One of the best ways to plan for your retirement is to have an idea of your likely future expenses. After all, no one wants to live solely on a government pension, not if they have any other options. Creating those options however, means that you need to have a financial goal in mind.

To this end, let’s take a look at some of the expenses you might not have considered for your retirement, but first let’s consider how much the government thinks you need in your retirement.

What does the government consider a comfortable retirement?

The ASFA Retirement Standard is the amount of money that the government predicts you will need to live a modest or a comfortable lifestyle in retirement. These figures are updated quarterly and take into account inflation, but they aren’t big numbers. In fact, singles are expected to live a modest lifestyle on $27,425 a year and comfortable lifestyle on $42,953; couples on $39,442 and $60,604 respectively.

The problem is that you might not consider that $39,422 lends itself well to a comfortable lifestyle for a couple! After all, this money needs to pay for all your essential living expenses, as well as holidays and upgrading your car or at least keeping it on the road. Another consideration is that these figures are based on the fact that you own your home and are in good health.

What are your costs in retirement?

If you will still be paying a mortgage or rent in your retirement, then this will have a big impact on your lifestyle. However, whilst everyone’s idea of a moderate or comfortable lifestyle is different, when you consider the rising costs of food, energy, council rates and healthcare, your retirement might no longer look bright and shiny.

Some people can expect high medical bills when they retire, simply due to an existing illness, so these expenses will need to be factored into their budget. The fact that we are living longer also means that we need more money to support ourselves for longer, as the alternative is a significant drop in lifestyle. Not forgetting that as we age, we are more likely to need medical care and the money for these services needs to come from somewhere!

For many of us, we look forward to retiring and travelling the world, but these expenses place a big demand on our budget, which if we rely on the pension isn’t going to get us very far. So you not only need to consider your medical bills and holiday expenses as additional costs in your retirement, but what about leaving money to your children?

If you have always wanted to leave your children a substantial inheritance, then you need to factor this into your retirement lifestyle as well.

Whilst we can hope that the aged pension continues to keep pace with inflation, if you need to rely solely on a pension with little or no superannuation, a moderate lifestyle may be the best you can afford. However, if you haven’t retired yet, it might be wise to consider making additional payments to your superannuation so that you can, at least, have a comfortable lifestyle in your later years.

For help planning for your retirement, call me (Amanda McCall) on 07 3356 6929 or book your appointment online.

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