How much money do you need to retire?

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Time to plan for your retirement?

Preparing for retirement can feel daunting, particularly when you have no idea how much money you will need to live comfortably after you stop working.

However, you may find the amount is less than you expect. While the figure is different for every individual/couple, here is some general advice.

How much money do you need to retire?

According to The Association of Superannuation Funds of Australia (ASFA), as of late 2021, a couple aged around 65 living a comfortable retirement will spend $64,771 per year and singles $45,962.

For those wanting a ‘comfortable retirement,’ the average super balance at retirement should be around $640,000 for couples and around $545,000 for singles.

This is general advice and is based on a range of requirements such as food, electricity, social needs and access to technology.

The sum you actually need to retire with will depend on the following:

  • Your lifestyle. A quiet and subdued homebody will need less after the age of 65 than someone who intends to travel widely in retirement.
  • The level of comfort you are used to. If you have a more luxurious lifestyle and plan to continue living this way, you’ll need additional funds in retirement.
  • Whether or not you own your home. Your home can be downsized to free up cash and give you more financial flexibility after you stop working.
  • The amount of money you have in shares. Not all retirement funds come from superannuation.
  • Investments that are generating income for you. You may have investment properties that are completely or almost completely paid for.
  • The age you wish to retire at. You will need more money if you retire earlier.

To work out how much you will need in real dollar figures, make an appointment with a financial advisor. This professional will help you to consider the lifestyle you are hoping for, your net worth (including superannuation, investments, property and superannuation) and the year you plan to retire.

Will I have enough money to retire on?

Everyone feels nervous about funding their lifestyle when they have stopped working but the sooner you set out a goal and start working towards it, the better. Even if retirement is just around the corner, it’s not too late to organise your finances and investments. Start now and you will close the gap between the money you have and what you need.

Here are a few tips to help you reach the right amount for retirement:

  • Consolidate your super: Most Australians work many jobs throughout their lives. This often results in dribs and drabs of super in multiple funds. The first step in preparing for the future is tracking down and consolidating your super into one fund. All super funds have features to help you consolidate, so once you have chosen your ideal fund, contact them for the help you need.
  • Top up your super: Once all your super is in one place, you can regularly add to it. It is tax-free to do so (up to a certain amount) and the money will compound as you approach retirement. Make your super contributions automatic and you’ll be growing your retirement income without even thinking about it.
  • Set a goal: If you want the absolute most out of your retirement, consider sitting down, going through your finances, and figuring out where you can limit spending to work towards your goal. Whether it’s fewer takeaway coffees or selling a car, everything saved can go towards the future. If you’re unsure of your goals, a financial planner can work with you to help you define them.
  • Invest: Superannuation funds are investment funds run for you by a third party. If you have the means, additional investments of your own can also pay dividends. Real estate, the stock market and government bonds are all long-term investments that can add to your wealth in retirement.
  • Self manage your super: SMSF can be a cost effective way to purchase real estate and manage family wealth. As a business owner, it can be a cost-efficient strategy to rent a business premises back to yourself, effectively paying yourself rent and boosting your super balance. Speak to your financial advisor for advice about this strategy and how it can work for you.

Start planning now, and you will be able to increase your wealth so you can live your dream retirement. Contact Edge Advisory Partners for advice today.

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