What's considered a comfortable retirement lifestyle?
31 January 2019
It can be difficult to imagine how you'll manage your finances after working life is over. What will be your main expenses and how much do you need to meet them?
A good place to start when evaluating how your finances will look in retirement is to understand how much you may need to achieve for a particular standard of living.
So what are the budgets for a comfortable versus modest standard of living in retirement?
The Association of Superannuation Funds of Australia (ASFA) has established living standards for both modest and comfortable lifestyles for retired Australians.
A modest lifestyle
While considered better than the lifestyle affordable on the Federal Government Age Pension, if you're retired with a modest standard of living you'd only be able to afford relatively basic activities.
Assuming you own your home outright, if you're single and aged around 65 you should budget around $27,425 per year, and if you're a couple it’s $39,442 a year, according to the ASFA Retirement Standard. By the time you’re aged around 85, these amounts decrease to $25,927 and $37,004 respectively.
A comfortable lifestyle
For a comfortable retirement lifestyle, you're considered to have the financial capacity to take part in a wide variety of leisure and recreational activities, as well as maintaining a decent living standard. You should be able to afford goods and services such as private health insurance, electronic equipment, a reasonable car, and domestic and occasional overseas trips.
Again assuming you own your home outright, ASFA budgets $42,953 a year for singles aged around 65 and $60,604 for couples. And as you move towards 85, the amounts decrease to $40,798 and $56,548 respectively.
How much do I need for a comfortable retirement?
For many, post-work income sources comprise a combination of the Federal Government Age Pension and superannuation.
To qualify for the Age Pension, you'll need to meet the Government's age and residence requirements. How much you get depends on your income, assets and other circumstances. This pension is not often sufficient to achieve a desired lifestyle, which is why super is so important.
According to the ASFA Retirement Standard for a comfortable lifestyle, if you're single, aim for around $545,000 in super savings, and if you're a couple you should plan for $640,000.
If you're concerned that your super balance isn't quite where it needs to be, here are some ways you can help boost your super:
- increase your contributions through salary sacrifice
- consolidate your super to avoid paying extra fees
- research your eligibility for schemes such as the Government Co-contributions
- search for lost super
Of course, before making any decisions about your super, you should consider your own circumstances and seek financial advice.
With over 20 years' experience, our financial planners can help ensure your super works to make your retirement as comfortable as possible. Request an appointment with an LGS financial planner online or call 1300 547 873.
All figures are from the ASFA Retirement Standard. The figures assume that the retiree/s will draw down all their capital and receive a part Age Pension.
All figures in today's dollars using 2.75% AWE as a deflator and an assumed investment earning rate of 6%.