7th Jan 2018

How to match retirement income with expected spending

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Set your dream retirement nest egg
Olga Galacho

If you’ve ever wondered whether you will achieve your retirement income target, check out MoneySmart’s calculation tools.

To begin with, work out how much superannuation and Age Pension money you will have throughout your retirement years with the planner tool. It takes just five minutes to discover:

  • what income you are likely to have when you retire
  • how contributions, investment options, fees and retirement age affect your retirement income from super
  • how working part-time or taking a break from work affects your super. 

 

The bar chart this tool generates will indicate how much you will receive each year until 90 years of age.



Next, try to figure out what your lifestyle will look like. If you own your home and are planning on having a comfortable lifestyle that includes some travelling, regular dining out and entertainment, then you fit into the YourLifeChoices’ Affluent tribe and our December Quarter Retirement Affordability Index™ * calculates that you will need an annual income of $42,225 to cover day-to-day spending if you are single, or $73,795 if you are a couple.

If you expect your spending to be modest and you are a homeowner, the YourLifeChoices Constrained tribe best matches your situation. This tribe needs a yearly income of $23,510 for a single and $42,343 for a couple.

Now compare your estimated retirement spending with the figure from the MoneySmart tool. If both are similar, then, barring unforeseen circumstances, you can expect to afford your aspirational day-to-day lifestyle.

If the gap is wide, then there are a number of strategies you can employ, depending on whether you are still working or not, to boost your super savings to a level you need for your anticipated lifestyle.

Remember that before taking any investment decisions, you should discuss your plans with a professional financial planner.

* The latest YourLifeChoices’ Retirement Affordability Index™ is available on our website.

Will you have enough money to fund your preferred retirement lifestyle? Do you have the means to boost your super savings?

Related articles:
Supercharge your super savings
The high cost of retirement
An adequate retirement income





COMMENTS

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Kathleen
11th Jan 2018
11:06am
I use this resource every time to make our budget for the ensuing six months. What I have noticed is that some items are either repeated or omitted. Mobile phones are repeated and I believe they belong in communication anyway. Rates for your home of residence is omitted and also water charges. I put the rates in Housing and Water charges I put with Domestic fuel and power.
I do find it very helpful though!
We spend zero amount on alcohol and tobacco and education. Housing does not require $105.51 if you own your own home. I put $30 there for repairs and rates so a big saving.
Food is about right as I allow that amount but do not need it every week.
Medical is also about right for us. Transport is way too much as we just keep our old car serviced well. Recreation is a bit generous as well.
It is certainly very much appreciated as it makes you revisit your budget and tweak it.
Thank you for providing this.
dreamer
11th Jan 2018
11:46am
I have for the last few years write every thing down daily for what I spend so I know what I am spending at the end of the year and I add 5% for the next year
Rainey
11th Jan 2018
6:13pm
There doesn't seem to be anywhere to add savings and assets held outside of super, which clearly make a huge difference. It's good to see the planner has finally been updated to reflect the assets test changes though.
Rainey
11th Jan 2018
7:02pm
Correction. It is there, under Advanced Settings - Other.

I hope my experimental calculation - based on mythical figures - is wrong, because it is telling me my income would fall $16K a year if I added $300K to my personal assets, suggesting one would have to be getting 5.5% interest on those savings just to be as well off as if you didn't have them. It really does reveal how inequitable the pension system is and how little benefit additional savings are at levels close to the aged pension threshold. Why does the government punish savers so harshly?
Rainey
11th Jan 2018
7:02pm
Correction. It is there, under Advanced Settings - Other.

I hope my experimental calculation - based on mythical figures - is wrong, because it is telling me my income would fall $16K a year if I added $300K to my personal assets, suggesting one would have to be getting 5.5% interest on those savings just to be as well off as if you didn't have them. It really does reveal how inequitable the pension system is and how little benefit additional savings are at levels close to the aged pension threshold. Why does the government punish savers so harshly?
Kathleen
11th Jan 2018
7:20pm
Homeowners on age pension do not receive $814.31 per week. So they need to adjust this to what the pension actually is. It is less than $700 per week. We have to live within our means. The quoted amount means there is other income. Taking off the alcohol allowance and some from housing and transport would bring it back under $700.


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