In 2004 and updated in 2007, the Association of Superannuation Funds Australia (ASFA) and Westpac researched the amount of income required to meet a retired couple's needs*. Their findings showed that for both a modest and a comfortable retirement in the major capital cities, a couple will need:
- $47,766 a year to have a comfortable lifestyle
- $25,780 a year to have a modest lifestyle.
The modest budget
The modest budget allows for the basics but little else. For example, both eating out and entertaining at home are very restricted, and no overseas travel is possible.
The extra expenditure associated with a shift from a modest lifestyle to a comfortable lifestyle in retirement adds a lot to enjoyment, comfort, style, holiday travel, health insurance cover, and the ability to participate more fully in modern Australian society.
At the modest budget level – even assuming they own their home – many retirees would be unable to participate in a range of sport and social activities that involved out-of-pocket expenses of various sorts.
The comfortable budget
The comfortable budget allows for entertaining at home on a fortnightly basis, seven glasses of wine a week (or an equivalent refreshment), and eating out either three times a week at a club restaurant, or once a week at a more expensive restaurant.
The comfortable budget also allows another $20 a week or so per person in total for expenditure on items such as drinks at the club, some gambling on lottery tickets or the like, tobacco purchases (if a smoker), or gifts to family or organisations.
The comfortable budget also allows for the purchase of some magazines, compact discs and DVDs. Again, home ownership is assumed.
* This research was conducted by ASFA and Westpac in August 2004. The figures have been updated as at March 2007.
How much is the Age Pension?
The age pension pays couples $898.20 per fortnight and a single person $537.70 per fortnight (effective 20 September 2007). Additional payments and supplements are available.
Even so, is the age pension enough to provide you with a modest or comfortable income?
What income will you need in your retirement?
It is important to consider what your expenses will be in retirement so that you are able to understand whether your superannuation will be sufficient. You will also need to consider:
- The effect of inflation
- The number of years you will need to support yourself in retirement
- All the issues raised in the nine point check list
- Other matters specific to your own circumstances.
A qualified financial planner can help you answer these questions and take all the factors into account when deciding how much you need in retirement.
Your AustralianSuper membership gives you access to commission-free, fee-for-service financial advice through Industry Fund Financial Planning (IFFP).