Ask an Adviser: How much do I need to retire?

How much do I need to retire? It’s one of the most frequently asked retirement questions, and for good reason. Each person’s answer is entirely unique. Here, we talk to Apt Director Andrew Dunbar about how to calculate yours – and why it’s important, regardless of your financial position.

The first question you should ask yourself is: What does a comfortable retirement look like for me?

‘Comfortable’ is a subjective term, and while there are tools and guidelines out there, they probably won’t use the same definition.

Each quarter, the Australian Super Funds Association (ASFA) publishes the ASFA Retirement Standard, a national guide to the costs of a modest and comfortable lifestyle.

As of March 2024, ASFA puts a comfortable retirement at $72,663 per couple per annum, but comfort is subjective. If you are planning travel, a move or big-ticket purchases, this may not meet your definition.

It’s important to explore the detailed breakdown to see where the figures align and where they don’t. For example, detailed expenditure for the March 2024 quarter allows just $1,816.36 per couple for overseas vacations each year. If you are planning a month in Europe, this may mean only one overseas trip every 10 years.

It is also important to note that the ASFA comfortable living standard is based on getting a part pension, with the amount of your pension escalating as your retirement savings dwindle.

If you are spending $72,663 a year from ASFA’s suggested amount of $690,000, money is likely to be a source of ongoing worry. While the pension is a safety net, it’s not something most of us want to be relying on as we age.

So even if ASFA’s comfortable living standard aligns with yours, you would want to plan for retirement savings of $1 million to give yourself a buffer (assuming home ownership and correct structuring of your investments to create reliable future income streams).

For most people, that $1.5–$2 million mark is where money won’t be a worry for a typically middle-class lifestyle.

Next, ask yourself if you have a detailed (and accurate!) understanding of your lifestyle expenses.

This is where tools like the ASFA Expenditure Breakdown can prove helpful for understanding expenditure at a detailed level. Use the starting figures as a guide, then modify them to suit your lifestyle.

In our experience, the indicative ASFA comfortable lifestyle is realistic for many, but for others with higher lifestyle and family needs, the true figure is in excess of $100,000 per annum.

The ASFA figures may allow one holiday each year, a few meals out a month and maintaining a reasonable number of hobbies and club memberships. But there is a wealth of other factors. What part of the plane do you want to fly in? Where do you want to stay? What sort of restaurants do you eat at? What support do you want or need to provide family?

Most of us expect to continue living a similar lifestyle in retirement as we live today. And with many of us living into our 90s, you may need to fund that lifestyle for three decades. So, whether your retirement budget is about champagne and caviar or beer and burgers, it’s important to have one.

Thirdly, ensure your spending aligns with what’s important to you.

Aligning your spending and your values is important for everyone, regardless of your financial position.

This exercise isn’t necessarily about controlling your spending, although it can help with that if it’s a goal. At its core, it’s about ensuring you use your money meaningfully because that is key to a happier life.

Start by thinking about what you would want people to say about you at your 80th or 90th birthday. It probably isn’t ‘she drove a Maserati’. It’s the things that make up your character that are important.

(In saying that, there is nothing wrong with also wanting luxury cars. It’s simply deciding on how meaningful that particular purchase is for you and using it as a yardstick.)

When you do this exercise, the changes you make add value and meaning to your lives. Whether your spending increases, decreases or stays the same is not the point. It’s about living a more meaningful existence and shaping the legacy you want to leave while you are still here to do it.

So, how much do you need to retire?

Unfortunately, there’s no simple answer; the number is unique to you. But, with a little planning and reflection, you can identify the figure that not only funds the retirement you want but ensures you live your best life in your golden years.

“If you are visiting Europe, for example, there are likely to be specific landmarks, galleries or museums that you are planning to visit. It can pay to do your research, as some are cheaper when pre-purchased (making sure it is a genuine and official ticketing site, of course!). Or you may find that it is free or cheaper on certain weekdays. This sort of thing can quickly add up.”

Dreaming of your next trip? Talk to an Apt Adviser about how you can build it into your financial plan and savings goals.

Need help finding your comfortable retirement figure? Download Apt’s free Retirement Roadmap or reach out to chat with an adviser.

General Advice warning

The information provided in this blog does not constitute financial product advice or a recommendation to purchase a particular product. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. Apt Wealth Partners Pty Ltd is not a registered Tax Agent. You should consider your individual situation and seek tax advice from a registered tax agent before making any decision based on the content of this document. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.