Great question! There’s a short answer and a not-so-short answer to this question.
The short answer:
It’s different for everyone. The classic answer people think is that they need a million bucks, but we have clients who happily retire with around $250,000 in super and other clients who happily retire with much more than a million dollars in super.
The not-so-short answer:
There are so many variables to the answer that we can’t really give you a simple answer, but we can help you understand those variables.
When do you want to retire? Each year you want to retire early requires a lot of extra savings. Each year is an extra year of expenses and you also lose out on the employer contributions that year you would have received from your employer. On the other hand, every year you retire later saves you a years expenses and earns you more employer contributions.
What lifestyle do you want in retirement? If you’re mates all know you as a cheapskate, you may get by with a fairly small superannuation fund or you might live entirely on the Age Pension. Love your trips to Europe, fine dining and luxury cars? Well, you’re going to need quite a large retirement savings. A handy guide for working out your lifestyle in retirement is the Association of Super Funds of Australia (ASFA) Retirement Standard. It’s got a full breakdown you can download explaining what costs they’ve factored in to each lifestyle estimate.
Any one-off purchases? Some people start retirement with a bang and decide they want to take a round the world trip and then caravan around Australia. If you’re planning to go big early, make sure you’ve saved for it!
How much do you want to leave behind? If you’re planning to leave behind a considerable inheritance, then you’ll need to factor that it in to your retirement savings. If you’re happy to live off your entire superannuation and leave nothing behind, then you won’t need to worry about it.
The best answer:
Plan now. Whether you’re 35 or 65, the best thing you can do is start to plan for your retirement. Too many people think the future will pan out by itself, but a little bit of planning, some proactive choices and the right investment options can make a huge difference to your retirement. Prioritise and live your dream!
And remember, there are generous tax savings available through superannuation but it’s not the only option and it’s not always the best option either (but that’s another blog in itself).
Got questions? We’d love to hear from you! Give us a call or send us an email.