It’s a very good question and obviously the answer is determined by a number of factors.
- How long do I intend to live?
- Where do I intend to live?
- What kind of lifestyle do I intend to have in retirement?
In essence the amount you need depends on the two major factors of any decent financial plan:
Many of us will spend more than 25% of our lifetime retired; men are now living until an average age of 86 years and women till 89 years of age.
Generally the first 10 years of retirement are more expensive than the older years. This is the time you may want to do some traveling and fulfill other goals that may not be as important in the latter years. i.e. sports, cars, fishing, boating etc.
So how much Super do I need in retirement?
Well generally speaking if you’re spending $70,000.00 per annum prior to retirement then you’re going to need this much and maybe more in those initial retirement years. If you have a strong financial plan that achieves a healthy 7% per annum on your Super balance then you’re going to need a sum of $1 million dollars (if you considered inflation you would need a lot more) to provide you with funds to ensure you don’t eat into your principal.
If you decide to play it safe and put your funds into a term deposit giving you a return of a generous 3% (normally less these days) then you will need in the vicinity of $2.4 million dollar to ensure you don’t use up your principal (if you considered inflation you would need a lot more).
Obviously the latter amount is unrealistic for most people. However with a strong plan and a detailed budget you can maximise your Super payout at retirement and optimise the longevity of the funds; all designed to achieve your retirement goals.
What must be said is that with a systematic plan it is possible to work out exactly how much you are able to spend, how much you can expect from Centrelink and how long your capital will last you. Once you have these factors in place you can cut the cloth of your retirement plan to suit the funds available. Like the rest of your financial life, good retirement depends on a good plan.