Retirement savings are a hot topic in Australia. People want to achieve a good post-retirement quality of life, but it can be difficult to know exactly how to achieve this. What savings do you need to achieve a comfortable retirement, and how much do Australian retirees need to budget each year?
Let’s take a look.
Retirement Savings in Australia – Comfortable and Modest Quality of Life
The level of retirement savings the average Australian needs depends on their retirement expectations – and on quality of life expectations in particular. To live a comfortable retirement in Australia, couples and single individuals will need considerably more.
Budgeting for Those Aged Between 65 and 84
Based on research conducted by the Association of Superannuation Funds of Australia (ASFA), you’ll need to budget for the following levels of expenditure each year to maintain your standard of living during retirement. These figures are based on ASFA’s retirement standard for the third quarter of 2022 and relate to people who own their own home.
For Australians aged between 65 and 84, expected annual budgets were:
- $68,014 per year for a couple living a comfortable lifestyle
- $48,266 per year for a single person living a comfortable lifestyle
- $44,034 per year for a couple living a modest lifestyle
- $30,582 for a single person living a modest lifestyle
Budgeting for Those Aged 85 and Above
Typically, as people age, average expenditure and budgeting requirements fall. For those aged around 85 years old, the expected annual budget was:
- $62,237 per year for a couple living a comfortable lifestyle
- $44,851 per year for a single person living a comfortable lifestyle
- $40,656 per year for a couple living a modest lifestyle
- $28,379 for a single person living a modest lifestyle
Budgeting for Those Aged 85 and Above
Typically, as people age, average expenditure and budgeting requirements fall. For those aged around 85 years old, the expected annual budget was:
- $62,237 per year for a couple living a comfortable lifestyle
- $44,851 per year for a single person living a comfortable lifestyle
- $40,656 per year for a couple living a modest lifestyle
- $28,379 for a single person living a modest lifestyle
Retirement Savings and SMSF Balances for Retirement – Comfortable Quality of Life
Based on these figures, ASFA estimates that an Australian retiring at 67 in the third quarter of 2022 would have needed the following retirement savings to achieve a comfortable lifestyle from the time they are no longer working.
- $640,000 for a couple living a comfortable lifestyle
- $545,000 for a single person living a comfortable lifestyle
The above figures for retirement savings and superannuation balances are based on the assumption that funds will continue earning money from their investments. This means retirees are able to keep on earning some form of income from their funds, even after they stop working, either in investment returns or in interest payments. In the above example – relating to the savings required to achieve a comfortable retirement in Australia – these savings are calculated according to an investment return rate of 6%.
Retirement Savings and SMSF Balances for Retirement – Modest Quality of Life
To live a modest lifestyle after retirement, Australians will need the following savings or superannuation balances to retire at 67:
- $70,000 for a couple living a modest lifestyle
- $70,000 for a single person living a modest lifestyle
You’ll notice two interesting things about these figures. First, they are both significantly lower than the savings required for a comfortable lifestyle. Second, they are both identical.
This is because of the Age Pension.
In Q3 of 2022, Australians would have begun receiving the Age Pension at 67 years old. This age pension is designed to support the basics during retirement, providing quality of life up to a reasonable standard but not including any extras or luxuries. The Age Pension takes care of a lot of the costs of living a modest lifestyle, and this is reflected in the retirement savings needs for Australians.
As both individuals will receive an Age Pension, the two values are the same. So, a single person will receive one Age Pension, while a couple will receive one each – twice as much between them.
Explore Your Retirement Options
Here at Sydney Brokers, we help Australians find the financial products they need to achieve their goals. From mortgages and personal loans through to SMSF products, we can assist you as you explore your options and make the right choice in the market. Reach out to our team today to discover more – let’s chat about your retirement options.