a couple has a comfortable retirement

Finishing work and retiring is the dream most of us can’t wait to achieve. No more deadlines, backbreaking labour, pen pushing, it doesn’t matter what your profession is; there’s no more daily grind. But then a stark reality sinks in. 

“So, how much do I need to live life my way?” 

If you’re asking that question the day after you ‘hang up the boots’, you’re like 80% of Australians who haven’t planned for their retirement. Failing to plan is planning to fail and that leads to:

The Old Age Pension

Relying on the government leads to the following pension payments*:

  Single Couple Couple (individuals)
Maximum Basic Rate + Energy Supplement (Weekly) $420.15 $633.40 $316.70
Total Per Annum $21,847 $32,936 $16,464

For a single or couple who earned $100,000 per year for 30 years leading up to retirement, this is a sharp fall. On a $50k/$50k income split it could be as much as a 60% loss per annum or the equivalent of dropping from $797 (net) to $317.

How much can you really afford to cut from your lifestyle just to meet the maximum pension amount?

Let’s start with some obvious exclusions. No more travel, no more dining out, no more recreational activities (like golf or fitness classes), no more pay TV - maybe not even Netflix! If you’re a smoker, three packs a week can add up to as much as a quarter of your pension – hmm might want to consider quitting!

Some of you will say, “But I can live on that. I can get by if I budget.”

Let me ask you: is that really what you want? To miss out on all the things that make life exciting?

As an indication, the ASFA Retirement Standard benchmark* for a comfortable retirement is $42,764 for a single and $60,264 for a couple. Instead of putting the thought of retirement off for our working lives (most of us are guilty of this), we should be striving to achieve an enjoyable standard of living that we set for ourselves.

Bring back the flights to Bali or Europe, dine out at that 5-star restaurant or café, play golf three times a week and enjoy the relaxing pleasures of Foxtel and Netflix.

Plan for those 20 - 30 glorious years of retirement with a financial strategy in place. Take steps now to do the things you love and when you finally do meet that last deadline, lay that last brick or throw out the empty pen your retirement reality will be a carefree one.

 

* Numbers in this article are accurate as at 1st May 2018.