The amount you need in retirement will depend on your situation. The easiest way to calculate the annual income you will need is to make a list of your current expenditure. Once you have created this list, go through it and cross off the expenses that will cease when you retire. Then, add in any new expenses such as travel and other activities.
Be realistic. Many women are surprised at just how much income they are likely to need in retirement. For most women this ranges between 50 and 75 per cent of your current income. The amount will be less if you (or you and your partner) own your own home.
Superannuation
Everyone who earns more than $450 a month is entitled to employer superannuation contributions of nine per cent of their salary under the superannuation guarantee legislation. This will be available to you on retirement so it’s very important you ensure your employer is paying this and that you receive regular reports from your superannuation fund.
Age Pension
Depending on your income and assets, you may be eligible for a whole or partial Age Pension payment. Contrary to popular belief, the Federal Government’s Age Pension is likely to remain a safety net for those who have low retirement savings.
While the Age Pension alone may not be sufficient to provide the income you need, when combined with income from other investments, the pension can help to fill the gap. Currently, the full pension for a single person is $476.30 per fortnight and, for couples, $397.70 per person.
The level of Age Pension you receive will be determined by an income and assets test and how your overall affairs are structured. Using allocated pension or annuity investment products in retirement can often increase your Age Pension entitlements.
What if the Age Pension isn’t enough?
If you qualify for the Age Pension and feel that is sufficient to live on then you may not need to worry about having income from other sources. But if the Age Pension is insufficient, or you are not eligible, then you will need to build up an investment pool that can provide your retirement income.
The size of the investment pool you need will be determined by your retirement income needs and the type of investments. This would need to be individually calculated.
The following table shows the lump sum you would need today to generate different incomes.
| Desired annual income in retirement | Lump sum today’s value |
| $10,000 | $200,000 |
| $20,000 | $400,000 |
| $30,000 | $600,000 |
| $40,000 | $800,000 |