Australians looking to retire may not have to worry too much about how much they should get out of their retirement, according to the latest figures.
Those seeking the bare minimum balance must have at least $100,000 in their super before retirement under the latest Australian Super Funds Alliance (ASFA) pension standard.
That’s about $45,106 a year for a couple and $31,323 for a single person between the ages of 65 and 84.
However, that number jumps up dramatically when someone wants more than just the basics of life.
The latest Australian Super Funds Alliance (ASFA) pension standard recommends that single people have a super balance of $595,000 for a secure retirement (stock image pictured)
Those who want to retire “comfortably” should have at least six times that amount in their account, with ASFA recommending couples have a balance of $690,000 or $595,000 for singles.
That’s an annual expense of $69,691 per couple and $49,462 for a single person.
Part of the huge discrepancy has to do with lifestyle, with those seeking a ‘modest’ retirement opting to exclude vacations abroad, eat out less often at restaurants, and spend less on heating and cooling .
Those are far from the only things to rule out, according to ASFA Deputy CEO Glen McCrea.
Those looking for a ‘modest’ retirement may need to cut out foreign holidays, eat out at restaurants less often, and spend less on heating and cooling (stock image pictured)
“We know that people spend more on their health as they age and the comfortable budgets also mean more out-of-pocket medical and dental costs, along with other health-related expenditures,” he said.
‘There is also less in the modest budgets for things such as clothing, hairdressers and streaming services. The telephone and data plan is also more restrictive.’
The ASFA standard also determines whether an individual or a couple can access retirement, with the government limiting how much an individual can receive based on their assets.
To receive the full pension, a homeowner couple must have assets under $419,000, which increases to $954,000 for the partial pension.
Andrew Tratt urges couples to have at least a million dollars in their super to give them a comfortable retirement
There are also questions about whether ASFA’s “comfortable” guideline is any good, with Australian Wealth Advisers’ financial planner Andrew Tratt saying the lifestyle offered by ASFA’s standard $70,000 a year for a couple sounds “awful” .
“Most couples would want $80,000-$100,000 in expenses per year to live a modest lifestyle,” he said.
“That’s not extravagant, if you think about it, it’s really $1,000 a week for bills and living expenses and then a $20,000 vacation at the end of the year.”
“That doesn’t include incidentals or helping the family or kids or things like that.”
Financial planner Darren Howard says people should start planning for retirement 10 years before they retire
Mr. Tratt believes that those who want to retire comfortably should have at least $1 million in their super account, something that financial planner at SMSF Darren Howard agrees with.
“You might take a nice vacation every year and maintain a lifestyle not too different from what you might have had while working,” Mr. Howard said.
Mr Howard says the ASFA numbers may work for those living in cheaper parts of the country.
“Those estimates, they try to balance people who might live in the countryside and then the city. I mean, I live in Sydney and my average figure is a million dollars per person.”
Mr Tratt warned that the ASFA figures could spell trouble for your finances if unexpected costs crop up.
“Even though people may not be spending all their money every year, you just want that peace of mind that you can help the family, you can upgrade that car, that you can do those things when you retire,” he said.
Those thinking about retiring should know that the sooner they start planning, the better prepared they will be for the future according to Mr Tratt
“We always get clients who want to retire next year, but you should have seen us five years ago to set yourself up, you could have done so much more to improve your situation,” he said.