Retirement expectations vs reality
February 17, 2019
A new study has found that people globally expect to spend an average of 34% of their retirement income on basic living expenses but the reality for retirees is that they require nearly 50%*.
The Schroders Global Investor Study 2018 surveyed over 22,000 investors from 30 countries and found that 15 per cent of retirees globally do not have income to retirement comfortably.
So how can you be realistic about the amount of money you’ll need?
Don’t under-estimate retirement spending
The report found that Australians who have not yet retired expect to spend 39 per cent of their retirement income on living expenses, when in reality retired people surveyed are spending 58 per cent.
Being realistic about the figures you’ll spend on things like heating, cooling, food, water, electricity, clothing and transport will help you set a more appropriate savings goal.
Adequate vs comfortable
Are you happy just getting by in retirement or do you have aspirations of overseas holidays and eating out regularly or even things like driving a new car vs used? The amount of extra money you will need to contribute to super will depend on how long you’ll live, what type of lifestyle you want and also future medical costs.
The Association of Superannuation Funds Australia (ASFA) benchmarks the annual budget needed by Australians to fund either a modest or comfortable retirement+. Both budgets assume the retiree own their own home outright and are relatively healthy.
You can see the difference between a modest or comfortable retirement for a single person in the table below
| Modest | Comfortable |
| $27,595 per annum | $43,200 per annum |
| No budget for home improvements | Replace kitchen and bathroom over 20 years |
| Need to watch utility costs | Can run air conditioning |
| Take out and occasional cheap restaurants | Restaurant dining, good range and quality of food |
| Reasonable clothes | Good clothes |
| One holiday in Australia or a few short breaks | Domestic and occasional overseas holidays |
| Basic private health insurance | Top level private health insurance |
Look at your current income
ASIC MoneySmart suggest another good rule of thumb is to assume you need two-thirds of your income before you retire to maintain the same standard of living in retirement. This estimate is only suitable for above average income earners^.
Don’t fret if you’re tracking behind
It’s never too late to contribute to super and every dollar counts. It’s important to understand that even if you don’t have a large super balance, anything you do have can help top up the Age Pension and give you a better lifestyle in retirement.
Need help?
When it comes to super, education is key. If you need help understanding how your super is tracking or how you can boost your super, you call speak to TelstraSuper by calling 1300 033 166 Monday – Friday between 8.30am and 5.30pm (Melbourne time). There’s no charge for advice about your TelstraSuper account – it’s part of your membership.
* https://www.schroders.com/en/media-relations/newsroom/all_news_releases/schroders-global-investor-study-2018-people-significantly-underestimating-cost-of-living-in-retirement/+ https://www.superannuation.asn.au/resources/retirement-standard
^ https://www.moneysmart.gov.au/superannuation-and-retirement/how-super-works/super-contributions/how-much-is-enough