How Much Money Do I need to Retire on $100,000?
What is the minimum amount of money required to retire on $100,000?
Now that's a nice round figure? The majority of us would be happy with $100,000 per year in retirement. It's enough to cover daily living expenses and travel a fair bit - after all, isn't that what retirement is all about?
The amount of money required to retire on $100,000 per year in Australia largely depends on when you retire, if you are a member of a couple (for Age Pension purposes), and whether or not you would like to take the Age Pension into account.
In this instance, however, the Age Pension is unlikely to play a significant role in contributing towards this income - perhaps only in the very late years of life. This is because you'll require a level of assets significantly higher than the upper-Age Pension asset limit threshold for the majority of your retirement in order to fund $100,000 per year.
So let's examine a variety of retirement ages and the amount required to retire at each age in order to fund $100,000 in annual retirement expenses.
These calculations are based on an inflation rate of 2.5% per year and a net investment return (after fees and taxes) of 5% per year. Additionally, they presume you qualify for Age Pension benefits.
The table below illustrates what you would need to save in order to retire on $100,000 per year if you were not entitled to Age Pension benefits. Due to the Age Pension not being included, the sum is the same for singles and couples regardless of retirement age. Once more, the estimates are based on 5% annual net investment return and 2.5% annual inflation.
How Much Money Do I Need for a Comfortable Retirement in Australia?
Interestingly, the majority of people won't need an annual retirement income of $100,000. In actuality, the AFSA Retirement Standard study discovered the subsequent lifestyle costs for individuals and couples up to the age of 65:
Source: AFSA Retirement Standard
Source: AFSA Retirement Standard Summary
Finally, the amount you need to retire will be determined by when you retire, the level of income you want in retirement, any capital expenses in retirement, and how much (if any) of a financial legacy you want to leave behind. It's an empowering exercise to compare your living expenses today (excluding you loan costs) to gauge how much you'll need in retirement to meet your desired lifestyle.
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