So how much do we really need to retire?

There’s been a lot of pretty scary “information” come out about the insane amounts of money we need to retire, so what are the facts? 

For many people, the concept of retirement shimmers like an oasis beyond the desert of day to day working life. For others it is the monster that lurks under the bed, often emerging in the wee small hours of the night, to worry them into sleeplessness. Will I have enough money to maintain my lifestyle? Will my super be enough? What age will I have to work until if it isn’t? Should I have done more planning, years ago? The good thing about monsters under the bed is that they disappear when the daylight hits. So how do we shine some daylight on the retirement monster?

Conventional wisdom tells us that it’s better to consider and plan for retirement as early as possible. However, this is rarely the reality. Life gets busy and sometimes just getting through the demands of the week, navigating work, family and other commitments, is all we can manage. So the next best thing is to have a look at your current situation, how much of your lifestyle you will want to maintain, and how you would like to construct a retirement map that best suits you.

What does your retirement look like?

Obviously the one thing we all have in common is that we want to enjoy our retirement without financial concerns about lifestyle and the future. So how do you imagine your retirement? Do you see yourself travelling? Are there hobbies you’d like to explore? Maybe spend more time visiting friends and family? Part of the problem in envisioning future retirement goals is that there abound many urban myths about how much money is actually needed to achieve them. Estimates can range into the millions. The reality of the situation is that there is no single amount that suits everyone’s idea of how retirement looks. As people’s needs and goals for enjoying their retirement vary greatly, so do their personal circumstances, resources and commitments.
A good start to overcoming retirement anxiety is to identify your personal income needs. These are your living expenses and lifestyle requirements such as housing, food, transport, clothing, health and utilities as well as entertainment, travel and leisure activities. Keiran McIlwain, Head of Advice and Professionalism at MLC, part of the NAB Group, says that many of the people he speaks with have “no idea of how much they spend on a weekly or even monthly basis. This awareness is critical to develop a realistic understanding of your current and future personal finances, and as such provides a basis for dispelling uncertainty.” Once you have a clear picture of your current situation and income goals you can begin to assess how you can maintain your lifestyle after retirement and where your needs may change in the future.

How long is a piece of string?

When it comes to the question of what the dollar amount an average Aussie would need to have to retire Keiran says, “It’s a common question but it’s important to focus on personal income needs – including lifestyle and all other expenses. Once you know what annual income you need to support your desired retirement, you can work through the finer details of how to fund this income need- which may include considering what your super balance will need to look like in lump sum terms.“
He goes on to explain, “MLC’s Wealth Behaviour Survey data for the fourth quarter of 2018 showed that the average Australian expects to need more than $1.2 million in retirement, excluding the value of their home.”

Superannuation is a primary building block for your retirement finances. As there’s no fixed amount that works for everybody, individualised advice is important to figure out a retirement plan based on your personal preferences and unique situation.

When in doubt, ask an expert

Starting a good relationship with a trusted financial adviser is a wise choice that will not only address your unique characteristics, circumstances and needs but will also support the changes that invariably come along with life. Talking to a professional, even just once a year, will also go a long way towards helping you feel more empowered and on top of things.

“Most super funds also offer tools that project superannuation outcomes based on a range of personal preferences. We always encourage customers to think of this as one piece of the puzzle that good financial advice pulls together,” says McIlwain.

See if your retirement planning is on-track and explore things you can do if it’s not.

Plan for the unexpected

As circumstances change during your lifetime, your individual requirements are going to change. Some adjustments can be anticipated, and others are more unexpected. Generally speaking, due to the decrease in work and family commitments, people often tend to downsize their living situations when they retire. Downsizing not only reduces the level of upkeep required to maintain the property, it can also provide a significant boost to your retirement funds.

Along with maximising income and managing lifestyle expenditure, a financial adviser will also provide support in negotiating the inevitable external and internal factors that occur over time. Possible external disruptions to retirement plans such as changes in government, financial and property market fluctuations interest rate adjustments and changes in super are common. Internal or personal factors that may disrupt plans, such as blending families, divorce, illness, and other significant family events can require risk mitigation strategies where necessary. Although challenging, these changes in circumstances can be navigated with ongoing financial support and advice at hand.

To get some peace of mind – and clear a little monster-shaped room from under the bed – the best strategy begins with taking a realistic look at your current and future lifestyle requirements and continues with putting in place a retirement plan that caters to your ongoing individual goals. Engaging reliable financial advice and regular revision of your plan also ensures that you remain on track despite disruptions, so you can wholeheartedly look forward to your retirement.

See if your retirement planning is on-track and explore things you can do if it’s not here.

Originally published on

Disclaimer: This information does not take into account your personal financial situation or needs. You should consider whether it is appropriate for your circumstances prior to making any investment decision.


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