What is your definition of a ‘comfortable’ retirement?

One of the first things a financial planner will ask prospective clients is how much money they think they will need to fund their lifestyle throughout retirement. Most people find this difficult to quantify and will answer saying that they would like a ‘comfortable’ retirement. 

According to the ASFA Retirement Standard (December quarter 2016) to enjoy a "comfortable" retirement (from age 65), singles will need $545,000 in savings to generate a yearly income of $43,372. Similarly, couples at retirement will need $640,000 to generate $59,619 a year. The figures assume that the retirees own their own home, and do not pay rent or mortgage payments. This ‘comfortable’ retirement income figure allows the retirees to take one annual holiday in Australia, eat out regularly, drink bottled wine and take part in regular leisure activities.

It is our role to work with clients to help them understand what retirement means to them before we can even start to think about how to fund it. 

At what age do they want to change their work commitments? Do they want to fully retire on their 55th or 60th birthday, gradually move from full-time to part-time employment or perhaps seek out some executive board positions? In the case of the self-employed, when will they commence the process of handing over to the next generation or looking for purchasers for their business? The days of counting down to retirement on your 65th birthday are numbered.

We also need to understand your lifestyle now and your current level of expenditure. Do you intend to live a similar lifestyle throughout retirement? How many times a week would you like to eat out? Do you have a ‘bucket list” of places to see and things to do whilst you are in the early years of retirement? Will you participate in recreational hobbies or sports? What is your health like? Do you want to provide financial assistance to your children or grandchildren?

Do you want to spend your kids’ inheritance or set them up financially after your death? This will impact how much you draw from your superannuation and other assets over your retirement years. Are you comfortable with downsizing your home if you need extra capital? Or perhaps staying in your home and using a reverse mortgage to draw against the equity you have built up?

These are all things we will explore in our discussions over time. There is no one right or wrong answer to any of the above, and your thoughts may change as time evolves. However, a deeper understanding of your vision of a ‘comfortable’ retirement will help us to work with you to achieve your desired outcome. There is no one size fits all ‘comfortable’ retirement, nor a one size fits all approach to planning for this.

At Your Family CFO we take time to get to know you and your retirement vision.