What Is A comfortable Retirement?
21 Aug 2016
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.
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
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.
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.
