How much money will you need to retire?

How much money do I need to retire?

It's a question that vexes many Australians, particularly as they approach retirement age.

The Association of Superannuation Funds of Australia, or ASFA, has published a guide on retirement income since 2004, which has become a widely accepted benchmark for retirement savings targets.

The ASFA Retirement Standard is a breakdown of the spending needed to fund two different retirement lifestyles - comfortable and modest - and an estimation of the superannuation balance required to achieve this.

Comfortable vs modest lifestyles

A couple living a comfortable lifestyle will spend $73,077 a year, while a single person will spend $51,805. Those living a modest lifestyle will spend considerably less - $47,470 for a couple and $32,897 for a single person.

People living comfortable or modest lifestyles spend money on the same sort of things, but the different spending power means the comfortable lifestyle includes more and higher quality goods and services.

For instance, the comfortable lifestyle includes a "reasonable car" while those living a modest lifestyle will have a cheaper, older more basic car.

Comfortable lifestyles will have top level private health insurance, regular professional haircuts and fast and reliable internet and mobile phone services. Those living the modest lifestyle will have basic private health insurance, budget haircuts, and a basic mobile service and modest internet and data allowance.

ASFA recognises that as people age their spending drops because they are spending less on activities such as eating out or holidays.

For people aged 85, a comfortable lifestyle requires an annual income of $67,714 for a couple and $48,971 for a single person. The modest lifestyle requires $44,152 for a couple and $30,838 for a single person.

How much you need

To retire at 67 and live a comfortable lifestyle, a couple needs $690,000 in superannuation savings while a single person needs $595,000.

The modest lifestyle requires considerably less - $100,000 for a couple and a single person.

It's important to note that the all the calculations assume that the retiree or retirees own their own home and are relatively healthy.

And the calculations also assume that the retirees will spend all their superannuation capital during their lifetimes and receive a part aged pension for the government, so there won't be any super remaining to leave to the children.

ASFA's Super Guru website contains a range of calculators to let consumers know how their super savings are progressing.

In particular, its Retirement Tracker website allows consumers who are still in the workforce to calculate what their retirement will look like. They input their annual incomes and current superannuation balances (and those of their partner if they are in a relationship) and the site calculates their likely annual retirement income.

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