When Will You Retire?
I never used to think about retirement very much until I turned 50. This milestone birthday was the catalyst for me to think about whether I was going to be able to afford to retire, and when I wanted to retire. Now, if you’re like me you have a million things that you want to do with your life, most of mine centre around travel and experiences, learning new things and being (hopefully) able to look after my grandchildren when they eventually arrive.
Don’t get me wrong, I actually love what I do. I love being able to help people achieve their financial goals. I guess for me, my financial goal is to have my mortgage paid off so that I have more choices. That I have the choice to be able to travel, work fewer days, spend time with friends and family and enjoy their company, cook more, help others through volunteer work and explore my passion for tiny houses.
What factors do we need to take into account when considering when we can retire?
According to the Australian Bureau of Statistics, the average age at retirement for recent retirees (those who have retired in the last five years) was approximately 63 years.
The retirement age in Australia varies depending on your age. This is the age where you can access your superannuation savings. You can generally access your superannuation when you have reached age 65. However, if you are under 65 you can generally access your superannuation savings if you have retired from the workforce and reached ‘preservation age’. The preservation age is the age at which you can access your superannuation savings and is generally between 55 and 60, depending on when you were born.
And you’ll become eligible for the age pension at 66.5, rising to 67 by 2023. To be eligible for the Age Pension you must also meet the Income and Assets test. This means that the more income and assets you have the less pension you may receive right down to not being eligible at all.
With statistics showing us that Australians are living longer than ever, chances are you could spend a very long time in retirement. How you make your savings last as long as you do is a key question when considering retirement.
The first step in planning your retirement is to look at your current plan for your income in retirement and see if you’re as prepared as you think you are. The Association of Super Funds of Australia (ASFA) publishes new ‘Retirement Standard’ figures every quarter to help retirees get an idea for the income they’ll need to match their lifestyle expectations.
How do you expect your lifestyle and spending habits to change in retirement?
The way you spend your time and the standard of living you want to enjoy will both have a significant impact on how much income you’ll need.
Do you have a big bucket list of travel destinations and experiences you’re hoping to work your way through? Or are your plans more focused on staying close to home, spending time with family and friends? Perhaps full-time retirement isn’t something you’re ready for and you’ll keep working part-time instead. Whatever retirement looks like for you, money is something that can either limit your plans or make them possible.
The Retirement Standard is calculated and published every quarter by ASFA to help people prepare themselves financially for retirement, and to budget for their future once retired. It estimates the total annual cost of living either a comfortable or modest lifestyle for retired singles and couples aged 65 to 85 and over 85. Each quarterly release is updated in line with inflation and includes detailed budget breakdowns for all types of items and expenditure. This enables you to carry out a comparison with your current budget and calculate whether your overall spending in retirement is likely to be more or less than the retirement standard estimates.
ASFA Retirement Standard for couples aged around 65
| Modest | Comfortable |
| $41,170 per year | $63,352 per year |
ASFA Retirement Standard for a single person aged around 65
| Modest | Comfortable |
| $28,514 per year | $44,818 per year |
Source: Association of Superannuation Funds of Australia (ASFA) – Retirement Standards, June quarter 2021
The level of retirement savings it would take to fund a modest or comfortable lifestyle are also included in the retirement standard figures. For the June 2021 quarter, it’s expected that a couple would need combined savings of $640,000 and a single person would need $545,000 in their super fund and other savings at the time they retire if they’re aiming to make ends meet for the ASFA definition of a comfortable lifestyle.
This calculator on the Moneysmart website can help you find out how much you will need in income and superannuation in order to retire.
If you need help with navigating through the process of looking at your income, superannuation and what you will need to retire, book in for a 1:1 session with me
Yours in finance,
Sarah xx