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How much money do I need to retire? Is a suitcase full of cash enough?

How Much Money Do I Need to Retire in Australia

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Even though retired life is supposed to be a peaceful experience where you finally get to do the things you missed out in your working years, it can be quite the opposite at times. Being an Australian. you might often question yourself, how much money do I need to retire?

How we plan our finances play a crucial role in shaping your life post-retirement. So, making wise decisions in your working years will play a pivotal role in the twilight of your life. 

However, a lot of people struggle to decide when to retire. Whether their retirement savings are adequate or not. Unless you have other ventures, you’re likely to spend your retired life based on your retirement saving.

In this article, we’re going to answer that question. We are also going to discuss certain aspects of the retired life to give you an idea about it. 

How Much Money Do I Need To Retire?

An old couple going for a walk

In all honesty, there’s no fixed answer to this question. Your costs will depend on a lot of factors, including your lifestyle, place of living, health, etc. So, it’s hard to determine a fixed amount for everyone.

The Association of Superannuation Funds of Australia has set up specific standards for retirement. According to their retirement, your annual living cost post-retirement can range from 26,000AUD to 60,000AUD based on these factors. 

The table below will help you get a better understanding of your finances after retirement. The costs are divided into three categories, premium, moderate and basic. The possible costs are taken into account to give you a realistic idea of annual cots based on your lifestyle. 

PremiumModerateBasic
Single43,687AUD27,902AUD21,222AUD
Couple61,909AUD40,380AUD31,995AUD

5 Key Factors That Can Affect Your Retirement Savings:

There are certain things you need to keep in mind when deciding on your retirement funds. These include: 

1. Your Retirement Age:

Your retirement age plays a key role in determining your retirement savings. Since you’re likely to spend the rest of your life based on your retirement savings, you need to determine when you want to retire.

If you start working in your late 20s, chances are pretty slim that you’ll have enough funds to retire in your early 50s. How many years you live after retirement is also a critical factor in this case.

The average life expectancy in Australia is 84.6 years for men and 87.3 years for women. So, even if you retire in your 60s, you’ll live a good 20 years. So, make your plans based on your expected retirement age.

2. Housing:

Your place to live is another crucial factor in determining your retirement funds. If you have your own place to live in, you won’t have to pay rent in your later years. Furthermore, the condition of your house, the number of family members, possible repairs and renovations are also crucial in your decision making. 

We recommend investing in your house during your working years. The first home super savers scheme from the Australian Government allows you to transfer any additional funds from your superannuation scheme and invest it into your house scheme.

3. Healthcare:

Your health should be your top priority in any situation. Even though Australia has a subsidised healthcare system, it’s still fairly expensive. 

Medicare, the government issued healthcare plan will support a part of your payment, but you have to pay first, and then receive the return. So, it’s necessary to have some funds allocated for emergencies. Also, costs like prescribed medication, ambulance and eyewear aren’t supported by medicare.

Also, having private health insurance will address such problems, but will leave a toll on your pocket. Regular premiums and payments can be troublesome for many. So, make sure you have your finances for health sorted.

4. Plans after retirement:

We all have plans for our retired life. Whether it’s going to a foreign destination, we always wanted, or simply lounging at the safety of our homes. It’s essential that we respect these wishes when we plan our retirement.

You should allocate some funds based on your retirement plans. Foreign trips, hobbies, parties, etc. are a great way to keep your mind free from stress and anxiety. So, make sure you have some funds allocated for your recreation.

Other retirement costs:

There are certain additional costs associated with your retirement savings that might not seem significant, but will add to your bills in the long run.

These costs include personal care, home appliances, clothing, transport, etc. Your preference in those fields will you manage your finances better.

How to Calculate Your Retirement Costs:

In Australia, retirement funds generally depend on two key factors, your superannuation funds and other retirement plans.

  • Superannuation: Superannuation is a guaranteed pension plan provided to every Australian by their employer. Your employer is supposed to pay 9.5% of your annual salary into your guaranteed super fund.

You can use a superannuation calculator to get an estimated amount of your super funds. You can make additional payments as well.

  • Retirement Plans: There are other private retirement plans you can avail as well. You have to pay a portion of your salary which will be invested, and you’ll receive an amount once you retire.

However, retirement plans are subject to market risks, and you can lose your money depending on the financial situation of the country. So, make sure you read all the documents thoroughly and then make the payment. 

What if I Don’t Have Enough Retirement Funds?

You now know about about how much money you need to retire. But what if it’s not enough?

Once you have an idea about your retirement costs, decide whether it’s enough for you. If you feel like your retirement funds are not enough, you can make contributions to your super, look for other retirement plans, make changes to your retirement plans, etc. to make up for it. 

In these situations, we recommend discussing with your financial advisor. You can get advice regarding your retirement savings as well as future investment plans.

How much money do I need to retire? Here's a ceramic doll of an old couple

Conclusion:

Planning for the future is always a good idea. The decisions you make now will determine how stable your life will be post-retirement. So, gather your resources and decide what you’re going to do in the future.

Find out your possible retirement savings and make decisions accordingly. Your stability in the future depends on your awareness in the present!

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