With an ageing population, more people are starting to look seriously at the prospect of how much they will actually need once they ‘retire’. There are many areas to take into account when considering retirement. Like, which fluffy shoes to buy for your mid morning stroll to the front lawn to pick up your newspaper, looking for the next holiday destination in your new motor home.

My guest writer for this topic is Sean Prosser , from Lighthouse Financial Advisers based in Sydney. Sean is an experienced financial planner and specialises in retirement planning and wealth creation.

The question about how much you need to live on in retirement is an old chestnut, where “old” is probably the operative word. Studies in the US show that life expectancy could reach 100 years of age by 2030. If that is the case  if someone were to retire at age 65, that means 35 years in retirement.
So it’s not just a question of having enough income each year in retirement, but also one of whether you will outlive your retirement savings.
The Association of Superannuation Funds of Australia, together with Westpac, found that to have a comfortable lifestyle, retired singles who live in their own home need to spend $36,607 a year and couples $48,648.

Recent life expectancy figures issued by the Australian Government Actuary estimate that a 55-year-old woman has a 35 per cent change of reaching 95 years and a man of the same age has a 19 per cent chance. But 71 per cent of 55 year old women will live till they are 85 and 58 per cent of men.

On average a 55 year old woman has a life expectancy of 89.7 years and a 55 year old man 86.2 years. So that’s quite a number of years that people will be spending in retirement.

Compulsory superannuation at nine percent a year will not get you that sort of money, so you will need to make additional contributions along the way.

So while it makes sense to get as much of your retirement savings into super so you can enjoy the tax-free environment, you will need to adopt a steady-as-she-goes strategy to achieve this end.
What that means is you should be looking at making additional super contributions from your 30s onwards rather than leaving it until the last moment.

Aside from the tax-free status of money drawn down from super after you are 60, there are plenty of other incentives to encourage you to make additional contributions, such as the tax concessions available during the accumulation phase of super.

The most accurate way of assessing your retirement needs is to work out a realistic budget. However, if that’s a daunting prospect, a good rule of thumb is approximately 60%-70% of your pre-retirement income.

So how much do you need in dollar terms per annum?

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Once you have determined your required annual income, you then need to establish exactly how big your retirement nest egg needs to be to provide that level of income for life.
The table below shows the savings you will need at retirement for some income levels, assuming retirement at age 65 years and that the income will be paid for an average life expectancy.
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This is general information and everyone’s needs and requirements are very different.
So if you are at all concerned with your retirement plans, talking with a qualified financial planner may be a good idea, it’s never too late to start planning.

To ensure you are on the right track to retirement, and having enough funds to get you there, Sean has offered an hour of his service at no cost to readers of this blog. This offer is only available to 50 readers, so you need to be quick. Sean can be contacted by EMAIL or visit his website at www.lighthouseonline.com.au