How much for a Comfortable Lifestyle? Tips for your Financial Future

Posted by Darren Jacotine

Consider these numbers around superannuation and your future:

For a comfortable lifestyle, a couple will require about a $510,000 super balance at the start of retirement.

A single retiree will require about a $430,000 super balance at the start of retirement.

How are you tracking?

And what does it take to end up with a super balance of that size, if relying solely on the 9.25% compulsory superannuation contributions?

Assuming 30 years of 9.25% contributions, a wage earner on $50,000 per annum is likely to have a super balance at retirement of $220,000.

Someone earning twice that amount, $100,000, will still only end up with $435,000.

That's what we call 'a very material gap' between the required super balance and the likely super balance.

And what that really means, is a HUGE DIFFERENCE in lifestyle for the retiree.

For a couple on a single wage of about $100,000, this gap will be $75,000 and their likely super balance will be about 85% of the required balance.

Clearly, there are three options:

  1. Increase their contribution rate above 9.25% for the couple's working life (say about 30 years); or
  2. The couple significantly downsizes their retirement lifestyle expectations; or
  3. The couple will have to extend their working life. 

A useful reference for planning your level of retirement savings

To know whether your retirement savings will give you a comfortable or a modest standard of living, refer to the ASFA Retirement Standard.

This benchmarks the annual budget needed by Australians to fund either a comfortable or modest standard of living in the post-work years. It is updated quarterly to reflect inflation, and provides detailed budgets of what singles and couples would need to spend to support their chosen lifestyle.

You'll see on that page that the ASFA Retirement Standard describes a 'Modest retirement lifestyle' as, "Better than the Age Pension, but still only able to afford fairly basic activities."

It describes a 'Comfortable retirement lifestyle' as "Enabling an older, healthy retiree to be involved in a broad range of leisure and recreational activities and to have a good standard of living through the purchase of such things as; household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, and domestic and occasionally international holiday travel."

ASFA calculates that a couple living in QLD would need to receive $56,163 per year for comfortable lifestyle, and $32,463 per year for a modest lifestyle.

Although many of us have been brought up to see 'being modest' as a good thing, this certainly doesn't apply to your retirement lifestyle!

How to get your super (and likely retirement lifestyle) on track...

To us, your superannuation is one aspect of your LifePlan. Superannuation is great, and you should take advantage of the tax advantages it offers.

Contact us to make a time to meet with us to discuss what's involved in us documenting for you a clear LifePlan.

Your LifePlan will cover not just building your wealth, but also protecting your assets, managing your cash flow, tracking your expenditure and making sure that in 10 years’ time, you are where you want to be financially and lifestyle-wise.

Every client we have developed a LifePlan for has loved it. They tell us it gives them comfort and clarity to know they have a clear, achievable, documented plan, developed by a team that not only considers investment and financial planning aspects, but also taxation and accounting aspects. That's the benefit of working with MIDDLEWISE ACCOUNTING, because we address 'the big picture' of your financial life, which is something that neither an accountant nor a financial planner can do in isolation.

The quality of your lifestyle in retirement is too precious to leave it to chance, and as you can see above, relying solely on compulsory superannuation is a recipe for a meagre lifestyle in retirement.

FREE LifePlan Consultation – Book NOW!

To assist you to get your Super on track, contact us TODAY on 1300 574 108 for a FREE 30 minute consultation. We can clearly show you, using our exclusive LifePlan Gap Analysis, your “big picture” and set out an action plan to help you on your way to achieving your retirement lifestyle!

Don’t delay. The sooner you get started with the right advice, the sooner you will grow your assets to have a beautiful financial future!

Notes on the amounts and figures quoted in this article: These comments are based upon the recently released June 2013 quarter figures Retirement Standard of ASFA.  The likely super balance is determined assuming the current tax treatment of super is unchanged, that the contributions have been made to a taxed super fund and that the super investors are home owners who are entitled in part to the Age Pension.  The above is not financial advice.  Any super investor should consult with a licensed financial adviser before making any investment decisions.

This article is provided as general information only and does not consider your client’s specific situation, objectives or needs. It does not represent accounting advice upon which any person may act. Implementation and suitability requires a detailed analysis of a client's specific circumstances. © 2013 Middlewise  Pty Ltd

on’t delay. The sooner you get started with the right advice, the sooner you will grow your assets to have a beautiful financial future! sets to have a beautiful financial future!

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