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Retirement: Reality vs "The Dream"

In retirement, you may dream about overseas holidays, living in a beautiful Hampton style home and spending time with your friends and family. However, the reality is that for some, their savings are unlikely to match their retirement expectations.

When you retire, your superannuation, asset and other investments are your lifeline. You no longer have a regular salary coming in and you rely on these savings to fund your day-to-day living expenses. This, along with the increasing cost of goods and services, means that retirement can be a daunting prospect for many.

So how much will you need? It’s difficult to know exactly how much you’ll need to fund your retirement but, the Association of Superannuation Funds of Australia (ASFA) attempts to provide a clearer picture of what this may look like.

Firstly, how much are you likely to spend?

The ASFA Retirement Standard provides a picture of how a modest lifestyle compares to a comfortable lifestyle and how much you’re likely to spend to maintain each of these two standards of living.

A comfortable lifestyle includes extra items that are considered to be ‘comforts’, such as updating the kitchen or bathroom, eating out from time-to-time, entertaining at home, having private health insurance at the top rate, enjoying an occasional overseas holiday and being able to afford to buy nice clothes and gifts.

The ASFA figures in table 1 estimate that, for a couple to maintain a modest lifestyle in retirement, they’ll likely spend around $761 per week compared to a couple who wish to live a comfortable lifestyle who are likely to spend almost double that, at around $1,168 per week.

But remember, a comfortable retirement isn’t a luxurious retirement. For example, the comfortable retirement figures for a couple only allow an amount of $271 per week for leisure and that includes saving for holidays. Also, both weekly budgets assume that the home is owned outright so it doesn’t include the cost of rent or mortgage repayments.

Note: Single calculations are based on a female who is relatively healthy and owns her own home.

What about the age pension?

As shown in table 2, if you’re relying on the age pension and, like most of us, are planning on a comfortable lifestyle in retirement, you’ll have a gap of 366.72 per week ($829.82 - $463.10).

How much do you need to save?

That’s the question on everyone’s mind. The ASFA Retirement Standard suggests the lump sum amount required for a single person to support a comfortable lifestyle is just over half a million dollars. Don’t forget, this is on top of your principal home.

If you would like to know if your retirement plans are on track feel free to contact me us at Heart Financial Advisers:

Stu Varidel and Your Choice Financial Planning Pty Ltd trading as Heart Financial Advisers are authorised representatives of Sentry Financial Services Pty Ltd.

The information contained herein is of a general nature only and does not constitute advice. You should not act on any information without considering your personal needs, circumstances and objectives. We recommend you obtain professional financial advice specific to your circumstances. The views expressed here are not ours. While the information contained in this article may contain or be based on information obtained from sources believed to be reliable, it may not have been independently verified. Where information contained in this publication contains material provided directly by third parties it is given in good faith and has been derived from sources believed to be accurate at its issue date.  To the maximum extent permitted by law: no guarantee, representation or warranty is given that any information or advice in this publication is complete, accurate, up to date or fit for any purpose; and no party or associated entities as mentioned is in any way liable to you (including for negligence) in respect of any reliance upon such information. This article may also contain links to websites operated by third parties who are not related to us. These links are provided for convenience only and do not represent any endorsement or approval by us.

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