Calculating your retirement needs

How much money you will need in retirement is actually a very different question to how much money is enough. Which is just as well, as no one really seems to know the answer to the latter question – with amounts from $500,000 to $1.5 million and everything in between bandied about by ‘experts’ as being ‘enough’.

The important question you need to ask yourself and the calculation you need to undertake is ‘how much will you need to live in retirement’?

A good place to start is by measuring your expected expenditure against the retirement standard issued by the Association of Superannuation Funds of Australia (ASFA), which details how much is needed to have a modest or comfortable lifestyle in retirement. Creating a simple spreadsheet using the categories in the retirement standard will give you an indication of how much you need to cover costs on a regular basis.

In addition to the categories covered by the retirement standard, you should also add to your spreadsheet the liabilities, such as credit cards and mortgage and loan repayments you will carry into retirement that are not included in the retirement standard.

Next, you will need to consider any additional expenses you may incur, such as the purchase of a new car, specific travel plans or medical expenses over and above what you have detailed on your spreadsheet.

Once you have compiled the above information, you can then break down what you will need to spend on a weekly or fortnightly basis. This can then be factored into the income you can derive from your superannuation, investments and any Age Pension you will receive.

Australian Super has a handy calculator that, with the input of some basic information (nothing personal) will give you an indication of how much income you can derive from your superannuation and how it can be topped up by the Age Pension, to help you meet your income needs.

This article has been sponsored by AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788. The views expressed are those of YourLifeChoices and not necessarily the views of AustralianSuper. The article contains general information and you should consider if it is right for you.

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