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April 06 newsletterIntroduction to retirement planning
How much you need to save for retirement is generally a vexed question, complicated by the fact that everyone's retirement needs will be different. A simple example is that if your grandchildren are living in your home town, this will obviously require less money than if your children have moved their families to London.
The best advice on offer is from the likes of Sorted, who suggest a level of retirement income based on 70% of your current annual income. While they go on to suggest those factors that will affect the amount of retirement income you'll need, for example owning or renting a home, they offer little concrete advice.
The aim of this newsletter is to give you some help in two areas.
How much do you need in retirement?
The first area is determining how much you may need in retirement. As discussed above, everyone's circumstances will be different, so there is no simple answer.
However, the Association of Superannuation Funds of Australia Limited, together with Westpac, have, through their research, produced the Westpac/ASFA retirement Living Standard, which provides the following guidelines for Australians (assumes retirees own their own home):
In the absence of any other information, these numbers at least provide some initial guidelines for your goal setting.
Calculating how much to save for retirement
The next step is to determine how much you need to save to reach a savings target that will produce your desired level of after-tax income in retirement. the Shape of Money has developed a new retirement planning calculator to help you determine how much you need to save.
As always, the calculator is comprehensive, but don't be put off. This is likely to be your biggest financial goal and it is well worth putting in the effort in order to achieve the retirement you desire.
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