12th Jun 2018

Do I really need $1 million to retire?

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Do I really need $1 million to retire?
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Have you heard the mantra that you’ll need $1 million or more to retire?  It’s the figure often thrown around as the financial retirement ideal. But everybody has different ideas and means for their retirement. There is no magic super number.

Most people heading into retirement will not have $1 million in super. In fact, the most recent Australian Bureau of Statistics (ABS) data shows that at retirement age, men have an average balance of $322,000 compared to $180,000 for women.

The suggestion that you’ll need $1 million in retirement ignores the role of the government Age Pension. Yet, seven out of 10 older Australians receive either a part or full Age Pension, according to the ABS. So it is unlikely that super will be your only source of retirement income.

To start working out how much you might need for retirement, you may wish to consider the following.

Your day-to-day expenses
Finding your own retirement number starts with a retirement budget. You'll have to plan for daily expenses and even for unexpected costs. And how much money you'll need to retire will also depend on any outstanding debts you have.

Eligibility for government entitlements
The Age Pension is a government entitlement paid to people who meet the age and residency requirements. The amount you receive depends on a range of factors, such as your assets, how much super you have and any other income you may receive in retirement such as rental returns.  

If you’re not eligible for the Age Pension, you may be eligible for other benefits such as a Seniors Health Card, which can assist you with the cost of prescription medication and other health services.

Learn more about super and the Age Pension 





COMMENTS

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Janus
12th Jun 2018
11:20am
Glad I did not need $1M to retire, as I would still be working.
I retired with quite a bit less than that, and am quite happy living off $32g /yr for 2 persons.

Bloody government gives me nothing. Liberals blew it forever when they changed the goalposts. (expletive deleted). Their motto for us: hurry up and die.

Caveat: no debts. Cheaper living in Tas. No bad habits eg smoking. Country living, no temptations, no water or sewerage bills.
Rosret
12th Jun 2018
6:27pm
How does one live on $32K without a government supplement and doesn't have the magic million?
One would imagine there is another investment top up.
I guess it all depends on how far away one estimates their due death date will be.
OnlyGenuineRainey
14th Jun 2018
8:01am
Rosret, many people are living on $32,000 a year without the magic million and with no government help, because the assets test is cruel and unrealistic in the extreme. It does not take into account the returns one is able to achieve on the assets. People who find their assets not returning well, or not at all, may not be able to sell them in some circumstances, yet often Centrelink continues to assess these assets at high value.

If Janus is single, and a homeowner, he might only have about $550,000 and get no government help. At the stated average 5% return (and many get less than that), he wouldn't make anywhere close to $32,000. After administration costs, he'd be lucky to equal the single aged pension when the value of concessions is counted.

A couple is expected to live without government help if they have around $830,000 in assets. Given the inclusion of furniture, car, etc. and that they have to hold enough cash to live on, they might struggle to have $750,000 in returning assets, and at the government-stated average return of 5%, that's only $37,500 - less any costs to administer their investments and take advice. Not hard to fall below the pension income level. ''Average'' means many are getting less than 5%, so some will be living on way less than the pension or eroding their savings quickly (if they have anything they can liquidate).

I would say you actually need close to $2 million (for a couple) to retire if you have more than $500,000, and financial advisers are telling couples who can't get to $2 million to consider reducing assets to a level where they qualify for at least a part pension, as unless they can get excellent returns without much risk they will struggle to achieve the income they would get having less savings and getting pension benefits.

It's a DUMB system, conceived by IDIOTS who have no idea how things are in the real world. And sadly, I don't think most people realize how bad the system is, because those without savings tend to just think people who have assets are ''lucky''!
Mad as hell
12th Jun 2018
12:51pm
Average account balances are misleading. Median account balances for 65 y.o. would be much lower than those stated. Can’t find the exact amount, if anyone could find please inform.
Old Man
12th Jun 2018
12:54pm
There is no definitive answer to this question. Some will need $1M+ whilst others will get by with $250,000 plus the age pension. Some will live in country areas, some will live in metropolitan areas, some will rent, some will own their home outright and some will be paying off mortgages. Some will have had a great time while working while others will have had less memories and put a bit away for tomorrow.
Jacky
12th Jun 2018
1:02pm
If you have $1M you will never spend it. The older you get the less you spend. Most people would live very comfortable will about $200,000 and the pension. I like how NZ pays the pension to every person when they reach 65 regardless of what they have and they can still be employed full time. Our Government has way too many rules and are very controlling of every aspect of your life if you get any benefit. If you have a rental property you probably won't get the pension. Considering what you have to deal with to have a rental property sometimes I think you are better off putting the money elsewhere and living without the dramas of tenants.
Big Al
12th Jun 2018
2:04pm
I disagree with your statement that if you have a million dollars you will never spend it, Jackie. What about people who devote most of their retired years to travelling? It depends to what extent of luxury you want to enjoy, surely? Most of us could probably travel for quite some time on a million, but if you want first class, five star hotels every night of the week, I would reckon you would max the mill out in about eight years, or so.
Rosret
12th Jun 2018
6:35pm
Jacky $1m is a draw down of $50K p.a. increasing as the individual ages.
If they retire at 65 with on $50K by the time they are 85 -95 prices will have escalated due to inflation making that 50K seem like 10K.
So yes, they will need it. The government is well aware of this and its why the private superannuation fund scheme is so flawed.
OnlyGenuineRainey
14th Jun 2018
8:11am
Jacky, obviously the experts disagree, because even counting above average investment returns, calculators on the web show that retirees with $1 million will run out of money before they turn 90.

Yes, I could live comfortably with $200,000 and the pension. The point is that a single with only just over half a million doesn't get any pension. A couple with much less than a million doesn't get any pension - or concessions. Many with around $1 million - or a little less - would actually be better off with half that amount, and financial advisers are telling people NOT to save too much for retirement. Which means the IDIOTS in government are imposing a much higher burden on the taxpayer than necessary by discouraging financial independence in retirement.

Yes, we SHOULD adopt the NZ system of no means tests. It's far more socially and economically beneficial.
Curious
12th Jun 2018
1:38pm
I am a self-funded retiree. I think everyone has a different lifestyle and hence a different financial arrangement needs to be considered.

When I retired in 2002, my financial adviser told me that I needed $1M to retire if I wanted to keep the lifestyle I had customed to. I don't consider my lifestyle as at the high end of the social scale. However, $1M for a Term Deposit at 2.40% p.a. only get you about $2,000 a month interest. $500.00 a week for grocery, energy bills, council rate, water rate, household insurance, prescriptions, health fund, transport and more if you have a car. If you want entertainment, going to restaurants, or a short holiday, you blow your budget. The above did not include any possible tax liability for earning this interest.

I came to the conclusion, $1M is not enough for retirement. If you want a decent living and to take good care of your health and to enjoy your retirement on a cruise at least once a year, you need $2M or more to retire. I wonder how many retirees can afford this? I am very careful with my money but sometimes I have to struggle. It is beyond me if people can survive $32K for 2 persons per annum.

Having said that, the above assumption is that we live in Sydney. Things can be different if you live a different capital city and even better if you live a regional city. These days I only live in Sydney for 6 months and in a regional city in Queensland to escape Sydney's winter. I noticed my expenses in the regional city have been a lot cheaper than those in Sydney. Housing is most affordable, grocery is a lot fresher and cheaper and the locals are most friendly. However, medical and hospital cares can be a problem, depending on what services are needed.

Food for thoughts!
Nerk
12th Jun 2018
2:37pm
Hi your loosing out by paying tax by having cash as a investment, I have around $950,000 in blue chip shares and get a tax refund each year, thats the beauty with 100% fully franked shares tax already paid, I am living on about 6 to 7 % of that.
The main thing is not having any debt, none at all, money is no good as cash in savings you pay tax on it, I was on the DSP for a number of years before turdball took it away however I have learned to budget and survive quite well and travel and stay overseas as long as I wish.
Curious
12th Jun 2018
2:46pm
Thanks, Nerk.

Any advice on blue-chip shares I can follow-up?
Old Geezer
12th Jun 2018
5:08pm
Nerk don't count on that tax refund of your franking credits if Labor wins the next election as they are going to keep it and not give it back as a refund.
Rosret
12th Jun 2018
6:38pm
If you have $1m in a term deposit you need a financial adviser and get it out of there.
If you retired in 2002 and invested in the housing market you would have $3m in assets by now.
Nerk
13th Jun 2018
1:04pm
Curious,,, Well commsec is who I deal with, it has listing on blue chip companies, which are the best companies in Australia, on the ASX ae stable and big.
eg.: BHP, WBC,,, Westpac bank, CBA.... Commonwealth bank, etc. they have to broke before you loose your money, I doubt that would happen.
or another way is called share trading buy heap of shares for 5cents and sell for 10cents you've doubled your money, do this daily and over time you can make a good deal of money, and pay tax at the top rate, however this way is also great for loosing a lot of money as well. personally I only invest in blue chip and so much more safer.
Curious
13th Jun 2018
1:08pm
Thanks, Nerk. Have a good day.
Farside
17th Jun 2018
5:14pm
@Curious, it's true the low cash rate returns provide only $2k a month in interest however you omit to consider topping up from your $1m in capital. Increasing your payment to $3k a month would be good for more than 40 years. And if ever we return to the days of high interest rates (which none of the oldies complained about) then you will be living on easy street.
Observer
12th Jun 2018
2:15pm
Suggest Janus checks with Centerlink, perhpas he has failed the asset test, as it would appear he is well under the income test limit ($300pf and 50 cent reduction per dollar over $300). That means a couple can receive $77k pa before losing their part pension.
The Liberal Govt has in my opinion been generous, and I live quite well on the age pension and a suppliment. But my view is that nobody deserves a living, and the pension is a generous gift, not an entitlement.
GrayComputing
12th Jun 2018
3:13pm
dear Observer
I suspect you are just another paid for web troll speaking the usual every is OK and great rubbish.
Tell us you real age and state that you are not a paid mouth piece
for any political party or for the super rich.
If you not a honest independent pensioner get off this site
Big Al
12th Jun 2018
3:55pm
So GrayComputing - anyone with a different perspective to yours is a troll/stooge of a right wing political party yadda yadda! Why don't you grow up, imbecile!
Old Geezer
12th Jun 2018
5:10pm
Appears that way Big Al. Anyone who has a different opinion is labelled a troll etc to get rid of them. Personally I love it as it means that I am being heard and educating people the truth of what is really going on.
Rae
12th Jun 2018
6:21pm
Janus may have a rental that returns $32000 after costs and is above the asset limit.

Property has a yield around 2% to3% and capital gains can only be released by sale. Illiquid at the worst of times.

Non producing assets are actively discouraged by the LNP. No holiday home or boat or fancy caravan for you lot unless you are the right sort of person with money.

Of course the fact that nearly all the other countries treat their elderly better is a perfect indictment of why fascist organisations controlling political parties is a very very bad idea.
OnlyGenuineRainey
14th Jun 2018
8:18am
If Janus is a single homeowner, Observer, he might well have too much in assets to get any pension but have an income of $32,000 a year, or even much less. The LNP has NOT been generous to people who slogged all their lives to save for old age and now have to drain their savings to compensate for pension loss. It's a disgrace that people with less assets are better off than those who worked hard and saved well but are not by any means wealthy.
GrayComputing
12th Jun 2018
3:07pm
It is time for all of us to rant at our MPs and Senators daily to take action for human decency and a huge stress reduction for pensioners

NO ASSET TEST FOR A PENSION EVER AGAIN!
A pension is not welfare.

Most economist say we will save taxpayers money by dropping asset testing because of the massive overheads cost in running Centrelink and the 10,000 conflicting rules.

Hiring more Centrelink staff will only increase taxpayer’s costs for processing the creeping insane red tape monster system politicians and well paid bureaucrats have created.

Help scrap it now. Become a hero.

Even poorer New Zealand has a NO ASSET pension so it is cheaper and user friendly.

Why worry that few million$ earners get it too. That is peanuts to them, not enough for a good vintage champagne.

Do retired and retiring people really look forward and want 100++ visits to/from Centrelink and be part of 3 million waiting queues and lost calls?

Does your MP really like being part of the system that allows this indirect abuse of the elderly?

This abuse is actually sponsored by our government and forced down to Centrelink and borders on a criminal act.

Why do MPs normally compassionate persons let this Centrelink abuse happen at taxpayers’ expense?

Some opposition and independent MPs stand to lose their chance at being part of the needed government changes

We all need to tell our MP and senators every day that these criminal asset tests for a pension must be dropped now.

Also contact opposition and independent MPs who can help us to get a fair deal on pensions

NO ASSET TEST FOR A PENSION EVER AGAIN!
Farside
17th Jun 2018
5:23pm
"borders on a criminal act", "criminal asset tests" – really, what crime might that be? How about turning down the hyperbole so people might actually consider the merit behind your main point concerning universal aged pensions. Even better, how about backing up the economic case to do so with evidence.
Charlie
12th Jun 2018
4:09pm
Before I retired, I worked it out to $1.5 million. That's a non home owner earning a comfortable wage from an interest bearing deposit. Doing one small overseas trip, buying a new car and replacing it at least once. Age pension not included.

Unfortunately I retired on medical grounds at 57 drew my $100,000 super and put it in the bank
Then penalized for having over $70000 in the bank so refused full rate of disability pension. Interest on the money was also counted as income so disability pension further reduced.
I bought a couple of the things I needed in retirement before my money was eroded by rent and medical costs. Reached pension age with nothing.
Old Geezer
12th Jun 2018
5:14pm
I retired over 30 years ago to with only about $100.000 but today I have bucklies of getting the OAP unless I invest in a very expensive house and go on a spending spree. That's right I have made all my money after I retired as I have had the time to learn how to invest successfully. It has been a very profitable hobby for me.
OnlyGenuineRainey
14th Jun 2018
8:22am
Then you, OG, are NOT qualified to comment here, because $100K 30 years ago was a HUGE amount of money and investment conditions and pension rules were VERY different from today. Clearly you have no idea how things are for people retiring now or recently retired.
Old Geezer
12th Jun 2018
4:31pm
You need to retire with either $500,000 or $2 million. Anything between $500,000 and $2 million in the current market you will be worse off financially if you leave your money in the bank.
Rae
12th Jun 2018
6:33pm
Why would you leave your money in the bank?
OnlyGenuineRainey
14th Jun 2018
8:24am
Delete the last 8 words, OG, and for once in your life you would actually have made a valid statement. You lost it with the last 8 words though.
Farside
17th Jun 2018
5:27pm
@OGR, what do you object to about "if you leave your money in the bank"; it's not hard to compare deposit interest rates offered by banks with CPI.
Cowboy Jim
12th Jun 2018
4:40pm
Nice to see that the Age pension is an entitlement as stated above. Lots of people in this forum call it welfare. It was an entitlement when I started work in the 60s and for me it still is.
Old Geezer
12th Jun 2018
5:06pm
Wrong the OAP is welfare paid to those who have no other means of support. It is definitely not an entitlement at all.
Curious
12th Jun 2018
5:13pm
Old Geezer. What difference does it make to you that it is an entitlement or a welfare?

If people worked all their life and paid taxes, to me it is an entitlement.

If people never worked all their life and paid no taxes, to me it is a welfare.

Let see how you definite your position, OG.
Old Geezer
12th Jun 2018
5:18pm
It makes a big difference because people like me worked all our lives too and paid taxes too but it isn't available to people like us. As it is worked out on what you have when you apply and has nothing to do with what you did before you retired it can be nothing but welfare which is paid to those who have no other means of support.

If it was available to all those who worked all their lives and paid taxes then you would have an argument that is an entitlement. But until it is then it is welfare.
Curious
12th Jun 2018
5:30pm
OG. With the introduction of superannuation in Australia, there is a rule that above certain financial level, retirees don't qualify the old age pension. The whole idea is to have superannuation to replace old age pension for those who work hard and save for their retirement.

This doesn't detract from the fact that who worked hard all their life and paid tax, the old age pension is not an entitlement.

The old age pension is no longer a universal safety net with the introduction of superannuation. So the future generation be aware this old age pension is not going to be a welfare when you retire.
Curious
12th Jun 2018
5:34pm
Sorry, a typo, should be read as follows: -

This doesn't detract from the fact that who worked hard all their life and paid tax but below certain financial and asset level, the old age pension is still an entitlement.
Old Geezer
12th Jun 2018
5:35pm
Superannuation doesn't change the fact that the OAP is welfare. Many people don't have enough superannuation anyway so it doesn't change a thing.
Rae
12th Jun 2018
6:37pm
Only because the IPA Liberal Party said so. That can change. Confiscate the Future Fund and rename it the Welfare Fund once again and siphon off the 7.5% taxes paid, never rescinded, and presto entitlement back again.

It's purely a legislative thing isn't it. Lot's of us would vote for our welfare fund back. I bet a referendum would do it.
Mad as hell
12th Jun 2018
6:49pm
The age of entitlement is not over because Joe Hockey said so. The Old Age Pension is an entitlement.
Curious
12th Jun 2018
6:51pm
Rae, I like your reply.....it is a man-make-rule to rob everyone with a legitimacy name tag for welfare. They are people's money and not the government's. We elected them to sort things out for us and have a fair distribution of wealth among us. See what a mass they make of it!
Triss
12th Jun 2018
11:01pm
As I've said before, OG, if the pension is welfare paid to those who have no other means of support then all pensions are welfare because if you took away the pensions of non OAPs they would have no other means of support.
iday
12th Jun 2018
5:10pm
Going by all the posts here, no figure will be satisfactory to everyone. We all live differently and make our own beds for that matter.
heemskerk99
12th Jun 2018
7:26pm
best comment so far
Cheezil61
13th Jun 2018
9:03am
So 7 out of 10 receive some sort of pension. I prob wont be able to get a pension til I'm 70 if this govt has it's way - how do I exist in meantime (60 til 70) if I retire at 60? Do I need to exhaust all my super before receiving Centreling/Newstart/OAP? Any tips/clues? I seriously doubt my super is enough to last 10yrs!
OnlyGenuineRainey
14th Jun 2018
8:29am
They haven't raised the age to 70 yet, Cheezil61, and there is huge opposition to doing so. Hopefully, the opponents will prevail on this one. Everyone I know - retired or not - is with you on this. The seat-warming bludgers are the only ones wanting the retirement age changed, because they never worked anyway. I think they will struggle to get their way any time soon. (I hope so, anyway!)

Regardless of what age you retire, you need to exhaust most of your savings fairly quickly because this stinking government will only give you a pension if you have very little. It doesn't pay to work hard and save in this country unless you can get very rich - and it takes much more than $1 million!
Nerk
13th Jun 2018
1:12pm
Did you know that lots of naughty people gradually take money out of the bank and stick it under the mattress to get the pension, stinkers aren't they, my advice is don't get $100. notes cause there in line to be banned.
Curious
13th Jun 2018
1:17pm
These people are mostly cheating and believe in a cash economy without paying tax. It is sickening, isn't it?

I hope one day they get caught.
Noodles
13th Jun 2018
2:33pm
I know of a woman who has around $200k in a safe in her home and gets a part pension.

If I was her I would not be telling people and I dont know why she told me! Be quite amusing if the ban did come in; can imagine the mad scramble to convert to $50 notes.
Noodles
13th Jun 2018
2:29pm
My husband and self both have superannuation pensions from our employers. We live on that and never touch our savings or investments. We have what we want and go where we want ... we are not extravagant at all but live very comfortably. We inadvertenly save as well.

You do need more than the full married pension rate if you are self funded as you have the additional expenses that pensioners do not have. I would suggest that $65K a year would suit persons lead a comfortable lifestyle. Your expenses are less; i.e. clothing, travel to and from work. However if you like to eat out every night; go to lots of paid concerts etc; cruise every few months; drink and smoke, yes you do need a lot more than $65k annually.
OnlyGenuineRainey
14th Jun 2018
8:04am
$65,000 a year! Wow! The government seems to think an self-funded couple should be able to get by on much less than $37,500 a year, since that's the return they claim is achievable on a level of assets that disqualifies a couple from any pension benefit.

If Shorten has his way, that will reduce yet again and many self-funded retirees will be eroding their assets quickly if they can't live on less than $30,000 a year.

The system really does hammer people for saving. Apparently it's a crime to save enough to NOT be a burden on the public purse!
Noodles
14th Jun 2018
10:05am
As I said OGR $65k is my estimate if you want to live a lifestyle where you live a pretty full on lifestyle. For us that amount is too much as we dont live that way.

Many as we know are on only part pensions and have the money to go on cruises, buy a caravan and travel around the countryside (i.e. grey nomads).

My friend who lives in a retirement village was saying her pensioner friend (obviously a part pensioner) has just left on her third cruise this year and this one is for a three month round the world.

As I have said on here before there are so many different situations where people class themselves as "pensioners" whereas in fact they are probably only getting small amount of pension. There is no way someone can afford three cruises like this unless you have a reasonable amount of money in kitty.
Ray
17th Jun 2018
1:46pm
noodles, if a person receives $1 or several hundred dollars, that person is technically in receipt of a "pension", therefore they have all right to call themselves a pensioner.

How do you know, what a person gives up in order to have the money to go on these cruises?? Do you live with them and in charge of their expense accounts?

Do you really believe that because someone is in receipt of a pension, they should have no fun? What makes you think that?
Fready
14th Jun 2018
6:00pm
Old Geezer should know that age doesn't necessarily mean knowledge. Fact is that people like me paid into a "Universal Pension" at 7.5% of wage (as well as income tax) for 33 years. However, in 1985 Labor introduced the assets and incomes tests that effectively precluded millions of tax-payers from the pension that they had paid for. They (including me) never received any compensation for this act of treachery. For those who paid tax between 1946 and 1985 the pension is (or should be) an entitlement.!
Farside
17th Jun 2018
6:04pm
Out of interest when did you last pay into the National Welfare Fund? I came across an old pay slip from 1977 and there was no 7.5% levy. The only deductions were in accordance with the prevailing income tax rates. It's curious how the mythology of the welfare contributions to National Welfare Fund remains so long after it passed into historical obscurity.


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