One of the toughest and probably one of the more crucial questions to answer when looking at your financial plan for the future is how much will I need / want to live on in retirement?
One approach is to estimate that you will require 75% of your pre-retirement income in retirement. There in itself is another problem, what will my pre-retirement income be?
To assist with the process of defining what will be enough, the Association of Superannuation Funds of Australia in conjunction with Westpac publish a report every 3 months looking at what is the cost of a modest and a comfortable retirement. The latest results to the end of June 2009 and suggests that costs in retirement have risen 0.7% over the June quarter for a couple wanting to live comfortably. As a result, in general, a couple looking to achieve a comfortable retirement needs to spend $51,132 a year, while those seeking a ?modest' retirement lifestyle need to spend $27,695 a year.
These numbers differ depending on your location with Perth the most expensive city followed by Brisbane and Melbourne the least expensive.
An interesting comment in the report is that the cost of living in retirement has risen more than the inflation figures across the board as explained by this statement:
"This is because retiree households on average have somewhat different spending patterns to the rest of the population. Along with generally owning their own home outright (so cost increases for housing and financial services are less important for retirees), they don't tend to spend much on education services. In contrast, food, health, transportation and recreation spending form a large part of retiree budgets."
As with anything financial, these numbers are useful starting points but your own specific requirements will be different depending on your plans. To see the media release and supporting data please click on the following link -