How Much Money Would you Need to Retire Comfortably?

It’s a question that crosses many people’s lips – how much money will I need to retire? The answer, unfortunately, is not simple. There are a number of variables that will need to be taken into account, such as how long you will live, when you will retire, what medical expenses you will have, and what kind of lifestyle you want to lead.

How Much Money Would you Need to Retire Comfortably?

It’s worth bearing in mind that your employer’s super contributions may not be enough if you want to be financially secure when you retire. That means it’s a good idea to keep up-to-date with your super needs, and think about making extra payments into your super when possible.

How much will you need each year?

This depends on which country you live in, but take for example Australia, where the cost of living is among the world’s highest and is slightly more expensive than the US. The Association of Superannuation Funds of Australia (ASFA) is the peak industry body representing all superannuation fund sectors, and they have put together a breakdown of costs that shows how much Australians will need each year in their retirement

This provides a detailed breakdown of costs, including housing (ongoing expenditure only, AFSA assumes the retiree owns their own house), energy, food, clothing, household goods and services, health, transport, leisure, and communications. Figures are updated each quarter to account for inflation.

AFSA also breaks down the annual budget for those wanting to live ‘modestly’, and those wanting to live ‘comfortably’. A modest lifestyle covers the basics, while a comfortable lifestyle, includes a wider range of leisure and recreational activities, and more money to spend on household goods, travel, good clothes, a good car and private health insurance.

Taking all of this into account, a single person living modestly will need $22,654 per year, while a modest couple will need $32,656. A single living comfortably will need $41,197 per year, and a comfortable couple will need $56,406.

Based on this estimate, you will probably need less than that on an average year if you were living in the United States, but of course this also depends on which city and state you reside. Another thing to remember is that these estimates are base figures, meaning it does not factor in extra spending on travel and medical expenses that might come up (and this is a big one if you are elderly).

How much is enough?

Once you have figured out your rough annual budget, you will then need to work out how much you will need in total. This can be tough, as you don’t know how long you will live after retirement. It’s best to budget for the maximum. Men can expect to live up to the age of 86, women to the age of 90.

A common rule of thumb is to multiply your expected annual budget by 13 if you retire at 65, or multiply by 15 if you retire at 60. However, each case is different, and you may want to take into account any money you want to leave in inheritance, or if you want to buy a second property.

Also check out this tool we found from Aussie insurer Suncorp’s Retirement Simulator. It’s a part of their retirement planning resources. When it comes to retirement and calculating super, it’s a good idea to chat to an expert

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Jessica Miller-Merrell

Learn more about Jessica Miller-Merrell, SPHR, SHRM-SCP, the founder of Workology, a workplace HR resource, and the host of the Workology Podcast. More of her blogs can be found here.


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