How much do you need for retirement?

Does a healthy couple with no mortgage really need $1m for a comfortable retirement?

This question is often asked by prospective clients and my response is “it depends”. That is not an attempt to avoid the question but the reality is that everyone we see has a unique set of circumstances. A good starting point to find out what people really need to retire is to ask questions regarding their current spending habits.

More often than not, people don’t really know what they are currently spending or what they are likely to want to spend in retirement. A good reference for these people is the ASFA Retirement Budget Standard (https://www.superannuation.asn.au/resources/retirement-standard) which gives guidance for a comfortable and modest retirement for couples and singles. As you would expect, there are assumptions built into the Budget Standard but it does provide a very good starting point. 

For example, it indicates that a relatively healthy couple with no mortgage would need about $60,000 p.a. to lead a comfortable retirement. Based on the assumptions used by ASFA, this would require a lump sum of $640,000 at age 65. Using this as a guide and adding in expected large one off costs in retirement such as overseas holidays, updating motor vehicles and other costs that are important to retirees, it is possible to provide reasonable projections for future retirement income.

At KP Financial Planning we meet with a lot of people getting close to retirement and looking for direction. An important aspect of the retirement plans we provide is the financial modelling we complete. We factor in existing assets and liabilities, ongoing expenses and likely large one off expenses such as overseas travel and updating motor vehicles for example. This allows us to project the probable outcomes for years into the future. This is a very powerful tool providing our clients with a degree of clarity and certainty as to whether or not they have the resources to meet their ongoing retirement income needs. 

In addition it allows us to identify how different financial strategies can improve a client’s situation whether that be by the retirement income products used or approaches to increase Age Pension entitlements.

This information is of a general nature only and has been prepared without taking into account your particular financial needs, circumstances and objectives. While every effort has been made to ensure the accuracy of the information, it is not guaranteed. You should obtain professional advice before acting on the information contained in this publication.

This case study and any graphs or examples included in this case study are for illustrative purposes only and are based on specific assumptions and calculations. Individual circumstances may vary and this will alter the outcome. The case study does not represent any forecast or guarantee on return.

This document may contain certain forward-looking statements. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control. You should not place reliance on forward-looking statements. To the maximum extent permitted by law, we and Matrix Planning Solutions Limited disclaims all liability and responsibility for any direct or indirect loss or damage which may be suffered as a result of relying on anything in this document including any forward looking statements. Past performance is not an indication of future performance.

Damien Roberts and GDKP Pty Ltd ABN 61 606 192 769, trading as KP Financial Planning, is an Authorised Representative (CAR 1237882 and AR. 333542) of Matrix Planning Solutions Limited, AFSL and ACL No. 238256