How To Know Your Retirement Is On The Right Track?

When you are around half way through your working life, the thought of retirement may not really be front of mind for you, but ideally it should be something you are at least starting to think about.

Do you know how much you need to retire?

A lot is published about retirement needs, but to calculate it accurately takes some thought and must take in to account your personal situation.

The best way to do this is to start by identifying the amount of income you would like at retirement and work backwards to get a lump sum from there. So try and think about what you would want in the bank account each month, to provide for the retirement you desire. This provides a great starting position to know what lump sum you are targeting and gives you a goal to work towards for your investment strategy.

Even though retirement may still be some way off, you are in the driver’s seat to make a real impact on achieving the retirement you want for yourself, but the first important building block you need to put into place is imagining what retirement could look like. Have you given it any thought?

As a financial planner, I really enjoy helping people achieve clarity on this, because it gets to the core of what money is all about for them. What we are talking about after all, is how you choose to live for upwards of one third of your life in retirement; and the amount that you have in the bank to fund this time in your life, will have a meaningful impact on how flexible and free you feel.

In December 2016, the Association of Superannuation Funds of Australia (ASFA) came out with its annual median retirement income figures needed in Australia, which were:

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They define a modest lifestyle as better than simply being on the Age Pension, but still only able to afford basic activities, while a comfortable retirement lifestyle allows retirees to participate in a broad range of hobbies and have a good standard of living by being able to afford household goods, private health insurance, a decent car, good clothes etc.

In today’s dollars, could you see yourself retiring on any of these amounts?

As someone who is 43, I think they look a bit low, but what’s interesting is that when I reflect on what many of our clients and people I’ve met with over the years have said they need, I think that a figure around the ‘Comfortable’ lifestyle range is not unusual. Even ‘quite often’ for people who could afford more.

Some of the things you should have in place at this point in your life to get you organised and on target for a comfortable retirement that is on your terms include:

  1. Have a clear budget and savings plan
  2. Develop an investment strategy that gets your money working for you
  3. Embrace superannuation and start to grow it for your retirement
  4. Have a clear debt reduction strategy
  5. Have a well thought out risk management strategy

It is my experience that very few people are in the fortunate position that they do not have to make compromises, to achieve the quality of retirement that they want. Anecdotally, about 7 out of 10 of our clients make compromises and as a general statement I would say they are better off financially than average.

The reasons for this is varied but not limited by the fact that it quite often follows that if you earn more in your working life, you have an expectation of a higher income in retirement as well.

As an example, a 40 year old today, wanting to self fund their retirement on an income of $80k in today's dollars will need around $2,400,000, with a balanced investment spread to achieve it. 

Try it for yourself. Take the time now to review what you might need in retirement, to achieve the income that you want. Click here for our retirement income estimate calculator.

My best advice to you now is that if you want to be able to maintain the lifestyle you enjoy today, get your ducks lined up from here and steadily chip away with purpose at achieving the retirement you desire.

Knowing how you are travelling financially to this point, will determine what the best next step is for you, so if you don’t feel like some of the elements I’ve outlined above are being addressed as well as they could be at the moment, then start there.

Conversely if you are feeling in control and well positioned at this point, it is worth considering more complex options, including a Self Managed Super Fund (SMSF) for example or investing within a Trust or Company or simply refocusing your strategy to have lower risk to shore up your position.  


The content of this presentation is intended to be general information only and has been prepared without taking into account any person’s objectives, financial situation or needs. Each person should consider its appropriateness having regard to these matters or obtain relevant professional financial advice before making any financial decisions.  Examples are illustrative only. Each person should obtain any relevant professional financial, taxation and social security advice before making any financial decisions.