Planning for Retirement: How Much Will You Really Need?

Retirement is a significant milestone, one that requires meticulous planning to ensure financial security.

With the cost of living continually rising, understanding the true expenses of retirement is crucial.

Let's delve into the figures provided by the government and industry sources to gauge how much you really need for a comfortable retirement.

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Government Guidelines for Retirement Savings

The Australian government offers a benchmark for retirement savings, suggesting the following amounts for a modest and comfortable retirement by the age of 67:

• Modest Retirement: $100,000 for both singles and couples
• Comfortable Retirement (Singles): $595,000
• Comfortable Retirement (Couples): $690,000

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Annual Living Expenses

To break this down further, here are the estimated annual living costs for retirees aged 65-84:

Singles

• Modest Retirement: $32,915
• Comfortable Retirement: $51,630

Couples

• Modest Retirement: $47,387
• Comfortable Retirement: $72,663

While these figures might seem adequate at first glance, they often don't account for the true cost of living, especially when considering lifestyle aspirations and unforeseen expenses.

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The True Cost of Living in Retirement

Travel and Leisure

Travel is a significant aspect of retirement for many Australians. According to Budget Direct, nearly 30% of Australians budget between $5,000 - $10,000 for overseas holidays.

This cost needs to be factored into your retirement planning if travel is a priority.

Dining Out

Enjoying meals at fancy restaurants can be a delightful part of retirement. However, industry figures indicate that the average cost of dining at a fancy restaurant is $100 per person.

This expense can add up quickly, especially for those who enjoy dining out regularly.

Healthcare

Healthcare is another substantial expense in retirement. The Association of Superannuation Funds of Australia estimates that an Australian couple will spend between $4,975 and $9,900 annually on healthcare once they’ve retired. This is a significant amount that needs to be included in your retirement budget.

Home Modifications

As we age, our homes might require modifications to accommodate our needs. According to the NDIS, minor home modifications can cost between $10,000 and $20,000.

Such modifications are often necessary but can be a significant financial burden if not planned for in advance.

Luxury Purchases

For those considering luxury purchases, the costs can be staggering. For instance, the average cost of a luxury car in Australia is $149,788.20, according to a study by leading PR news publication BT Magazine. While not a necessity, such purchases reflect the lifestyle many aspire to maintain during retirement.

The Reality of Government Pension Estimates

While the government’s estimates provide a baseline, they often fall short of the true cost of a comfortable retirement. The figures might cover basic living expenses, but they frequently overlook the additional costs that contribute to a fulfilling retirement lifestyle.

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Shortfall in Savings

For singles, the government suggests $595,000 for a comfortable retirement. However, with annual expenses at $51,630, this amount will last approximately 11.5 years without accounting for inflation or investment returns. For couples, the suggested $690,000 with annual expenses of $72,663 would last around 9.5 years. This clearly demonstrates a potential shortfall, especially considering that many will spend two decades or more in retirement.

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Inadequate Modest Retirement Funds

The suggestion of $100,000 for a modest retirement seems particularly inadequate. With annual costs of $32,915 for singles and $47,387 for couples, this amount will deplete rapidly, leaving retirees financially vulnerable.

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Conclusion

Looking for a retirement plan you can trust? Consider SMSF property investment with Supavest, the only solution that allows you to invest your super into brand new house and land builds, anywhere across Australia.

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Get in touch with the team at Supavest today! 

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