How much is enough?
This depends on every person. Every person has a different idea on how their retirement might look. How much money they need depends on a variety of factors. Your starting point can be how a comfortable retirement looks like to you.
How does your ideal lifestyle look like?
A ‘comfortable’ retirement for you may be travelling or simply just spending more time with your children and grandchildren. It may be just to not worry about money and spend more of your time doing the things that you love.
Then, you also have to consider any uncertain events such as unexpected medical bills or anything else that could happen in retirement.
The Association of Superannuation Funds of Australia’s Retirement Standard (ASFA) had outlined a ‘comfortable retirement standard’ that allows retirees to maintain a good standard of living in their retirement years. It considers:
How much money will you have in your retirement?
Remember that it’s never too early to start thinking about retirement. You don’t want to wait until you’re 65. You want to first figure out how much money you’re going to need in retirement.
Again, it all depends on many factors such as your ideal lifestyle. You can work out how much money you need in different ways.
Going back to the ‘comfortable retirement standard’ by the ASFA mentioned previously, according to them, the minimum annual cost of a comfortable retirement is:
This means, you would need to have a lump sum of approximately $545,000 (for singles) or $640,000 for couples by the age of 65.
To add on, the cost of a modest lifestyle has a lower minimum annual cost with $28,775 for singles and $41,446 for couples according to the ASFA.
Regardless on the cost, you still need to consider how these numbers would look different over the next 20 to 30 years. Lifestyle expectations are most likely going to change over the years, and the cost of living increases every single year. Because of this, you need to always update how much you’ll need overtime.
What to do if you don’t have enough money for retirement?
If you don’t have enough money for retirement, there are still a few things you can do to get it back on track. They include the following:
But, to make sure that you are not put into this situation, read further on how to make sure you have enough money for retirement.
How to make sure you have enough money for retirement?
To make sure that you have enough money for retirement, you can take the following steps:
1 – Start Now
You don’t want to wait until you’re 60 to start saving money for retirement. The earlier you start, the better. If you want to live the lifestyle you want in retirement, it’s important to start thinking about how you can make contributions to achieve it.
You may think that you could just rely on the Aged Pension. However, based on the current rates ($860.60 per fortnight for a single person), it doesn’t give you a lot of choices and the life you want in retirement.
That’s why, start making contributions to your retirement fund now and get started with savings. As soon as you enter the workforce, it’s your opportunity to maximise the potential benefits and avoid potential setbacks later in life.
2 – Make Extra Contributions to Your Savings
It’s recommended that you speak to your bank and see what they offer in terms of savings account and term deposit interest rates.
Then, continue to make extra contributions throughout your life to boost your retirement savings. Overtime, those small amounts can make a big difference.
You may also want to consider if there are any expenses that you could cut back on and contribute to your retirement savings instead. For instance, you may have a coffee every morning, or an unused subscription that you can cut the cost on and contribute it to your retirement savings.
3 – Seek Financial Advice
Retirement planning is not the easiest process. Since everyone’s financial situation is different, it’s recommended that you seek personalised advice from a financial adviser or professional.