How much do I need to retire?

How much do I need for retirement?

Most pre-retirees fear running out of money in retirement more than anything else.  That’s why, as retirement specialists, the most common question we’re asked is, “How much do I need to retire?” 

Hammers have one purpose

Most of us turn to our super fund when it comes to answering how much is enough.

But be skeptical of the super funds; they are trying to sell you more super.  When all you have is a hammer, everything looks like a nail.

The retirement calculators on their website aren’t helpful.  They are over-simplified and wrong.  Plug in some numbers and you’ll soon learn that according to the super funds you don’t have anywhere near enough. 

It’s okay, you’ll probably have enough

In our experience, there’s no ‘magic number’ for a super balance.  We have seen clients retire with $250,000 in super and live more successfully in retirement than millionaires.

A funny thing happens when people retire.  A few months into retirement, people start feeling more confident about their finances.  That’s because they are still able to do the things that are most important to them. 

For the most part, people just enjoy doing the same things they’ve always done.  They enjoy exercising, learning new skills, and spending time with their family and friends.   

Home ownership more important than super

Asking ‘how much is enough’ is the wrong starting point.  It’s better to do a stock take of where you are today and make the most of your opportunities.

If you have excess savings capacity, it’s time to get your debt in order.  Especially your non-tax-deductible debt, like credit cards, personal loans and your mortgage.  Start with the smallest debt first and pay it out.  You’ll feel encouraged by your success and move on to the next one.

According to CoreData research, a key driver of retirement success is whether or not you own your own home.  So, try to enter retirement with your mortgage repaid.  Even if that means you need to access your super to extinguish it.

Don’t forget about the age pension

Keep in mind that Australia has a world-leading financial safety net; our age pension system.  For a pensioner couple, this can be more than $37,000 a year.  While most older Australians receive the age pension, not everyone gets that much.  Your financial assets interact with the Social Security system and reduce your entitlements under the means test.  But even couples with up to $876,500 in financial assets in addition to the family home are eligible for a part pension.   

That’s why you’ll probably have enough in retirement.  Besides, there’s more to life than money.  And there’s more to a successful retirement than money.

What’s clear is that you always have options and opportunities to improve your retirement.  If you’re wondering if you’re making the most of your opportunities, give us a call.  We’d love to run the numbers for you.  

Daniel Crump is the founder of Daniel Crump Financial Planning.  This article is general and does not consider your personal circumstances.  If you would like advice specific to you, give us a call.