The annual cost of retirement

If you struggle to define your retirement planning target one initial starting point can be to consider how much current retirees spend each year. Here the Westpac ASFA Retirement Standard is helpful, and it has just been updated.

An essential ingredient in successfully creating wealth is your purpose – particularly one that motivates you.

One of the common purposes of wealth creation is to accumulate enough money that you can make work optional (aka “retirement”.) This is your point of financial independence, whether you choose to cease working or not.

In my financial planning experience most people can’t tell me how much money they’d like to be able to spend in retirement. Without a clearly defined target the task of working out how much you need to save each year is quite difficult. And online retirement calculators can’t help you as they require a target input too.

If you struggle to define your retirement planning target one initial starting point can be to consider how much current retirees spend each year. Here the Westpac ASFA Retirement Standard is helpful, and it has just been updated.

Retirement cost of living

As at the end of the June 2010 quarter a couple needed approximately $53,500 per year to live comfortably in retirement (per household). Couples living more modestly survived on approximately $30,400 per year.

A single retiree required approximately $39,000 per year to live comfortably.

The Westpac ASFA Retirement Standard assumes the retirees own their own home. It defines a modest retirement lifestyle as “better than the Age Pension, but still only able to afford fairly basic activities.”

A comfortable retirement lifestyle is defined as: “enabling an older, healthy retiree to be involved in a broad range of leisure and recreational activities and to have a good standard of living through the purchase of such things as; household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, and domestic and occasionally international holiday travel.”

You can obtain detailed budget break downs on the ASFA website. The Westpac ASFA Retirement Standard is updated quarterly.

If you are using this information in a retirement calculator remember to increase the amount each year in line with inflation. Some calculators do this automatically.

Author: Matt Hern

Certified Financial Planner professional, Matt Hern has three times been awarded as one of Australia's Top 50 Financial Planners by The Australian Financial Review Smart Investor. He is passionate about guiding you on the right financial choices to achieve what you really want. Matt Hern is an Authorised Representative of Charter Financial Planning Limited AFSL 234665. All information is general advice only.

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