Let’s be honest: thinking about just how much money you need to retire is terrifying. Afterall, it involves thinking about two of life’s heaviest topics: getting older and money.

However, this doesn’t change the fact that to have a great retirement you need to understand your finances. Currently over 50% of us don’t have enough super saved up, or enough in savings, to fund our retirement.

This blog has been created to take the fear out of retirement, empowering you to start planning your finances today. Retire with confidence and help your family rest in the assurance that you will be well looked after as you age.

Below you will find a list of topics we will cover in this blog:

Hit the link and you’ll be taken to the corresponding section.


What does a comfortable retirement look like?

Throughout this blog the term ‘comfortable retirement’ will come up. So, before we go further it makes sense to pin down what that looks like.

A comfortable retirement is one in which you have a good standard of living. You can afford household goods, run a reasonable car, get some good clothes, and enjoy private health insurance. This also includes being involved in a broad range of leisure and recreational activities.

 

The cost of an average retirement

Now we know what a comfortable retirement is, let’s crunch the numbers.

Speaking very generally, a healthy retired couple would need $1,100 a week between them. That adds up to $62,00 a year, or $640,000 for the entire retirement.  For a single person, this number drops to $770 a week adding up to $40,000 a year.

The average pension rate in Australia is $24,770 for a single person and approximately $37,341 for a couple. This means that to retire comfortably, you can’t rely on the pension alone.

The cost of your retirement

Obviously, the numbers we just discussed aren’t necessarily reflective of how much you personally need to retire. To accurately calculate that, you need to consider your current cost of living and your estimated lifespan.

Start with how much it costs you to live now. Be sure to include things like:

  • Utilities
  • Groceries, clothing, and other essential items
  • The cost of running and maintaining your car
  • Private health insurance

Then, subtract repayments on your home mortgage, school fees, family commitments, or your next overseas holiday. Chances are, retirement won’t involve these things (well, maybe the overseas holiday).

Now it’s time to think about how long your retirement finances will need to last.

In Australia, half of men aged 65 will live past 86 and half of women will reach 90. So, a retirement of 25 years is quite likely for more than half of all Australians.


— Care costs

Any retirement plan that doesn’t consider the cost of potential health and personal care is incomplete. It’s important to think about your future care costs now, before you need support.

Around one-third of Australians 65 and older need some form of aged care service. These range from help around the house with cooking, cleaning, and maintenance to personal and nursing care.

Fortunately, the Government foots the bill for 78% of all aged care costs. However, it’s likely you’ll still need to contribute. The more money and assets you have, the more you will have to pay.

 

— The dangers of over saving

Be warned though, there’s such a thing as saving too much. This occurs when people severely overestimate the amount they need to retire. It can lead to chasing inappropriate targets resulting in a low standard of living before retirement, during retirement, or both.

Make sure your financial plan is based on credible targets and based on actual needs. This means you can confidently spend and get on with enjoying your retirement!


Making your money go further

One way to reduce the amount you need to retire is to consider retirement village living. Communal life enables you to share the big costs among many residents, turning them into low, fixed weekly fees.

Another key benefit of retirement villages is that they have been carefully designed with age in mind. That means you won’t have to do any alterations like ramps or handrails as you get older. This eliminates the surprise costs, often expensive ones, that will come with modifying the family home.


— The power of downsizing

Retirement villages offer a way to capitalise on your biggest asset: the family home. Selling, downsizing, and using leftover equity to make retirement more comfortable, is a good option for those who feel they don’t have enough money to retire on. It’s also a great way to eliminate mortgage debt if you have any remaining.

Next steps

Before you make any decisions, always seek independent financial and legal advice.

Considering a retirement village? It’s well worth your time to speak with the residents’ committee at any village you’re considering moving into. They have a lot of experience in this area and can advise on any concerns you may have. They can also point out many of the benefits you may not be aware of.


Still confused?

Try our free online service, YourConcierge101. All you need to do is answer some simple questions and we’ll provide you with your own toolkit tailored to your specific circumstance. Click the button below to find out more today.

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