Do I really need $1 million to retire?

Many of us spend most of our working life with some sort of vision of where they see themselves during their retirement. But have you calculated the amount of money YOU will need for your retirement?

Wouldn’t it be nice to have a million dollars?

The thought of having a million dollars at any stage of your life sounds pretty good, doesn’t it? Having that amount or more when you retire would be spectacular for some but only scratches the surface for others, but it’s all relative.

It is better to be realistic and look at your unique financial situation and decide on your retirement goals based on that. That’s not to say one million dollars isn’t the end goal, but it doesn’t have to be for everyone. Here’s why.

What is a comfortable retirement?

Retirement looks different for everyone and it’s important to consider your own situation to discover your magic retirement fund figure.

The term comfortable also means different things to different people, so you need to do your research and figure out what you’d like your future to look like when you reach 64 years old.

Consider your retirement age and how long you might live

The average Australian aged between 60-64 is retiring with $154,452 (men) or $122,848 (woman), according to the 2019 report by Association of Superannuation Funds of Australia.

Given the increase in medical assistance, awareness about healthy living and other interventions, Australians are living longer, well into their eighties or later. This sometimes means the need for more money at retirement.

For instance, if you retire when you are 65 years old, you need to plan your retirement fund to last for at least 20 more years.

But the age you retire isn’t the most important thing to consider, you need to work out what a comfortable retirement looks like to you based on your values and the lifestyle you want.

Setting your retirement goals

Here’s the top tips on setting your retirement goals and figuring out what you really need when you retire.

One million dollars for retirement may still be your goal but never fear, you can definitely have a comfortable retirement if your realistic goal is a lot less!

  1. What sort of lifestyle do you want when you retire?
  2. Know your expenses
  3. Consider how long you’re likely to spend in retirement
  4. Will you be eligible for the Government Age Pension?
  5. What sort of lifestyle do you want when you retire?
  6. Consider a transition to retirement (TTR) strategy
  7. Speak to an expert

What sort of lifestyle do you want when you retire?

Your preference for the type of lifestyle you want when you retire is something you can work out based on your current lifestyle choices.

When we talk about lifestyle, we mean where do you want to live, will you downsize or sell your house for a motorhome/caravan, how often do you want to go out for meals, will you want holidays, do you have lots of grandchildren to spoil, or do you have some hobbies or sport/activities that you wish to continue.

All of this will determine how much money you might need to support your lifestyle.

ASFA Retirement Standard: A comfortable vs modest retirement

The Association of Superannuation Funds of Australia’s (ASFA) Retirement Standard provides an estimate on how much money you need for a ‘modest’ or ‘comfortable’ retirement, for both singles and couples. It also explores what a comfortable retirement looks like, versus and modest one. The table below also compares these standards to the Government Age Pension. (Note: these estimates assume you own your home.)

Budgets for various households and living standards for those aged around 67

WHAT CAN IT AFFORD?Regular leisure activities Dining in restaurants regularly A reasonable car Budget for home improvements Domestic and occasional overseas trips Premium private health insurance Occasional leisure activities Take away and cheap restaurants A basic car Budget for small home repairs One domestic holiday or a few short breaks Basic private health insuranceNo or low-cost leisure activities Inexpensive takeaway or club special meals No car, or no budget for repairs No budget for home repairs Very short breaks or day trips in your city No private health insurance
$45,239 per year$28,775 per year$22,937 per year (maximum basic rate) 
$63,799 per year$41,446 per year$34,580 per year (maximum basic rate) 
* Excludes the pension supplement and energy supplement. Services Australia. Applicable 20 September 2021 to 19 March 2022.

2. Know your expenses

An important part of the puzzle is working out what expenses you might have when you retire.

Here are some questions to consider regarding your expenses:

  • Will you have a mortgage or paying rent?
  • What will you spend on groceries, medications and everyday items?
  • What will you need for eating out, entertainment and activities?
  • How often and how many holidays will you take?
  • Do you have any debts, such as car loans or personal loans?

You will also need to take into consideration some unexpected costs and the occasional splurge or unpredictable events. It pays to have a buffer and be prepared.

3. Consider how long you’re likely to spend in retirement

Nobody can exactly predict what age we will live to. However, there’s no doubt that the general population is living longer.

It’s estimated that 40% of women and 65% of men who are 65 today can expect to live well above the average life expectancy to at least 90 years old.

You may need to take into consideration the potential length of time you will be in retirement for and it’s better to overestimate than to underestimate so you will feel secure that you will continue being supported until the end of your life.

Current AgeMaleFemale
SourceCompiled from Australian Life Tables

4. Will you be eligible for the Government Age Pension?

If you don’t have enough finances resources and assets by the time you retire to support yourself, you may be eligible for the Australian Government Age Pension.

For over 70% of Australian retirees today, the pension is the main source of income.

Currently, the maximum age pension for a single person is just $440 per week or $22,575 per year.  If you foresee that your living expenses will be higher than this then it’s crucial to start planning for other sources of income, such as superannuation and investments.  

5. Consider a transition to retirement (TTR) strategy

A transition to retirement (TTR) strategy helps you ease your way into retirement, so it doesn’t feel so overwhelming. You can be more prepared financially and emotionally, as you will have more control over how you reach your retirement and how the funds will work.

When you reach the age you’re permitted to access your super, also known as the preservation age, you may be eligible to access your super whilst still working part time.

You will be able to get the best of both worlds by continuing to work whilst being able to access your superannuation funds to supplement your income.

If you’re worried about your super balance and would like to continue to work full time, you can choose to boost your super while saving on tax through a TTR strategy.

6. Speak to an expert

Even when we break it down into these easy steps, the whole retirement planning process can still feel quite overwhelming.

Speaking with an experience registered financial advisor / superannuation advisor will help alleviate some of the stress of planning or know what you need to do.

Having a better idea about your lifestyle wishes, expenses, the length of your retirement, your eligibility for government support plus other factors, will put you in a better position to discover what you will need to in you superannuation when you retire.

Let us help your retirement get up, up and away

If your retirement goal is still $1 Million, then you will need to start planning now and the experts will have the best advice and tips for your individual situation. 

Whether retirement is years away or it’s just around the corner, the great thing about super is that it’s never too late to make changes that lead you closer to your goals.

The Super Heroes team of financial advisers and extensive superannuation planning services take into consideration all the aspects of your financial situation and utilize strategies directly with investment funds to help you plan for a better future.

After all, superannuation is a reward for a lifetime of hard work, so let Super Heroes fight for your retirement returns.

Get super help from Super Heroes today via the contact details below.