This is one of the most common questions I get asked. There is no definitive answer – everyone is different. Some people are used to living on very little while others have a lavish lifestyle to fund.
Once you are no longer working would you prefer to have a set income that increases with inflation each year or would you like to be able spend more in the early years of retirement? The second is an option we are starting to explore in more detail.
What we tend to find is that in the early years of retirement when there is more time and health is good, there is a higher level of travel, activity and social life that requires more spending. Over time this will often reduce. This can be due to declining health or just a desire to slow down. The timing of this will be different for everyone.
And of course it is not a case of set and forget – it needs to be revisited and updated due to changes in goals, investment returns and personal circumstances.
To get a starting point for retirement income the Association of Superannuation Funds Australia (ASFA) updates the ASFA Retirement Standard every quarter. This is provides a guide for how much income is needed to provide either a modest or comfortable lifestyle. These are explained below:
Modest retirement lifestyle –
Better than the Age Pension, but still only able to afford fairly basic activities.
This is currently $21,946 for a single or $31,643 for a couple. (March 2012)
Comfortable retirement lifestyle –
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.
This is currently $40,297 for a single or $55,080 for a couple. (March 2012)