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How much do i need to retire? Retirement Planning

Blog | How much do I need in retirement?

Glenn Fairbairn
Director/Private Client Adviser
21 Jan 2021

As a financial adviser, I get asked a lot of questions about retirement, but by far the most common question is: How much do I need to live a comfortable retirement?

Unfortunately, the answer is not an easy one given that the meaning of a ‘comfortable’ retirement can vary from one person to the next. I have some clients who can quite comfortably meet their needs with $40,000 per annum, while others need more than $150,000 per annum.

The Association of Superannuation Funds of Australia (ASFA) benchmarks the annual budget needed by Australians to fund either a comfortable or modest standard of living in retirement.

ASFA considers a modest retirement lifestyle as better than the Age Pension, but still only able to afford basic activities. A comfortable retirement lifestyle enables a retiree to be involved in a broad range of leisure and recreational activities and to have a good standard of living through the purchase of such things as, household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, and domestic and occasionally international holiday travel.

Although the ASFA Standard is a great guide, I would prefer a more tailored approach to determine how much my clients need to meet their specific objectives in retirement. The role of a good financial adviser is to help their clients identify what their ideal retirement looks like. Questions to consider include:

  • How much do you need each year to maintain your household?
  • Do you plan to travel in retirement and if so, what does travel look like i.e., domestic/international, business class/economy, 5-star hotels/staying with family?
  • How will you fill in your time i.e., do you enjoy maintaining your garden, or do you prefer fine dining?
  • What do you spend your money on now and will this continue in retirement?

Answers to the above questions should provide you with the magic figure of how much you need each year to meet ‘your’ definition of a comfortable retirement.

So now what?

Now it’s time to reverse engineer and calculate what investment balance is required to maintain this level of income throughout your retirement.

At Hewison Private Wealth, through our direct investment approach, we have been able to generate investment income (net of fees) of around 4% per annum for our clients.

Therefore, to meet our client’s objectives, without drawing down on the capital, we generally prescribe the “Multiply by 25” rule. Put simply, you multiply how much you will need in retirement each year by 25.

For example, if you need $40,000 per annum, you need $1 million dollars in your retirement. ($40,000 x 25 equals $1 million.) If you want $50,000 per annum, you need $1.25 million.

Relying on income and not capital growth to meet your requirements in retirement, minimises the impact of market downturns and protects your capital base. The last thing you want to do in retirement is draw down on capital when markets are experiencing a downturn.

Once your retirement lump sum objective is determined an adviser can then create a financial roadmap to advise what course of action is required over the remainder of your working life to ensure that you can have the retirement that you have always dreamed of.



Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.