This article is the second in a series on Retirement. The previous (go to the website link – Articles - Technical) covered “how long will my money last”.

The recent ABS “Multipurpose Household Survey” reviewed the age at which people retire.  The survey looked at anyone over the age of 45.  According to the ABS figures, the average age at retirement for people over 45 in 2008/09 was 53 (58 for men and 49 for women).

These statistics indicate that a significant portion of the Australian population retires before the age of 65 and as a result would potentially spend a long time in retirement, depending on their life expectancy.

Life Expectancy:

The amount of time a person spends in retirement will ultimately be determined by how old they are when they retire and how long they live.

Expected to live to: 

How much is enough?

The Westpac/Association of Superannuation Funds of Australia (ASEA) Retirement Standard shows the aggregate costs for people living in retirement need at least $51,727 a year to have a comfortable retirement.  A single person needs at least $38,611 to have a comfortable retirement.

The current maximum age pension for couples is $27,482 combined (or $1,057 a fortnight).  The maximum age pension for single people is $18,228 a year (or $701.10 a fortnight).  Therefore, if retirees solely rely on the age pension, they will have a less than modest retirement in terms of spending and what they can afford to buy.

So you can see the “gap” between Age Pension and the survey results on the cost for people living in retirement is significant. This results in the need for self funding for retirement. The question is - How much is needed?

The amount required is affected by;

• Your needs in retirement – that is the cost of the lifestyle you desire
• How long you will live and changes in your lifestyle requirements along the way

There is of course a third factor – being how to invest my money. We will cover this topic in our next Newsletter.

Our belief is to work through a process with new clients to establish their long term goals and analysis of the current needs to determine what actions should/can be taken before it is too late. This becomes the “strategic plan” for the family unit.

It is never too late to plan.

Grant Hodgins

Director