Living your best life in retirement

If you’re nearing retirement age, you may be wondering if you will have enough money saved to give up work and take it easy, particularly as cost-of-living increases hit some basic expenses such as energy, insurance, food, and health costs.

Fortunately, in this article, we have included some of the top considerations for what you might need.

What do you need when you retire?

The Association of Superannuation Funds in Australia (ASFA) updates its Retirement Standard every year. This standard provides a breakdown of expenses for two types of lifestyles: modest and comfortable.

Based on our average life expectancy – for women, it is just over 85 years and for men, it is 81. If you are about to retire at age 67, you will have between 14 and 18 years in retirement, on average, depending on your gender.

ASFA finds that a couple needs $46,944 a year to live a modest lifestyle and $72,148 to live a comfortable lifestyle. That’s equal to $902 a week and $1,387, respectively. The figure is, of course, lower for a single person – $32,666 for a modest lifestyle ($628 a week) or $51,278 ($986) for a comfortable lifestyle.

What does that add up to? ASFA estimates that, for a modest lifestyle, a single person or a couple would need savings of $100,000 at retirement age, while for a modest lifestyle, a couple would need at least $690,000.

A modest lifestyle means being able to afford everyday expenses such as basic health insurance, communication, clothing, and household goods without going overboard.

The difference between a modest and comfortable lifestyle can be significant. For example, a modest budget does not allow updating a kitchen or a bathroom, and overseas holidays are not an option.

The rule of thumb for a comfortable retirement is an estimated 70% of your current annual income. The main reason you need less is that you no longer need to commute to work and don’t need to buy work clothes.

Building your nest egg

So, how can you build a sufficient nest egg to provide a good retirement life? There are three main sources: superannuation, pension, and investments/savings. Superannuation has the key advantage that the money in your pension is tax-free in retirement.

Your superannuation pension can be augmented with the government’s Aged Pension either from the moment you retire or later when your original nest egg diminishes.

Your income and assets will be taken into account if you apply for the Age Pension, but even if you receive a pension from your super fund, you may still be eligible for a part Age Pension. You may also be eligible for rent assistance and a Health Care Card, which provides concessions on medicines.

Money keeps growing

It’s also important to remember that the amount you accumulate up to retirement will still generate income, whether from rentals from investment properties or merely from the growth in the value of your share investments and the accumulation of money from any dividends paid.

You can also continue to add to your superannuation by, for instance, selling your family home and downsizing as long as you have lived in the house for more than 10 years.

If you are single, $300,000 can go into your super when you downsize and $600,000 if you are a couple. This figure is independent of any other superannuation caps.

Next steps

Planning for a sound retirement life often requires just that – planning. Having a plan can be the key to a happy and fulfilling retirement.

If you want to discuss your retirement and navigate a lasting plan, speak with your trusted Nexia Adviser today.