Planning for retirement a part of life that makes sure you will have a comfortable and secure future. Estimating how much income you’ll need during your retirement years is an essential step in the process. This involves considering your living expenses, lifestyle goals, and sources of funds. Consulting resources such as the Financial Advice Association of Australia (FAAA) can assist with expert insights and guidance for smoother financial planning.
Living Expenses
Start by estimating your everyday living costs. Think about expenses such as housing, utility bills, groceries, insurance, and transport. These are the basics that will form the foundation of your retirement budget. For Australians, it’s wise to also factor in healthcare costs, since these tend to rise as we age. By taking a realistic look at these expenses, you can build an accurate baseline for what your retirement income should cover.
Leisure & Lifestyle
Retirement often means having more time to pursue hobbies, leisure activities, and travel. Whether that’s joining a local club, taking classes, or heading on an occasional holiday, these plans can add significantly to your budget. Think about the type of lifestyle you envision and allocate funds to make it happen. It’s important to be honest about your goals and balance them with what’s achievable financially.
Random Costs
No one can predict the future, but you can prepare for it by setting aside a buffer for unforeseen expenses. This might include home repairs, medical emergencies, or support for family members. Building a contingency fund into your retirement plan gives you one less thing to worry about when these situations arise.
Australian Retirement Standards
The Association of Superannuation Funds of Australia (ASFA) provides detailed benchmarks for retirement living costs in Australia. These standards distinguish between a comfortable and modest retirement and break down the requirements for singles and couples. Using these benchmarks can give you a clearer picture of what you might need based on your circumstances and preferences.
Longevity
Australians have one of the highest life expectancies in the world, which means your retirement savings need to last. When estimating your retirement income needs, consider how many years you may be drawing on your funds. This is especially important as outliving your savings can be a real challenge if not planned for.
Include Your Superannuation
Superannuation is a major component of retirement income for most Australians. Check your super balance and use online calculators to estimate how much it could grow by the time you retire. Make sure to review your contributions regularly and check if you’re on track to meet your goals. If you’re behind, consider making additional voluntary contributions to boost your super savings.
Government Support
Don’t forget about resources like the Age Pension. Even if you don’t plan to rely solely on it, the Age Pension can supplement your other retirement income. Familiarise yourself with the eligibility criteria and how much you could potentially receive from this government system.
