I’m Con and I work at AMP and I want to look at how much is enough to retire on. I’m going to give you a rule of thumb and point you to some great resources for getting help. The answer really depends on what kind of retirement you want. Like everyone I have dreams and goals in retirement. Mine involve Greek Islands and long hot summers. One thing I don’t think anyone wants is a retirement full of sacrifice and tight budgeting, when you’ve done that all your life. You really want to be in that position where you can draw on some super and relax and enjoy your retirement.
So to experience at least roughly the same kind of lifestyle you’ve had through your working life, there’s a rule of thumb to use. Here you calculate 65 percent of your final pre-retirement income and you multiply that by 20. Let’s say I’m about to retire at 60 and I’m earning $60,000 a year, and I want to live at about the standard I’m living now. I take 65 percent of that amount, so that would be $39,000 a year. The reason you might only need 65 percent is there’s a whole lot of income tax that you’re probably not paying on your retirement income. The mortgage is probably gone, the kids are out of your hair so no education cost and there’s probably one or 2 less cars that you need.
Now life expectancies are much higher these days so you’re probably going to need to budget for around 20 years. The rule of thumb says, in this case to keep my standard of living, I’ll need a lump sum amount of 20 times $39,000, so that’s $780,000. Obviously this doesn’t take into account your circumstances, so you’ll have to consider your own situation before making any financial decisions. Okay, so if I really want to make my retirement holidays in the Greek Islands a reality. I need to sit down, crunch the numbers and see how much money I’m going to need to get there. And that I’m putting enough money away to get there.
To help you with all that, there are lots of online tools you could probably use. The AMP Super Simulator will give you an idea on how much you need in retirement and how your tracking towards it. Our retirement simulator will look at how much you have and how long that it’s going to last, depending on your spending patterns. If you’re an AMP member then you can go one step further by using My Portfolio. It will simulate how your Superannuation is performing and tracking for you.
Now if you do your sum on the simulators and you see you’re going to fall short, don’t worry. You can find plenty of information here to help you learn how to maximize your savings before you wind down and relax.