How Much Income do you Need to Retire Comfortably?

How Much Income do you Need to Retire Comfortably?

Many Australians seem to have a pretty good idea of the lifestyle they want to enjoy when they retire. For some it’s a brand-new caravan to set off around the country. For others, it’s having enough in the bank to add a workshop out the back and start making things. Maybe your vision for retirement is something totally different. But what about the income you’ll need to get there?

Funding your daily essentials, health & fitness needs, social engagements, hobbies and interests and connection with friends and family requires some dutiful consideration, and it is critical to know how much income you’re likely to need when it comes time to retire.

Comfortable vs Modest Lifestyle When You Retire

According to the latest quarterly retirement standard published by The Association of Superannuation Funds of Australia (ASFA), the minimum annual cost of a comfortable retirement is $45,239 for singles and $63,799 for couples aged around 67. Note this is assuming they own their own home and are in relatively good health. This is in stark contrast to what ASFA consider to be a “modest” retirement lifestyle at that same age, $28,775 for singles and $41,446 for couples. The primary difference being that retirees living a “modest” lifestyle pursue fewer leisure and social activities and exercise less frequently than those living “comfortably”, and would also hold basic health insurance as opposed to more comprehensive private insurance.  Let’s focus on what is “comfortable”.

What a “Comfortable” Retirement Lifestyle Entails

ASFA break down a comfortable lifestyle into four distinct categories:

  • Daily Essentials: Housing; Groceries; Transport; Clothing/Footwear
  • Staying Fit & Healthy: Private, comprehensive health insurance; medical appointments including doctor/specialist visits; exercise expenses (e.g. aquarobics, yoga, bowls, dance classes)
  • Staying Socially Engaged: Movies; streaming services (e.g. Netflix); club membership
  • Connecting with Family: Computer/laptop; internet; mobile phone plan; interstate flights once annually; international flights once every seven years

Obviously, different people will apportion their expenses within each category differently, and may have some additional expenditure outside of these. For instance, some retirees wish to put aside a certain amount of money for their family (perhaps their grandchildren) on a regular basis. For others, it may be more frequent travel or taking up a new hobby or interest. When you start your own retirement planning journey well before you actually retire, you’ll need to factor in the expenses you’re likely to incur in each of these categories and more, and the income you’ll need as a result.

Bridging the Income Gap Before its Time to Retire

Upon reading the figures raised in the standard, and considering your own situation, you might have concerns about whether you’ll have enough income when you retire to be able to adequately fund the retirement lifestyle you desire. No matter how far away you are from leaving the workforce behind, it’s never too early to start taking practical steps towards securing your financial future. McKinley Plowman’s Life Plan program features a section within its free initial report that shows you the likely age at which your assets will run out, giving you a clear indication of how important it is to get on top of your retirement funding early. Some people can commit more money to their superannuation fund, adjust their investments or alter their spending habits to “bridge the gap” well in advance of retirement age. At the end of the day, it’s important to seek professional financial advice before making any final decisions.

How MP+ Can Help

The Wealth team at McKinley Plowman have unparalleled experience in retirement planning and ensuring our clients not only meet their lifestyle expectations when they retire, but ideally exceed them. To see what we could do for you, don’t hesitate to get in touch with us on 08 9301 2200 (Joondalup), 08 9361 3300 (Victoria Park), or via our website.


Data from: ASFA Retirement Standard September Quarter 2021

written by:

Aaron has over twenty years of experience in the financial services industry working with large companies and small businesses across all aspects of financial planning. He has broad experience across superannuation (including self-managed superannuation), investments, estate planning and personal insurance, retirement planning and business succession planning.
Aaron is passionate about the value of professional, client-focused advice and enjoys working closely with clients to help them make smart decisions with their money, as well as aiding them to clarify and achieve their financial aspirations.

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