How much is “enough” for retirement?

Have you ever asked yourself the question, “How much do I actually need to retire?”. It’s a question almost every client asks us in one form or another and the truth is there is no one-size-fits-all answer.

Although guidance figures certainly exist and can be a useful starting point. At Hewison Private Wealth, our approach starts by understanding where you want to be and work backwards from there, building a plan that fits your life.

The ASFA Retirement Benchmark: A Useful Starting Point

The ASFA Retirement Standard is Australia’s benchmark guide to how much you need to spend in retirement to support a modest or comfortable lifestyle. It is a well-researched and widely used reference point, updated quarterly to reflect real-world costs. For context, a comfortable retirement is currently benchmarked at $78,566 per annum for a couple and $55,923 per annum for singles (ASFA, 2024).

These of course are guidelines only, built on a set of standard assumptions around home ownership, health, Age Pension support and retirement age which positions it as a starting point rather than a personal figure. This is where a financial adviser can provide value by refining that figure into one that reflects your own situation and goals.

A Different Question

What does your ideal retirement lifestyle look like? Travelling more, taking up a new hobby, spending more time with family, these are the questions worth asking. This vision becomes the backbone of your retirement number, and this can certainly change. The idea is to think first about what will bring you joy and fulfilment in your retirement years, then ask what income is required to support that lifestyle.

For some, it can be hard to know where to begin, particularly if retirement feels a long way away. Although, the sooner you start thinking about it, the sooner you can get a plan in place.

Living Off Income, Not Growth

Starting with your desired retirement lifestyle and the income you require, we then calculate the portfolio needed to sustainably generate that income.

A portfolio will typically hold a combination of income and growth assets. Income assets provide a reliable and stable income stream, while growth assets provide potential for capital growth, helping to offset the effects of inflation over time.

The objective is to live off the income generated within the portfolio, rather than growth, which is not as predictable and can fluctuate with market movements. Relying on growth to fund income needs risks being forced to sell in a downturn. Living off income while preserving the long-term sustainability of your portfolio is central to retirement planning.

In practice, we typically apply a target income rate of around 5% of the portfolio per annum. If the goal is to fund $75,000 per annum in retirement (today’s dollars), that rate implies a target portfolio of approximately $1.5 million, a figure built from your lifestyle and income needs.

It is this process that shapes how we work with clients at Hewison Private Wealth. We build a plan around their real life, their individual income needs, their flexibility, and their goals, with the freedom to live well today and into the future.

Understanding the lifestyle you want is the first step towards building a plan to support it. Speak with a Hewison adviser today and start the conversation.

ASFA, 2024: https://www.superannuation.asn.au/consumers/retirement-standard/