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Retiring: how much money will you need?
Retiring: how much money will you need?
How much will you need each year?
Use FIDO's Budget Planner to help you sort your income and expenses, and calculate your weekly, fortnightly or monthly surplus or deficit.
Then look at your current expenses and work out how they would change if you were retired.
For example, if your mortgage will be paid off by the time you retire, you can cancel out this amount. If your children will be independent, you may need less for living expenses.
Example of expenses for a couple with two children and a mortgage, who want a retirement income of $38,000 a year
| Expense | Current yearly expenses | Retirement yearly expenses |
| Mortgage | $16000 | 0 |
| General living | $37000 | $34000 |
| Insurance | $7000 | $4000 |
| Education expenses | $10000 | 0 |
| Total | $70000 | $38000 |
Allow for any continuing or new expenses in retirement. You may need to save more if you:
- plan to retire before 65
- pay rent for your home
- still have debts to pay off
- cannot do any part-time paid work once you retire (for instance, because of ill-health)
- have extra expenses, such as special health care needs
- want to travel
- will have to pay for a car, computer or mobile phone that your employer pays for now.
How much will you need to save?
The earlier you retire, the longer you will have to live on your savings - you might have to support yourself for more than 30 years. As a rough guide, multiply the annual income you want at age 55 by 19; at age 60, by 17; and at age 65, by 14.
The table below shows our example of the savings needed to get a retirement of $34,000 per year, until age 85.
Savings needed to get a retirement of $38,000 per year, until age 85
| If you want an annual income of $38,000 and you are retiring now at | Multiply income by* | Estimated savings needed |
| Age 55 | 19 | $722000 |
| Age 60 | 17 | $646000 |
| Age 65 | 14 | $532000 |
* Assuming current market rates for buying a retirement income (an allocated pension), with your retirement savings earning 6% after costs.
What about the age pension?
Many people get some age pension once they reach 65, if they can satisfy means and assets tests. The maximum age pension today is about $15,000 a year for singles and $25,000 a year for a couple. If you want more than this, you will need to rely on your own retirement savings.
Please note that Centrelink revise pension rates in March and September each year, and the figures quoted are based on Centrelink payment rates effective from 1 January 2009. For current figures, go to the Centrelink website information on age pensions, or contact Centrelink on 132300.
Developing a retirement checklist
| TIP! | Do your own retirement checklist. Superannuation, tax and social security benefit rules are complex, and will affect you. Do your homework and get professional advice. |
Our retirement checklist below will give you some suggestions for working out what you will need in retirement and how to organise it.
| Your retirement checklist | How to find the answers |
| How much will it cost to maintain your current lifestyle in retirement? | Prepare a retirement budget.
Include regular living expenses as well as one-off costs, such as a new car, home alterations, and travel.
Plan to clear all debt before or as soon you retire. |
| What retirement benefits and choices does your superannuation fund offer? | Ask your fund administrator. |
| Will you be eligible for government benefits? | Discuss with a Centrelink Financial Information Service officer, even if you do not expect to claim a pension. |
| Tax concessions? | Get Australian Taxation Office publications and talk to your tax adviser. |
| What financial products and services would suit you in retirement? | Your superannuation administrator may have information.
Your tax adviser might be able to help.
Centrelink’s Financial Information Service can also tell you about products and services in the market, though they can’t recommend products.
Consider seeing a licensed financial adviser if you have more than $100,000 in superannuation and personal investments. |
More information
Lots for financial tips and safety checks for retirees and people about to retire on FIDO's homepage for retirees
FIDO Website: Printed 03/16/2010
