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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.

Case study 1: Why you may not need as much as you think when you retire

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
 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

Case study 2: How the age you choose to retire could affect how long your savings last

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.

How an Aware Super financial planner can help

Charlie and Beth decide to talk to a financial planner at Aware Super. Following their planner’s recommendations, they decide to do two things:

  1. They delay their retirement for three years until Charlie reaches age 65
  2. Once their mortgage is paid off (when Charlie is 63), they will salary sacrifice the $30,000 per year into super. This is the amount of their mortgage repayments, so the extra contributions won't affect their current lifestyle

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:

  • $80,000 per year salary for Charlie and $55,000 per year salary for Beth, indexed with AWOTE of 3% p.a.
  • Desired income in retirement is $65,000 p.a., indexed with CPI of 2.5% p.a.
  • Starting super balance Charlie $200,000 and Beth$150,000.
  • They have no other assets.
  • Based on income tax rates for financial year 2022.
  • Based on SG of 10% for 2021/22 and then each financial year by 0.5% until it reaches 12% on 1 July 2025 (where it will remain at 12%).
  • Salary Sacrifice contributions are assumed to increase in line with annual salary increase at AWOTE of 3.0% p.a.
  • Investment returns for accumulation are based on the Aware Super MySuper Life Cycle option, assumed to be CPI + 4% p.a. until age 55, reducing from CPI + 4% p.a. to CPI + 3% p.a. between the ages 55-65 (inclusive) and CPI + 3% p.a. from age 65 onwards.
  • Investment returns for retirement are based on the Balanced Growth (Pension) option, assumed to be CPI + 3.5% p.a.
  • Insurance premiums are assumed to be the average premium for an Aware Super member of the same age in financial year 2021, indexed with AWOTE of 3% p.a.
  • No other fees and earnings tax are modelled as investment returns are assumed to be net of all fees and tax.
  • This case study is for illustrative purposes only and is not intended to provide a forecast or guarantee on outcome.
  • The case study is based on current regulatory requirements and laws, including tax rates, which may be subject to change. Investment return assumptions are for illustrative purposes only. Actual returns year on year may be negative and may vary materially. If investment returns/inflation are higher or lower, outcomes will differ.

Where to next?

Attend a retirement webinar

Join our experts as they break down super and finances into easy-to-understand topics through our live webinar education series.

Speak to a financial planner

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.

Find out more about the Government Age Pension

You may be eligible for the Government Age Pension when you retire to help fund your life in retirement.