How much do you need to retire on $100,000 a year?
It’s a nice round number, isn’t it? Most of us would be quite comfortable living on $100,000 per year in retirement. It’s enough to cover a reasonably-high level of living expenses and enjoy a lot of travel – which is what retirement is all about, isn’t it?
You may think you need a bucket-load of money to retire on $100,000 a year; and you do need quite a bit. But I bet it’s not as much as you think.
How Much Do I Need to Retire on $100,000 a Year?
The amount of money you need to retire on $100,000 a year in Australia will depend on when you retire, whether you are a member of a couple (for Age Pension purposes) and whether or not you want to take into account the Age Pension or not.
In saying that, in this instance the Age Pension isn’t going to factor too much – maybe only in the very late years, as you’re going to need a level of assets that are higher than the upper-Age Pension asset limit threshold throughout the majority of retirement in order to fund $100,000 a year.
These calculations assume a net investment return (after fees and taxes) of 5% p.a. and inflation of 2.5% p.a. They also assume you are eligible for Age Pension payments.
|Retire at 60||Retire at 65||Retire at 60||Retire at 65|
|Money Lasts 20 years||$1.50M||$1.50M||$1.30M||$1.30M|
|Money Lasts 30 years||$2.10M||$2.05M||$1.95M||$1.90M|
|Money Lasts 40 years||$2.50M||$2.50M||$2.40M||$2.40M|
The table below shows how much you need to retire on $100,000 a year if you were not eligible for Age Pension payments. The amount is the same for both singles and couples and regardless of your retirement age, due to the Age Pension not being included. Again, the calculations assume a net investment return of 5% p.a. and inflation of 2.5% p.a.
|Retire on $100,000 per year|
|Money Lasts 20 years||$1.60M|
|Money Lasts 30 years||$2.15M|
|Money Lasts 40 years||$2.60M|
The calculations in the tables above were performed using this calculator and all of the associated assumptions.
How Much Do I Need to Retire Comfortably in Australia?
Most people won’t require a retirement income of $100,000 per year. In fact, the AFSA Retirement Standard study concluded the following lifestyle expenses for singles and couples aged around 65:
|Moderate Lifestyle||Comfortable Lifestyle|
|Expenses per year||$28,254||$40,829||$44,412||$62,828|
Source: AFSA Retirement Standard
|Modest Lifestyle||Comfortable Lifestyle|
|Super Balance at Retirement||$70,000||$70,000||$545,000||$640,000|
Source: AFSA Retirement Standard Summary
Ultimately, the amount you require at retirement to cover expenses will be determined by when you retire, the level of income you would like in retirement, any capital expenses in retirement and how much (if any) of a financial legacy you would like to leave behind.