From deciding when you want to call it a day to figuring out your next holiday, there’s a lot of planning that goes into retirement.
One of the biggest factors influencing the answers to both these questions is money: how much do you actually need of it to retire? After all, this number will influence both how long you have to work to earn it, and how you’ll be able to spend it.
So what’s the magic number, you ask?
Well, there’s no one set dollar figure that works for everyone – like most other aspects of super, it all depends on your own personal needs and circumstances, and the other assets you may have outside of super. But there are a few tools that can help you get an idea of what you might need.
The ASFA Retirement Standard
1Budgets for various households and living standards for those aged around 65 (December quarter 2019, national)
Retirement income simulator
Making a retirement budget
Sometimes the most helpful things are the most obvious – in this case, creating a good old budget can help give you an idea of what your financial needs will be in retirement.
As you go about using these tools, remember to think about your current expenses and how they might change by the time you retire.
For example, if you have a mortgage, will you have paid this off by the time you retire? If you are currently looking after children or other family members, will these arrangements still be in place by the time you retire? If you currently have a car – or two – will you be able to make do without it, or primarily use alternative methods of transport after you stop working?
While some of your current expenses may disappear, remember to also think about the kinds of new expenses that may emerge in retirement.
Some of these may be more fun than others – for example, with all the new-found freedom you’ll have in retirement, you may be planning to travel more than you currently do. On the other hand, as you get older, your health needs may also change, which means you may need to spend more on health-related expenses.