Anne Fuchs: Hello, and welcome to Super Insider, a podcast on all things investing, superannuation and retirement proudly brought to you by Australian Retirement Trust. I’m your host and my name is Anne Fuchs. Today we’re talking about how much money you will need in retirement. With me is Josh van Gestel, our Senior Manager of Education Delivery here at ART. Welcome, Josh.
Joshua van Gestel: Hello, Anne. Good to be back.
Anne: This is a very popular discussion point. Before we get into it, I want to remind all of our listeners and viewers that of course and you know this -- this is general advice and general information only and you will need to decide if this information is right for you. Australia is obsessed with this particular subject.
Josh: Yes, they are.
Anne: How much money do you need in retirement?
Josh: It is the million-dollar question, isn’t it?
Anne: Are you being a bit cheeky?
Josh: Yes, I fell right into that.
Anne: Talk to me.
Josh: I think that we love grabbing the headlines and saying you need a million dollars for retirement, or I think the most common question I get asked when I go around the country presenting to members and talking to members is, ‘Do I really need a million dollars?’ I’d like to actually say that the question is wrong.
Anne: In early 2025, Australian Retirement Trust did ask a lot of Australians what they thought their number was, and the average was a million dollars.
I’m not sure if people just were pulling that number out of the air.
Josh: I have a feeling that they were, and I also have a feeling that it tends to be what we hear in the media a lot; there is a lot of conversation often in the media about how much you need, and I think it’s just a nice big number.
Anne: One peak body within superannuation, ASFA, says, it’s about $600,000.
Josh: Yes, and there are different organisations out there that talk about numbers that you need for a comfortable retirement.
Anne: Which is why people are so interested in this.
Josh: Absolutely.
Anne: Because they’re confused.
Josh: Yes, absolutely.
Anne: They don’t know what the number is.
Josh: I think when it comes to ASFA they say for a comfortable retirement as an individual you’ll need about $600,000. For a couple, you’ll need probably a bit closer to $700,000.
Now, that comfortable retirement is going to be your super. You’re probably still going to be getting some money from the Age Pension, and although that gives you some direction, I think that the question people should be asking is, ‘How much do I need based on my circumstances and my situation?’, and they’re where the 5 rules are.
Anne: Because really that number, if you think about the job you have, if you’re working now, there isn’t an average salary that you need to have.
Josh: That’s right.
Anne: because everyone’s circumstances are different, and it’s exactly the same in retirement.
Josh: That’s exactly right.
Anne: Shall we go through the 5 ingredients or questions to work out your number?
Josh: The very first one is, I would suggest to you, at what age do you actually want to retire?
Anne: Do you have a number for yourself?
Josh: Myself?
Anne: Do you have a goal?
Josh: An age one?
Anne: Yes.
Josh: I’d say 60 is looking great.
Anne: Yes, 60 is my goal.
Josh: Maybe 55.
Anne: Ooh, look at you go!
Josh: I would love to be in my studio painting – any time now would be good.
Anne: Okay.
Josh: I think for me personally I’d love to be retiring in my early 60s, if I could, or at least transitioning in some way in my early 60s.
Anne: I do think that because of the COVID phenomenon, people are seeking more balance and to live a larger life earlier and not be so consumed with work up until the very end. It’s dialling back the hours and then having more time when you’re younger to be able to live life fully.
Josh: I think the other thing we see in research is very often people retire early not because they want to but because they’re forced to. Whether their body is shutting down on them, their health is…
Anne: Their back is killing them.
Josh: I think, to your point, we are seeing that people are actually going, ‘You know what? I want to take a bit more control.’ But the first question is, really, at what age do you maybe not want to retire, whether that’s actually going to be realistic or not; it’s maybe thinking about when do you think you could retire? Once you’ve got an idea of that, and especially if you’re in a couple as well, there’s 2 of you you’ve got to think about. If one person is very much younger than the other, are they going to go into retirement sooner?
Anne: A lot of couples retire together, though.
Josh: Yes. That’s important to consider. I don’t want to be too generalist, but often you will see that, if there’s a husband and a wife, it will be the wife that is younger. May already have a smaller super balance. There is going to be an impact if you make the decision to retire together and someone’s younger.
The first thing is to really think about the age that you want to retire.
Anne: Once you’ve worked out your number, the age, we then go to the next step in the formula to work out your number.
Josh: The next step is to actually think about how long do you think your retirement will go?
Anne: How long will you be on this earth before you depart it?
Josh: That’s right. I actually was talking to my 11yearold son about the mythical beast of the Cyclops. I don’t know if you knew about the Cyclops…
Anne: Goodness gracious! No.
Josh: But the Cyclops knew when they would die.
Anne: Are you actually making this up or is this a thing?
Josh: No, I’m serious.
Anne: Okay.
Josh: It’s a thing. Why I raise that is we obviously don’t know that. When it comes to you working out your number
Anne: It depends on your health circumstances, because some people do know when they’re going to depart the earth.
Josh: But I would say that for most of us we’d have a pretty good idea, based on our own health, based on life expectancy, based on our siblings …
Anne: Your grandparents, and so on.
Josh: …we’d have a pretty rough idea. In my case, I’ve got a father and a mother both in their 90s. I’ve got aunties and uncles well into their 90s. I pretty much should make the assumption that I’m going to have a very long life.
Anne: Yes.
Josh: When it comes to my 2 retirement numbers and when I think about that number of when I want to retire, I’ve got to realise that I’ve got to fund a pretty long journey as well. Those are probably the 2 main goalposts you’ve got to think about in regards to your age.
Anne: Then step No. 3?
Josh: Step No. 3 is where I actually think you then apply your own situation. Are you a couple or are you a single? The reason why that’s important, as you’d know, is if you’re a single person, you’re bearing all your costs yourself. So, utilities, groceries, cost of living all of that you’re carrying yourself, and your savings have to fund that. If you’re part of a couple, you can obviously pool that.
If you think back to the ASFA number that we talked about earlier, a single person needs about $600,000; a couple we’re saying only needs about $700,000 for a comfortable retirement. It’s because they share those common costs; they don’t need double the amount.
Anne: But it’s more than that, I guess, too. There’s do you live up on Magnetic Island up in beautiful North Queensland or are you living in Cremorne in the Lower North Shore of a beautiful part of Sydney.
Josh: That actually goes to No. 4, to think about those needs and wants. Okay? You are thinking around where your lifestyle is; what your expectations are.
Anne: Do you still have a mortgage?
Josh: Do you still have any debt, including a mortgage? We’re seeing a lot more people move into retirement with a mortgage or with carrying debt for their kids as well.
Anne: You may want to be downsizing.
Josh: Yes.
Anne: In the needs and wants, it’s really about what do you need in terms of a roof over your head; how much do you want to live life, in terms of are you happy with Brissie heading to the Broncos Leagues Club for a schnitty or are you flying first class to Paris to see the opera?
Josh: Absolutely. That goes back to what we talked about right at the beginning. There is no magic number. The magic number is something that you individually have to really work out.
Anne: This is why we would encourage people, as part of that Step 4, to actually know what your budget is. You need to know how much money you think you will need to live on and then work it out. There is your age that you want to retire.
Josh: Yes.
Anne: How long you think you’re going to live for. What was the third one? I’ve gone blank.
Josh: The third one is then thinking about your situation. Are you a couple or a single?
Anne: That’s right. Yes, and then the needs and wants.
Josh: And then the needs and wants.
Anne: And then the fifth one?
Josh: Is bringing that all together.
Anne: And adding it up.
Josh: When you want to think about, ‘Well, that’s a lot for me to try and visualise or determine’, that’s where a lot of super funds, like ART, have retirement forecasters or calculators on our website that will ask you for some of those details that we’ve actually just outlined.
Anne: And then we’ll give you a number.
Josh: We’ll give you an idea as to not just what the number is but allow you to think about, ‘Am I on track?’ That’s where step 5 is probably the most powerful. I’ve seen, Anne, probably 2 things. I’ve been privileged to actually educate people for about 15 years with ART. I remember very clearly presenting at a factory in Adelaide. I was doing a seminar about retirement, and this lady came up to me at the end she was in her early 70s crying. My heart went out to her. But they were actually tears of happiness.
Anne: Oh!
Josh: She realised in that moment that she could actually retire. A retirement forecaster, or that tool, actually gives you the ability to go, ‘Am I set up? Am I on track? Can I make this decision? Or do I actually need to do something?’
Anne: And this is the thing, and you may need some simple advice or some more complex advice associated with that because, ultimately, if the number that you get looks challenging for whatever reason, there are choices to be made about changing the age that you retire.
Josh: Yes.
Anne: How much you live on; the mix between the income account and the Age Pension.
Josh: If Paris for the opera might be a bit of a stretch, it might actually be going to Broncos Leagues.
Anne: Or QPAC here to the opera.
Josh: That’s right. But it’s also thinking about are there actually things that I can do, are there steps that I can take? As well as changing some of those numbers, do I change the way I’m invested? Do I look at putting extra money into my super where I can? How far out from retirement am I and what am I able to do about it? The sooner that you actually start to come up with that number, the better.
Anne: Josh, the reality is there are a lot of people who probably are in the situation where they don’t like the number, and that is just life.
Josh: Yes.
Anne: We know that the average 40-year-old, from research that we’ve done in the past, has about $90,000, where their balance really needs to be close to $150,000...
Josh: That’s right.
Anne: to meet that ASFA comfortable standard. So, there is a gap there. Let’s call it a $50,000 gap, for simplicity’s sake. So, that’s okay. That’s fine. Let’s do something about it. The earlier you can think about what that number is, the younger you are, the fewer hard choices you need to make when you retire.
Josh: That’s what I often say; that as you get closer to retirement, working out that number, the levers you have to push and pull.
Anne: There is less to pull.
Josh: Yes, that’s right. Whereas if you do it younger, the smallest steps and smaller things have a big impact. But the other thing I would say, Anne, is that I think a lot of people work out that number far too late. Even people come into their 50s. I’m there; I know you’re not there yet. And I think almost bury their heads in the sand a bit because they think they’ve maybe lost the opportunity. I would actually challenge someone coming into their late 40s, into their early 50s to really think about this, because that last 10-15 years before retirement can be incredibly powerful.
Anne: We know that if you’re 51 and your cholesterol is too high, you’ve got a bit too much in terms of padding around you, and what have you, there are not many Australians that would go, ‘I’ll just accept that and put my head in the sand and do nothing about it.’ Most Australians I know would go, ‘I’m going to get on the cholesterol tablets. I’m going to do some walking’, but we don’t apply that same mindset to superannuation.
Josh: But do we actually go back to that opening comment? Is it because I’m seeing a headline that says I need a million dollars? That’s where I think it is important we change the conversation to say, ‘You may not need a million dollars. You need to work out your number. And then how do you get financially fit, with your analogy, to achieve that?’
Anne: I’m just extending this health analogy, but there is no perfect weight.
Josh: Yes.
Anne: It depends on your height. For our listeners and viewers, that analogy of what’s the right weight? What’s the right weight for you?
Josh: Yes.
Anne: If someone said, ‘perfect weight is 65’, most would just give up and go, ‘I’m not bothering’, which is what the million-dollar number is doing to people.
Josh: Exactly right.
Anne: The 5 steps let’s just say them one more time. Boom, boom, boom!
Josh: The goalposts: the age you want to aim for or that’s reasonable; how long you think you’ll be in retirement; are you a single or part of a couple, what is your situation?
Anne: That’s No. 4.
Josh: No. 5 is then thinking about, ‘How do I bring that together?’ So, using something like a forecaster, what am I aiming for and then what can I actually think to do about it?
Anne: We hope it’s been really helpful, this conversation, for our listeners and viewers, and that you take some action off the back of it, don’t we, Josh?
Josh: We absolutely do.
Anne: Tell your family and friends. If you are a bit older and you have some young people in your life that you care and love, and you want them to have a great retirement, give them a nudge and sit down with them with your iPad and get the calculator out and do it with them. Thank you so much for listening and viewing Super Insider. Subscribe, tell your family and friends, and we look forward to you joining us again soon.
This transcript has been edited for length and clarity.
