With some prep work now, rising inflation and the increased cost of living don’t need to negatively impact your confidence in having sufficient retirement funds later (a common worry, according to our recent Challenger Retirement Happiness Index). Let’s look at how you can be prepared and make the change with ease.

Start with a ballpark estimate

For those intending to retire, one of the main factors that will influence their decision about when to do so is financial stability. Understanding both the expectations you have around your retirement lifestyle and how long it will need to be maintained is key to setting the stage for this security. 

Looking at the Retirement Standard from The Association of Superannuation Funds in Australia will help you set a benchmark, as it estimates the total annual budget for either a comfortable or modest lifestyle for retired singles and couples. Figures are updated each quarter in line with the changing costs of living in retirement and include detailed budget breakdowns for all sorts of living costs. What they don’t include is rent or home loan payments. Each estimate assumes an individual or couple live in their own home, mortgage free. 

Source: ASFA Retirement Standard, March quarter 2024

Understand your lifestyle goals

It’s no coincidence that the Retirement Standard  distinguishes between a comfortable and modest lifestyle in retirement. As you can see from the table below, there is a tangible difference. 

Source: https://www.superannuation.asn.au/wp-content/uploads/2023/10/ASFA-Retirement_Standard-Summary-2023.pdf

Understanding your personal preferences and goals in how you want to live after you give up work, and then comparing this to what you can afford, will help close any gaps between expectations versus reality. The ideal retirement will look different for everyone, so it’s important to customise your plans to suit your preferences: maybe annual holidays are important to you, or you have a hobby that you can’t live without. 

Our online retirement spending planners for singles and couples   can help you figure out how much you may ‘need’ in retirement (essential spending) and how much you ‘want’ (discretionary spending). 

Consider how much you can afford to spend

When financial stability is the goal, having a handle on a sustainable budget is crucial. A spending level is considered ‘safe’ if the household has a high degree of confidence that they can continue spending their desired amount for at least as long as they are expected to live. 

Challenger’s Retirement Illustrator Model tested 2,000 simulations to calculate the degree of confidence that your savings balance could support the level of spending you’d like. 

To see how your retirement dreams could stack up to reality, speak to your financial adviser, call us on 13 35 66 (from 8am to 6pm AEST, Monday to Friday) or email us at info@challenger.com.au.