How much do I need for retirement?
Life can sometimes seem like a rollercoaster, full of twists, turns and unexpected change – but most of us would love a smooth ride once retirement rolls around. The fact is, Australians are living longer than ever before. The Intergenerational Report for 2015 found that the number of people aged 65 and over is expected to double over the next 40 years. Similarly, our earning capacity keeps on climbing. In fact, average incomes have doubled since 1975 – and those in the mining industry have reaped some of the biggest rewards.
When you're working hard, enjoying life and supporting your family, it can be difficult to know how much you should be tucking away for your twilight years. If you're worried about this, you're not alone. A survey from HSBC found that 22 per cent of working age people aren't aware of how much they need to retire comfortably.
Luckily, there are plenty of resources at your fingertips to get things on track. Here are a few ideas to help you work out what you might need.
What kind of lifestyle will you have?
Figuring out how you want to live is a personal thing – and it differs from person to person. One retiree's extravagance might be the norm for another, so it's worth sitting down with an adviser to work out the kind of lifestyle you'd like to lead. There are normally two phrases that sum up retirement: Comfortable or modest. These are broad-stroke terms but they can give you an idea of how much you'll need to tuck away.
According to the Australian Securities and Investments Commission, if you've been earning an above average income and successfully paid off your home loan, you could need around two-thirds of your pre-retirement income saved up to keep up the same standard of living. As well, the Association of Superannuation Funds of Australia (ASFA) has a general guide you can use to work out a budget. For a comfortable lifestyle, it's estimated that a couple might need around $58,444 a year.
This covers a whole range of things, from travel, a nice car and good clothes, to private health insurance. The figure will go up or down depending on your personal preferences, but it's a handy benchmark to work against.
How can you start saving?
Once you've got a clear picture of the type of life you'd like to lead down the track, you can start to plan your savings efforts – and it's important to get onto this as soon as possible. Whatever your goals, advice is crucial. With the help of your financial planner, you can work out where your savings target is at currently and figure out ways to improve this. It might mean bigger super contributions, or changing your property investment strategy.