As you start to plan your retirement, it’s good to know that you may not need as much as you think to maintain your lifestyle. And there are things you can do now to make sure your money lasts as long as you need it to.
Find out more in these case studies.
Annie works part-time as a teacher and earns $80,000 before tax.
Her take home (or after-tax) pay is about $62,000 a year - after paying for $18,000 income tax and the Medicare levy. She is also paying off her apartment, with mortgage payments for the year at $15,000. Annie wants to pay off her mortgage before she retires, which she plans to do at 67.
Annie also calculates that her daily living expenses are likely to go down by about $4,000 a year when she retires, as she doesn’t need to take public transport to work, and her kids are likely to be living on their own, which will reduce her food and utility expenses. Taking all these factors into account, she estimates that she will only need about $43,000 a year in retirement to maintain her current lifestyle.
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| Work out how much income Annie need in retirement* | Per year |
|---|---|
| Before-tax income | $80,000 |
| Less income tax | $18,000 |
| Less mortgage payments | $15,000 |
| Less reduced expenses | $4,000 |
| Income needed in retirement | $43,000 |
*Based on 2021/2022 income tax rates
Annie will be eligible for a part Government Age Pension of $16,000 per year when she retires. This means she'll only need to withdraw $27, 000 to fund her retirement income of $43,000.
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| Annie’s income in retirement per year |
$43,000 |
|
| Less Government Age Pension | $16,000 | |
| Income Annie needs to withdraw from her super each year | $27,000 |
Work out how much you can confidently withdraw in retirement
The age you choose to retire could make a big difference to how long your super will last.
Aware Super members Charlie (aged 60) and Beth (aged 59) are planning to retire in 3 years’ time. Charlie’s super balance is currently $200,000 and Beth’s is $150,000.
Their first step is to work out how much they plan to spend in retirement. Their combined income is currently around $107,000 after tax and they use most of this to fund their current lifestyle. Charlie and Beth now discuss how their spending might change once they retire.
Charlie and Beth will have paid off their mortgage, which will reduce their expenses by $30,000 a year. They work out that their other living expenses are also likely to fall by $12,000. So they decide they could comfortably live on $65,000 a year in retirement.
If they continue with the current retirement plan, they’ll likely run out of super 13 years after they retire. This means when Charlie is 76 and Beth is 75, their only income will be the Government Age Pension. Their combined pension will only be about $38,000 per year - a lot less than the $65,000 they have budgeted for.
Charlie and Beth decide to talk to a financial planner at Aware Super. Following their planner’s recommendations, they decide to do two things:
Charlie’s and Beth’s retirement savings should now last around 30 years after they retire, so they can now fund their lifestyle into their mid-90s.
Everyone’s situation is different, and that’s where Aware Super can help. We have resources to support you online or over the phone. You can also book a free appointment with one of our financial planners. The sooner you get started the better off you’ll be.
Assumptions and disclaimers:
Join our experts as they break down super and finances into easy-to-understand topics through our live webinar education series.
A financial planner can work through complex financial matters and help you create the right strategies to achieve your financial goals in retirement. They’ll explain any next steps, fees and charges before progressing.
You may be eligible for the Government Age Pension when you retire to help fund your life in retirement.
