How much do I need to retire?

According to research organisation Investment Trends, on average people expect they will need $56,000 each year in retirement.

This is fine you might say, but to me this statistic is pointless in isolation. We need to know more. We need to know what actually is the average income in retirement.

This figure wasn’t provided by Investment Trends’ in their 2010 Retirement Incomes Report, but I know it’s far less than $56,000. It has to be, simply because the average balance in superannuation upon retirement is typically less than $100,000.

But people may have other assets outside superannuation I hear you say. True, most have one other major asset – their home – but little else. And your home doesn’t provide an income.

So, this raises a number of questions; how much wealth do I need to retire on $56,000 a year? How do I go about this? Do I salary sacrifice into superannuation? Should I buy an investment property? Are shares a good idea?

The answer doesn’t lie so much in what actions you take, when you take them is more important. Building wealth takes time. If you buy quality assets at the right price and hold on to them for the longer term, you will increase your wealth.

Consider this example:

Fred wants to retire at 65 and wants $56,000 every year until he dies. Today, a 65 year old male has a life expectancy of around 19 years. If Fred relies on his superannuation for income during retirement, he will need to accumulate $795,000* before he stops working, around $695,000 more than the average above.

*Assumptions: 6% pa return, 3% pa inflation, 3% pa indexation, monthly income payments, no tax payable.

Fred can maximise the chances of achieving his goal by starting to invest early. This would leave plenty of time for his investments to grow.

Time is money they say.

To find out how much you will need to retire, contact Financial Planning Expert.


This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial and tax advice prior to acting on this information.Opinions constitute our judgement at the time of issue and are subject to change. Financial Planning Expert Pty Ltd does not give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document.
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    Financial Planning Expert is an independent financial planning business based in Melbourne. We provide genuinely independent and conflict free financial advice. We’re experts in self-managed superannuation fund (SMSFs) advice and strategy, retirement planning, property and share investment advice, life and income protection insurance, tax planning, asset protection, estate planning and advice for Australian expatriates.