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Do You Really Need $1M To Retire On?

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Is it possible to put a dollar figure on the amount you need in retirement?

You’ve probably heard it said that the average Australian needs a nest egg of $1 million as they head into retirement. And you may be wondering how accurate this figure is. Is it too high or is it too low?

In truth, this dollar estimate may be entirely accurate for some retirees or wildly inaccurate for others. Just as we are unique in how we live, work and play throughout our working lives, so too are our retirement plans. You may want to retire early, travel frequently and regularly entertain, while the next person may prefer to retire later, travel less and keep their own company. 

Just as we are unique in how we live, work and play throughout our working lives, so too are our retirement plans.

It’s for this reason that you’ll gain a more accurate retirement estimate by calculating your expected monthly expenses in retirement. Start by looking at what portion of your current take-home pay you spend, and where it goes.

Think ahead to which of these expenses would go up or down in retirement. For example, you currently eat out one night a week, but are you likely to want to do this more frequently when you retire? Refer to the AFSA Retirement Standard for a rough living expenses guide.

Factor into your retirement calculations, the size of any debts and the likely cost of healthcare (depending on how healthy you are).

Take the first step

Now, look at possible income sources such as the age pension or income from investment properties, term deposits and managed funds. How much you receive from the government will depend on how much income you receive from other sources and what your assets are worth.

Your superannuation is a primary source of retirement income, so it’s vital to find a super fund that works in your favour – low fees, transparency and solid returns.

When deciding how many years of retirement income you require, keep in mind that the average life expectancy for a female in Australian is 84 years and for a male 80 years.

Source: AIHW

The gap between your expenses and income is the amount you can expect to draw from your savings and investments each year. Take your best guess about how many years you’ll be maintaining this lifestyle in retirement, and you’ll start to form a rough estimate of the likely size of your nest egg.

Plan ahead for a comfortable retirement by acting now to grow your super. Your Yellow Brick Road financial advisor can help you understand your super options, as well as calculate how much you need per week, month or year to live the lifestyle that you hoped for in retirement.

**The information on this article contains general information and does not take into account your personal objectives, financial situation or needs. If you require further information don’t hesitate to contact the branch directly.

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