when and how much?

So I guess the first question is, when can I hope to retire (not want, cause you know, tomorrow is good for me) and the second question is, of course, how much will I need.

Answer one is a quick Google away … the current Australian retirement age (or age when you can access the pension) is 67. I actually expect that to go up before I hit retirement age (apparently it will be 70 by 2035) but 2042 seems like as good a year as any to plan to retire. The second question is a bit trickier.

According to the ASIC (the Australian Securities and Investment Commission, a government body) MoneySmart website, a single person with a modest lifestyle needs $24,250 a year or $465 a week. Comfortable requires $43,665 or $837 a week (as at January 2018). And your own home in both cases. I rather imagine things will have changed by 2042. (Minor freak out, I have only 24 years to go from asset poor, cash poor and superannuation poor to retirement. Do you think I’ll be able to afford the good bread for that toast at least?)

Of course, ASIC then throws in a little curve by saying you could also aim for a goal of two-thirds of your pre-retirement annual income. That’s a bit more than both modest and comfortable with my current job. I’ve earned a good deal less than my current rate for much of my career, an I’ve definitely not been great at handling lifestyle inflation. Which means that now, of course, I am seriously picturing a future without wine, coffee, books and brunches.

So I use their handy calculator, type in age, current salary and super figures and I end up with an estimated income (between pension and super) in the $35-37,000 range which seems to be mostly made up of the age pension within the first decade, and quite frankly, I’m not that comfortable with that. There’s a lot of baby boomers between me and retirement and it’s quite possible they will overload the pension system, especially if/when the Australian economy slumps. (That’s not pessimism people, all economies have highs and lows.) Anyway, the figure the calculator provides is somewhere between the modest and comfortable, but only until I’m 89 which is when I can expect my super to run out. If there is no pension by the time I reach retirement age, my super is NOT going to cut it as it’s the smaller part of that estimated income quite early in the retirement period.

I will admit, I first looked at this tool a year or two ago when it seems there were a few more options. For instance, there was another tab at that time that told me half of the female retiree population could expect to live to 92 and one in five lives to 98 or older. Now, I have some significantly elderly women on both sides of the family tree and while I may be unfit and overweight, prudence dictates I plan for a scary number. The number well beyond when my super is gone.

While doing all of this, another calculator popped up on Facebook from Industry Super. I plugged in the same info (retiring at 67) and it tells me as a woman I can expect to live to 85. Leaving the budget at the pre-set settings as “comfortable” for housing/food/entertainment etc (and it obviously assumes I will own a house at that point) and it says I need $43K a year. I threw in an extra $20K lump sum to go travelling (or it might be to renovate or pay off the house, whatever) and it tells me I’ll need $809,000 by the time I’m 67. Then I try the same site’s super projections based on my age, current salary and what’s already in my super and that cheery little thing tells me my super falls quite short and runs out at 79.

So, the (work in progress) answers have become apparent to some questions:

  • I aim to retire at 67 (in 2042) but will probably work longer because a) retirement age will be 70 by then, and b) I’ll probably have to work at least a few days a week regardless
  • I can probably expect to live into my 80s but best to plan for 90-97, just to be safe
  • at $53,000 a year (well above modest figures from those calculators but taking into account my pension concerns), that’s a target of $1,484,000 ($53,000×28 years of retirement life) without taking into account any pension or continuing investment income
  • my current salary and super means the money runs out when I’m 89 (best case scenario) so it’s probably lucky I’m totes unhealthy and love food, and
  • I need my own home.

Going back to that ASIC page, the lump sum figure is somewhat lower, they quote ASFA (the Association of Superannuation Funds of Australia) with an estimated lump sum of $545,000 for a single person, assuming a partial Age Pension. However, again, there’s a lot of Baby Boomers between me and a government pension and I’m just not on track to have that much money in super at the moment.

My “back of an envelope” figure of $1.48 million is closer to a $1.5 million figure I heard bandied about on the news a few years ago (also by ASFA, I note – no wonder this is confusing). I am thinking that’s not the real figure for which I need to aim. To earn that $53,000, I need enough socked away to generate that in super, investments or interest generating deposits and own my own home outright as well. If I end up getting the age pension, well that’s awesome but these numbers don’t count on that.

So now I have a base target for now ($1.5 million) as I trawl through all this information for something more concrete BUT what’s the real number? How the heck do I work out how much I need to generate $53,000 in income post 2042? I see some financial literacy work in my future on savings, investments, home buying, the whole kit and caboodle, no crystal ball needed.

I’ll start working on that first target while I’m working out how to work out the amount I really need…

* Here’s a scary side note, I’ll admit to glancing at these figures back in September 2016 when comfortable for a single was $43,062 or $828 a week. During my continuing period of wilful ignorance, that necessary figure has increased by $600/year. #awesomeNOT

The image on this post is by Pineapple Supply Co. on Unsplash


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