No one can blame you if, during your 20s and 30s, you didn’t really think much about retirement. If you’ve been putting away a reasonable fixed amount (about 10% of your monthly salary) toward your savings since you first started working, it’s highly possible you’re set for life.
But if you haven’t been saving regularly, and you want to maintain your present standard of living well into retirement, you’ll probably need to save more than half of your annual income.
Of course, the amount you’ll have to save also depends on how old you are now and how early (or late) you plan to retire. If you want to live a comfortable life, you also have to factor in your criteria for what living a comfortable life is all about.
In case you’re feeling a little lost and want to know the average cost of retirement per month, then this article can help.
The Retirement Standard According to ASFA
The Association of Superannuation Funds of Australia (ASFA) invests a ton of resources in keeping track of retirement expenses and providing estimates on the cost of retirement in Australia.
Each year, ASFA releases budgets for seniors who may be single or living as a couple, providing approximations on how much money they’ll need to maintain a modest or comfortable standard of living. The document called the Retirement Standard is a terrific resource if you want to get a fair idea of how much money you should be saving for retirement.
The Standard presents three broad lifestyle categories: a comfortable retirement, a modest retirement, and a retirement completely supported by the Age Pension.
- Comfortable: A comfortable retirement entails having enough money to cover healthcare, house repairs, local holidays, occasional trips abroad, a good-quality car, regular leisure and lifestyle activities, as well as a few other luxuries that go into daily living. Maintaining a comfortable lifestyle is predicted to cost about $65,445 per year for couples between the ages of 65 and 85. A single person might need a budget of $46,494 annually to maintain the same standard of living.
- Modest: Cutbacks in many living expenses are necessary for a modest retirement. However, this lifestyle still allows for the purchase of a car and participation in plenty of leisure activities that probably won’t include overseas holidays. A modest lifestyle could cost about $42,621 per year for couples between the ages of 65 and 85. For a single person, a $29,632 annual budget may be enough to cover expenses.
- Age Pension-dependent: Retirement supported by the Age Pension typically entails a conservative way of life as you’ll be living on a limited budget. This means the majority of spending would be restricted to necessities. For couples, their combined Age Pension will provide around $35,000 per annum. For individuals, the amount would be approximately $23,000. Note that your Age Pension will vary depending on your income and assets. Since this amount falls short of even the moderate threshold for retirement, there wouldn’t be money to spare for luxuries or non-essential items.
While these ASFA estimates are based on data-based projections, they don’t consider the average monthly cost of retirement homes in the distant future, that is, in case you don’t see yourself living in your own home.
However, the above figures can serve as a guide as you try to build up your retirement fund. And to ensure you cope well with the cost of retirement in the future, it’s best to start saving today.
If this article has inspired you to think about your own unique situation and, more importantly, what you and your family are going through right now, please contact your advice professional.