But do you have any idea what your number will be when you retire? How much will you actually have to spend and will it come via the age pension or via your own superannuation – or what combination of both?
According to the Association of Superannuation Funds (ASFA) a comfortable retirement requires $58,922 per year for couples and $42,893 for singles. That assumes that you own your own house, debt free.
How much money will you need when you retire?
Read on to find out how to calculate your number. But first, consider these issues:
We work longer
70 is the new 65 nowadays, because we’re working longer – or at least intending to. According to the Australian Bureau of Statistics (ABS) 71 per cent of persons intend to retire at the age of 65 years or over and 23 per cent of the persons aged 45 years and over are intending to retire at the age of 70 years or over compared with only eight per cent in 2004-05.
Will you downsize?
Many 60-somethings sell the family home and move to something smaller. This should release capital that can be used to replace your employed income and/or invested to provide an income. Some use the freed-up equity to move into a retirement village.
Factor in your debt.
It’s all well and good saving, but if you have debt and haven’t paid it off before you retire, it could eat up your retirement savings. This isn’t just consumer debt. If you’re treading water on your mortgage by dipping into the equity every few years you might be left with significant debt when you retire.
Can you budget better?
What does it cost you to live now? If that’s $800 a week, $1,000 or even $1,500 what’s going to change about your life when you retire to scale back your spending? You won’t be paying to commute, and probably don’t need to buy nice suits and daily lunches. But over and above that retirees sometimes find they have additional expenses such as joining clubs, doing activities that they’ve always dreamed of, heating their homes during the day, or treating the grandchildren.
Check out some handy budgeting tips here, to help you get started. We have 40 easy ways to save money, plus check out term deposit interest rates and at-call savings account interest rates if you’re looking for somewhere to stash that extra cash.
Beware of spending it Lotto-style.
If you plan to buy the boat or the bach, take a round-the-world trip or simply live a life of luxury, keep in mind that your retirement capital needs to last a long time.
Whatever your age, now’s the time to work out what your savings will add up to at age 65 or 70. A good place to start is Canstar’s Retirement Planner Calculator, which will help you identify the gap between what you currently have in super and your desired retirement lifestyle. Another option is SuperGuru’s superannuation calculator, which will help you work out roughly how much your super lump sum might be at retirement and spell it out in terms of how much you can spend each week. Make sure you’re honest with yourself when you punch the numbers in.
Then look for ways to save. We all have ways we could spend less, earn more and save. We just need to be truly deeply honest with ourselves. It’s very easy to delude ourselves that a new TV, trip to Fiji or that next coffee or cigarette is a necessity. Yet invested wisely now, the cost of each of those luxuries could be worth many times what you pay now by the time you reach retirement.
Finally, you can do it. If you’ve got this far, look for ways to make your budgeting and saving work, rather than excuses to stick with the status quo.