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Book a FREE consultation
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Get started with a free strategy consultation and receive a copy of the Good Fortune Guide – written by James McFall, Managing Director Yield™ FP and 2020 National Finalist Certified Financial Planner of the Year to help educate you on your Financial Plan.

Although there is no substitute for a personalised retirement plan, this article aims to be a good starting point for women considering retirement in 2021.

Retirement is a cornerstone of any Financial Plan, and therefore we need to answer the question; “How much do I need to retire?“. While at face value this can seem like a pretty straightforward question, considerations like if you are a single woman or in a relationship is only the starting point of where your situation becomes unique and personal. For instance, we always ask our clients what their ideal retirement looks like and the answers vary greatly and the variables in what you want personally will ultimately dictate what the right answer for you is.  Especially in 2021, considering the impact of the Covid-19 crisis.

 

When thinking about funding your retirement, a good place to start is the Association of Superannuation Funds of Australia (ASFA) most recent retirement standard survey. The most up-to-date figures are available for the June quarter of 2021, with the survey aiming to provide retirees with a budgeted annual expenditure to lead through retirement.

 

The table to the right breaks down the average weekly expenditure required for both single and couple retirees between the ages of 65 and 85, and categorises the expenditure between what it would cost to lead a “Modest” and “Comfortable” retirement lifestyle.

But what does this really mean?

ASFA describes a modest lifestyle as leading a quality of life better than if you were to solely rely on social service payments, whilst a comfortable lifestyle, on the other hand, enables retirees to lead a more fulfilling retirement with allowances made for a broad range of leisure and recreational activities.

 

To put all these figures together, ASFA has compiled the weekly and monthly expenditures to better understand how much you will need for retirement, which you can see to your left.

As these figures are averages, it stands to reason that many people’s actual retirement needs will fall around these figures . For this reason, ASFA data is a very helpful consideration, however in reality your needs could be quite different, so it pays to get more granular when defining your income need.

 

In a recent study conducted by the ABC ‘Australia Talks’, they gained insights from over 54,000 Australian’s. There were 27 ‘worry factors’ that were presented to participants across Australia covering issues from money, to love, to human survival. Interestingly the second biggest worry people have is saving for retirement. Over 62% of participants surveyed feel this way and while the statistics alone is quite obviously concerning, it makes me think – is uncertainty driving insecurity? 

 

We find that what people transitioning into retirement are seeking above all else reassurance that they are secure, and this naturally starts with knowing how much is enough. To accurately quantify your retirement income need, it is first important to understand the factors that drive your unique retirement income needs.

Are you considering your entitlements?

When people are considering how they will fund their retirement lifestyle, one area that many don’t always consider is how the entitlements under social security, such as the age pension, can be used to supplement their income needs.

 

To the right, we have updated a variety of numbers on the different income needs, including ASFA’s comfortable and moderate lifestyle and then $10,000 p.a. higher income needs above this amount, up to $120,000 p.a. We’ve done this with the intention of providing guidance on what lump sum is needed exclusive of Centrelink and including it, to provide some additional insight on what you might need to meet your income needs in retirement.

 

How are you going to fund it?

For most people, their plan for retirement is through a combination of retirement savings, such as superannuation and any other investments, such as property. So, if this is the case, let’s take a look at how the average superannuation balance for those between 60 to 64 and see how far they are from retiring comfortably as a couple who owns their home.

 

The figures to the right are the median account balances and the required balance for a couple to afford an annual expenditure of $63,352 p.a considering age pension entitlements, assuming they can earn a 5% rate of return, retiring at 65 and lasting to age 90, with 2.5% inflation. As you can see, the median is quite significantly behind in terms of where their superannuation balance needs to be to fund retirement comfortably. This disparity is even more concerning knowing that 1 in 4 males and 1 in 3 women have no superannuation savings across all age groups in Australia, and that 25% of females and 13% of men are retiring with no Superannuation Savings.

 

But fear not, as it isn’t all doom and gloom! It’s important to remember that as time goes by, these median balances are expected to grow in-line with the maturing industry award-based superannuation system introduced in the 1980’s which is also legislated to move to 12% by 2025. So much so, that by 2023, its projected that 43% of Australians at retirement age will be self-funded, signifying the effective income system we have in this country, as found in the Treasury’s Retirement Income Review.

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