How much do I need in Retirement?

Research by the Association of Superannuation Funds of Australia (ASFA) released in the beginning of August 2012 found that the cost of a comfortable retirement continues to rise, despite relatively low rates of inflation.

For a couple who own their own home, retirement costs at least:

  • $31 760 a year for a 'modest' retirement lifestyle
  • $55 213 a year for a 'comfortable' retirement lifestyle.

To fund this without relying on the Age Pension at all, you would need a lump sum on retirement* of:

  • About $600 000 for a modest retirement (with 5% returns) or $500 000 (with 7% returns);
  • About $1.03m for a comfortable retirement (with 5% returns) or $850 000 (with 7% returns).

Reitrement page

How does comfortable differ from modest?

Both budgets assume the couple owns their home outright and are relatively healthy.

A modest retirement lifestyle is considered better than the Age Pension (paying around $29,614 pa for a couple in August 2012), but still only able to afford fairly basic activities.

A comfortable retirement lifestyle enables an older, healthy retiree to 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.

The differences relate mainly to differing amounts spent on food, health and leisure, with extra items included in the comfortable budget such as:

  • being able to update the kitchen or bathroom at some stage,
  • some wine,
  • eating out from time to time,
  • being able to entertain family or friends at home,
  • purchasing magazines and CDs,
  • an economy overseas holiday and
  • being able to afford additional alcohol, purchase tobacco or make gifts.

For more detail, please see: http://www.superannuation.asn.au/resources/retirement-standard

* Notes and assumptions

  1. Living costs based on ASFA figures – see http://www.superannuation.asn.au/
  2. Lump sums based on the ASIC Money Smart retirement calculator, assuming retirement at age 65 and investment in an account-based pension, which is tax-free
  3. Annual income assumed to increase by 3% each year for inflation with all surplus income is reinvested.
  4. Money runs out at age 87 (life expectancy of a 65 year old female), after which the retiree is dependent on the age pension, paying $29 614 per couple at August 2012).