Let’s talk about comfortable retirement. We all envision longer sleep-ins, less peak-time traffic and no more “yes sir” to the boss who doesn’t appreciate us. Retirement truly is a time that many of us look forward to. But, do you have what it takes?
The folks at ASIC have highlighted “how much you need to retire comfortably” and it has been published by Moneysmart. However, we’d like to give you a very basic, easy-to-understand run down based on reality.
General statistics are often used, which can be misleading for your personal calculations. Normally the average income in Australia is used as the base number. The average gross income in Australia is $86,642 per annum. After tax, that number is $66,283 per annum or $1275 per week.
To comfortably retire, it is said that you need approximately 70-75% of your current income to maintain your current lifestyle. Based on 70% of the average income, that number per year is $60,650 or $892 per week.
Currently, the life expectancy average is 85 years old (it is actually just above that, but we will simplify for this example). Not accounting for inflation, and estimating that you can retire at 65 years of age, (based on previous calculations) the lump sum you need to “retire comfortably” is $928,000.
That seems like a lot of money, right? Unfortunately, we also need to consider the fact that retirement comes with much more ‘free-time.’
Let’s break it down.
In your work life, let’s say you work a typical 8-hour day (ouch, we know, sometimes it’s more!), you sleep 8 hours per day (yes, we hear you, sometimes it’s less!), that leaves you with 8 hours of recreational time. When you are retired, you no longer have the daily 8 hours of work, therefore, your recreation or ‘free- time’ just doubled. More ‘free time’, means more time to spend money!
I’m sure you see where this is going…
Unfortunately, many Australians barley have half of the super required to retire. Based on a paper from Parliament House of Australia (which gives us a breakdown of welfare payments), the 2019-20 financial year is estimated to be just over $50B dollars, by 2025-26 that number is predicted to jump to $72B (over 40% increase). These predictions are estimating that the pension could be reduced, or income taxes could go up, either way, the numbers say it all.
So, if you are relying on a pension (which, for singles is currently just over $400 per week), the simple truth is, it may not be good enough, or even worse, it may not exist by the time you get to retirement.
The only way to protect yourself and gain financial security is to take action. When, you may ask? YESTERDAY, if you didn’t do it then, then you should do it TODAY.
Our team is always here to answer any questions and implement strategies that not only give you a better looking retirement, but also benefits you in the short to medium term by getting your mortgage paid off sooner. Whether you want to reduce the amount of income tax you pay or get a better understanding of property investing– get in contact with us today!