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How much money do I need to retire on the Sunshine Coast?

How much money do I need to retire on the Sunshine Coast blog by Mike Beal Retirement Planner

How much money do I need to retire on the Sunshine Coast? Ahhh yes, good question! This is one of the first retirement planning questions I ask my clients. The thing that concerns me the most is the number of people that know the answer? Very few! 

A rough guide to “how much money do I need to retire on the Sunshine Coast”

As a rough guide, 70% of your pre-retirement income may be an appropriate target figure as you no longer have a mortgage (hopefully) and you don’t pay tax (assuming you can get your money into super).

So, once I know the income you need I can work backwards to figure out what your ‘Sunshine Coast Retirement Planning Magic Number’ is

For example, let’s say you’re earning $100,000 p.a. pre-retirement, let’s go for a figure of 70%, or $70,000 p.a. as your retirement planning income goal during your pending retirement on the Sunshine Coast.

Do you want to maintain your capital or leave it intact?

Another variable will be whether you want to maintain your capital or leave the capital intact.

Obviously, you will need less if you are not intending to leave the capital intact because part of the income you are generating is from consuming the capital. 

Here are some figures you would need as a lump sum, assuming you want to either maintain the capital vs depleting the capital to nil. For the depletion scenario, I’ll assume the time-frame is 25 years. For both scenarios, I’ll assume a reasonably conservative 4% p.a. return.

Compare this to the cost of an industry fund or low-cost retail fund at say, 1% p.a. ($7,500 p.a.) then it does not make much sense to maintain the SMSF if it costs $11,500 p.a. more to manage. That’s not even factoring in the time it takes for you to maintain and manage the SMSF. So, why have the hassle and time-costs associated with the SMSF? 

  $50,000 $60,000 $70,000 $80,000 $90,000 $100,000
Maintain
capital
$1,250,000 $1,500,000 $1,750,000 $2,000,000 $2,250,000 $2,500,000
Deplete to nil, 25 yrs $781,104 $937,325 $1,093,546 $1,249,766 $1,405,987 $1,562,208

So, for our scenario, where my imaginary Sunshine Coast Financial Planner client requires $70k p.a., let’s say they have 10 years until they retire at 65. They currently have say, $500k in super. If we assume an earnings rate of 5% p.a. for the next ten years the $500k would grow to $814k leaving a shortfall of $936k. 

What if your employer is contributing?

However, their employer is contributing 9.5% or $9.5k p.a. (9.5% of $100k salary), this would add $119k, reducing the savings shortfall to $695k. 

To save this amount they would require additional savings of $55k p.a. (a little prohibitive on a $100k p.a. salary) although this assumes they maintain capital during retirement, if they deplete the capital to nil during their retirement over 25 years, their target goal is $1.093m rather than $1.75m – this will reduce the required savings level to a more manageable $12.7k p.a., which may well be achievable. 

What if you fall between the two scenarios?

Also, many people may fall between the two scenarios whereby, although part of the capital would be eroded during retirement there is likely to be a lump sum left over.

For further analysis of how much income you might need to retire on, consider research by ASFA (Association of Super Funds of Australia, www.asfa.com.au).  According to ASFA, for couples wanting a ‘comfortable’ retirement you would require an income of $61,522 p.a.  (June Quarter, 2019).  Or a tad over $40 p.a. for a ‘modest’ lifestyle. 

For a single person wanting a ‘comfortable’ retirement, you’re looking at almost the same as the ‘modest’ couple’s retirement, around $43k p.a.  And finally, $27k p.a. for a ‘modest’ single person’s retirement.

The difference between comfortable and modest retirement

What’s the difference between ‘comfortable’ and ‘modest’? Here’s a few of the categories that have some of the larger differences.

  Comfortable ($ per week) Modest ($ per week)
Groceries $204 $168
Heath Services $191 $96 (no private health ins)
Holidays $95 $47 (no overseas holidays)
Dining, cinema, takeaways, alcohol $161 $92
Transport/Car $159 $96 (higher quality vehicle)

You may also be entitled to the Government Age Pension thus reducing the required amount of capital during retirement. The maximum age pension is $36,301 p.a. for a couple who own their own home or $24,081 p.a. for a single homeowner.

What if I have assets?

You can have assets, excluding the family home, of $394,500 for a couple and $263,250 for a single and still receive the full government age pension, the Government Age Pension is gradually decreased until you have assets of $860,000 (couple with home) or $572,000 (single with home) at which time it is phased out completely (note that an income test also applies).

If you would like a personal analysis and be able to ask a professional financial planner “how much money do I need to retire on the Sunshine Coast?” then contact Mike Beal your Sunshine Coast Retirement Planning Expert. Mike is a financial planner based in Maroochydore but can also see you at your home. Whether you need a financial planner in Caloundra, Noosa, Buderim, or Kawana just give Mike Beal Financial Planning a call on 0409 799 279 or emailmike@mikebealfp.com.au

Important note: While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) make no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided.