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How much will it cost to retire?

Picture this: you’re 60 and planning on retiring in five years. A visit to a financial advisor reveals that you are nowhere near where you need to be financially to live a comfortable life for the next 20 years. You are hit with the realisation that you should have been saving for your retirement a lot earlier than you were.

Modest LifestyleComfortable Lifestyle
$24,506 per year$35,189 per year$44,011 per year$60,457 per year

So now the big question is; how much will I need to retire? According to the ASFA Retirement Standard, if you want to live a comfortable lifestyle, a single person will need $44,011 per year and a couple will need $60,457.

But these figures are only subjective. What it comes down to is five questions:

1. What will your living costs be?

If you own your own home, you are already in a better position than most retirees. Without this large expense your living costs are reduced. It’s a great idea, and a great habit, to calculate how much you are spending now by starting a budget to track your expenses.

2. Will your savings generate enough cash?

It’s worth looking into the type of superannuation account your money is invested in. If you are younger and feel that a more aggressive investment option is sustainable, talk to your financial advisor about the risks and benefits. Alternatively, if you are approaching retirement age, you might want to consider a more conservative investment option to ensure your savings don’t dwindle away if the market hits a rough patch.

3. How long will you live?

We can only guess this; but let’s assume that you live to 85. That’s approximately 20 years that you will need to fund a comfortable lifestyle.

4. What type of lifestyle do you want?

Think about your current lifestyle and how hard it would be to lower your standard of living. Ideally, you want to continue living the lifestyle you have been living until now. This is your goal.

5. What could your future medical costs be?

No one wants to think they might have to spend their hard earned money on medical expenses but it’s definitely an expense that needs to be considered. Even the expense of modifications to your home to make it easier to get around as you get older fall under this category.

When all is said and done, there is no magic number that you should strive to have in your bank account the day you retire. Answering the five questions listed out will help you and your financial advisor to determine an appropriate figure for you to live on.