Living your best life in retirement | Oracle Advisory Group

As you approach retirement age, you may be worried about whether you have saved enough to comfortably retire and cover increasing expenses such as energy, insurance, food, and healthcare costs.

Luckily, someone has already figured out what you may require.

The Association of Superannuation Funds in Australia (ASFA) updates its Retirement Standard every year, which provides a breakdown of expenses for two types of lifestyles: modest and comfortable.

Based on our average life expectancy - for women, it is just over 85 years and for men 81 - if you are about to retire at say age 67, you will have between 14 and 18 years in retirement, on average and depending on your gender.

ASFA finds that a couple needs $46,944 a year to live a modest lifestyle and $72,148 to live a comfortable lifestyle. That’s equal to $902 a week and $1387 respectively. The figure is of course lower for a single person - $32,666 for a modest lifestyle ($628 a week) or $51,278 ($986) for a comfortable lifestyle.

What does that add up to? ASFA estimates that, for a modest lifestyle, a single person or a couple would need savings of $100,000 at retirement age, while for a modest lifestyle, a couple would need at least $690,000.

A modest lifestyle means being able to afford everyday expenses such as basic health insurance, communication, clothing and household goods but not going overboard. The difference between a modest and a comfortable lifestyle can be significant. For example, there is no room in a modest budget to update a kitchen or a bathroom; similarly, overseas holidays are not an option.

The rule of thumb for a comfortable retirement is an estimated 70% of your current annual income. The reason you need less is that you no longer need to commute to work and you don’t need to buy work clothes.

Building your nest egg

So how can you build up a sufficient nest egg to provide for a good retirement life?

There are three main sources: superannuation, pension and investments/savings. Superannuation has the key advantage that the money in your pension is tax-free in retirement.

Your superannuation pension can be augmented with the government’s Aged Pension either from the moment you retire or later when your original nest egg diminishes.

Your income and assets will be taken into account if you apply for the Age Pension but even if you receive a pension from your super fund, you may still be eligible for a part Age Pension. You may also be eligible for rent assistance and a Health Care Card, which provides concessions on medicines.

Money keeps growing

It’s also important to remember that the amount you accumulate up to retirement will still be generating an income, whether it's rentals from investment properties or merely the growth in the value of your share investments and the accumulation of money from any dividends paid.

You can also continue to add to your superannuation by, for instance, selling your family home and downsizing, as long as you have lived in the home for more than 10 years.

If you are single, $300,000 can go into your super when you downsize and $600,000 if you are a couple. This figure is independent of any other superannuation caps.

Planning for a good retirement life often requires just that – planning. If you would like to discuss how retirement will work for you, contact us today!

Important information – Oracle Advisory Group makes no representation or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. The information in this document is general information only and is not based on the objectives, financial situation or needs of any particular investor. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek their own professional advice. Past performance is not a reliable indicator of future performance. The information provided in the document is current as the time of publication.