Having an idea of what sort of lifestyle you would like in retirement can be a good starting point.
You might want to take an overseas holiday every year or just take day trips or short breaks more locally. Eating out, leisure activities and transport are also considerations you might need to take into account.
The Association of Superannuation Funds of Australia’s (ASFA) Retirement Standard has researched some benchmark annual budgets that might give you some idea of what you could need for a ‘comfortable’ or ‘modest’ retirement lifestyle.
Comfortable retirement lifestyle
For a single person wanting a ‘comfortable’ retirement lifestyle, ASFA suggests an annual income of around $43,000, and for a couple, it gives a figure of almost $60,000.
Things that amount of money might cover could be an annual holiday in Australia, eating out regularly at restaurants, regular participation in leisure activities and owning a reasonable car.
To drive this level of income annually, ASFA estimates that a single person might need around $545,000 in assets to support such retirement expenses. ASFA suggests for a couple, around $640,000 would be the target figure.
This amount could be made up of superannuation, shares, cash, and investment property, but not the home you live in.
Modest retirement lifestyle
Living a modest lifestyle in retirement could include a couple of short breaks each year near where you live, eating out infrequently at restaurants, trips to the cinema and some paid leisure activities as well as owning an older, less reliable car.
Your expenses each year might be around $24,000 for singles and $34,000 for a couple, according to ASFA, so the assets needed to support that would be around $50,000 or $35,000 respectively, because most of your expenses would be met by the age pension.
Making an estimate
If you are a high income earner, one way of estimating how much money you might need in retirement would be to assume you need 67%, or two-thirds, of your income before you retire to maintain the same standard of living when you are retired, according to the Australian Securities and Investment Commission (ASIC) MoneySmart website.
It’s never too early or late to think about topping up your super. Putting in a little extra now can make a difference in the future.
Salary sacrificing might be an option, while bringing all your super together into one fund can help to manage fees that you might be paying.