What Is A comfortable Retirement?

Modesty and comfort are both in the eye of the beholder to a certain extent. But have you ever wondered how your retirement plans (or retirement reality) stack up against everyone else?

How much super will I need when I retire?

This is a difficult question to answer because everyone has different retirement goals. That said, the Association of Superannuation Funds Australia (ASFA) provides some comprehensive assessments of how much money a single or couple would need in retirement for either a modest or comfortable lifestyle. Each quarter, ASFA release their Retirement Standard benchmark, which calculates the amount of annual income, in today’s dollars, required to meet either a modest retirement lifestyle or a comfortable retirement lifestyle. As at June 2016 a couple aiming for a modest retirement require an annual net income of $34,216, while a couple aspiring to a comfortable lifestyle must be able to generate $59,160 per annum.

For retirees aged around 85, a modest lifestyle for a couple equates to $34,598 per annum and a comfortable lifestyle requires income of $54,460.

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According to ASFA,  an Australian couple will need to save $130,000 more for a comfortable retirement following changes to the Age Pension and increases in the cost of living; ASFA now estimates that Australians will need a super balance at retirement of $640,000 for a couple and $545,000 for a single, an increase of $130,000 and $115,000 respectively from 2014 estimates.

Back to the question though: what is modesty and what is comfort?

According to ASFA:

A modest lifestyle – is better than the Age Pension, but still only funding fairly basic activities. These activities currently allow around $160 per week for food, $78 per week for health and around $100 for transport. Around $35 per week is allocated to household goods and services and just under $17 per week for communications (the free library internet service is looking good!) Just over $110 per week is allocated to leisure. It might involve owning an older, less reliable car

Definition of a modest retirement

A comfortable lifestyle – is one which enables an older, healthy retiree to be involved in a broad range of leisure and recreational activities. It allows funding for private health insurance, a reasonable car and regular holidays (domestic and occasionally international). Based on current figures, there is an additional $40 per week allocated to food expenditure, an extra $50 per week for household goods and services and a total of just over $300 per week for leisure activities.

Definition of a comfortable retirement

Crucially however, both of the definitions (and allocations of money) above assume that the retired couple own their own home.

Comfortable retirement Modest retirement Age Pension
One annual holiday in Australia One or two short breaks in Australia near where you live each year Even shorter breaks or day trips in your own city
Regularly eat out at restaurants. Good range and quality of food Infrequently eat out at restaurants that have cheap food. Cheaper and less food than a ‘comfortable’ lifestyle standard Only club special meals or inexpensive takeaway
Owning a reasonable car Owning an older, less reliable car No car or, if you have a car, it will be a struggle to afford repairs
Afford bottled wine Afford cask wine Home brew beer or no alcohol at all
Good clothes Reasonable clothes Basic clothes
Afford regular haircuts at a good hairdresser Afford regular haircuts only at a basic salon or pensioner special day Less frequent haircuts or getting a friend to cut your hair
Take part in a range of regular leisure activities Take part in one paid leisure activity infrequently. Some trips to the cinema Only taking part in no cost or very low cost leisure activities. Rare trips to the cinema
A range of electronic equipment Not much scope to run air conditioner Less heating in winter
Replace kitchen and bathroom over 20 years No budget for home improvements. Can do repairs, but can?t replace kitchen or bathroom No budget to fix home problems like a leaky roof
Private health insurance Private health insurance No private health insurance
Source: ASFA Retirement Standard

Click here for more information about the ASFA retirement standard.

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