01 Aug How Much Money Should You Have for Retirement?
MOST Australians recognise the need to set aside money for retirement. What’s not always clear is just how much cash is needed to support a pretty decent lifestyle in our retirement years. There really isn’t one single answer or amount to answer the question of how much we need to retire on because everyone has different living expenses and different goals.
An excellent starting point in ascertaining how much cash you need to be financially independent in retirement, is to work out and create an annual budget. It will most likely be more of an anticipated amount, but it will at least get you started and get you taking a more serious look at what retirement will look like for you.
You’ll need to think about things like traveling, hobbies, cars, eating out, entertainment, health, clothing, and pretty much as everything in between. If your plan is to own your house, be sure to include things like maintenance, insurance, and other costs associated with owning a home. If you choose to rent, then factor in the appropriate costs for that as well.
After you have figured out an annual sum to cover all of your outgoings, the next step will be to determine at what age you are financially capable of enjoying a good retirement. Let’s say you determined the amount you need to fund your retirement; anyone can use a simple calculation to figure out the approximate amount of funds a person would need to reach their retirement income goal.
To figure out an approximate retirement amount, just take the annual income you would like to have for retirement and multiply it by 17 if you plan to leave the workplace by the age of 55. If you plan to leave by age 60, then multiply your retirement goal by 15, and by 13 if you are planning to retire at 65.
As an illustration, let’s just say that you decided that you will need $50,000 a year to give you your preferred retirement lifestyle. By using the formula above, you will need approximately $850,000 in accumulated retirement funds. The later you retire, the lesser the amount. Again, these are just estimates to give you an idea, so those numbers could look a bit different for you.
Many retirement hopefuls most likely look at this amount and wonder how on earth they’ll ever put away that sort of cash. It can be done, but the trick will be to start as early as possible.
There are some useful online tools such as a calculator you can use at www.fido.gov.au to help you with your calculations and anyone trying to plan for retirement can find an abundance of tips and help for saving by looking at online articles, reading books and magazines, and even talking to a financial planner on the Sunshine Coast or an adviser in your area. Don’t wait any longer to start planning for the retirement of your dreams.