirement, now or in the future, the Association of Superannuation Funds Australia (ASFA) releases an updated Retirement Standard 2 every quarter. This Retirement Standard benchmarks how much, in today’s dollars, retired singles and couples aged around 70 need to spend each year to enjoy what ASFA define as either a ‘comfortable’ or ‘modest’ retirement lifestyle described using everyday indicators.
A ‘comfortable’ retirement is defined by ASFA as enabling an older, healthy retiree to be involved in a broad range of leisure 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.
Funds required per year for a ‘comfortable’ retirement lifestyle:
Single – $42,962 per year
Couple – $58,915 per year
A ‘modest’ retirement is defined by ASFA as better than the Age Pension, but still only able to afford fairly basic activities such as one or two short breaks in Australia closer to where you live, infrequently eating out at cheaper restaurants, owning an older car, buying reasonable clothes, haircuts at basic salons, infrequent paid leisure activities and private health cover but with little money left over for home repairs.
Funds required per year for a ‘modest’ retirement lifestyle:
Single – $23,695 per year
Couple – $34,090 per year
Age Pension only:
Includes day trips in your own city, only inexpensive takeaway meals, no car, basic clothes, less frequent haircuts, very low-cost leisure activities, less heating in winter, no private health insurance and no budget for home repairs.
Single – $22,666 per year
Couple – $34,169 per year
Of course, you may prefer more than a ‘comfortable’ lifestyle. But these ASFA figures provide excellent starting points for understanding the potential costs of living in retirement.
Planning for later years of retirement
Australians are living longer and spending more time in retirement than ever before. An increasing number of Australians will live to age 90 and beyond.3 This may bring a new set of challenges to retirement, which can mean it’s even more important to have a plan in place.
NEXT: Take charge of your Retirement Journey – Part 2
2 The Association of Superannuation Funds of Australia, ASFA Retirement Standard, September 2015.
3 The Association of Superannuation Funds of Australia, Spending patterns of older retirees: New ASFA Retirement Standard, September 2015.
Disclaimer: This article has been prepared by Count Financial Limited ABN 19 001 974 625, AFSL 227232, (Count) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124.
Information in this article is based on current regulatory requirements and laws, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Count, its related entities, agents and employees for any loss arising from reliance on this document.
This document contains general advice. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision.