Calculating how much you need to save for Retirement

Calculating how much you need to save for your retirement is an essential part of planning for the future, whether you dream of sailing around the Whitsundays on a luxury yacht, exploring the Australian outback in your motorhome, or just pottering around your garden with your cat.

But how big does your nest egg need to be? And what’s the best way to budget for such a long-term investment? We take a look…

1. Saving for your lifestyle

The first step in calculating how much you need to save for your retirement is to consider what sort of lifestyle you would like to lead. With most Australians living longer than ever before, retirement now often involves more than just saving for aged care, medical bills, and life insurance. Many retirees are choosing to travel the world, take up a new hobby, and use their free time to do all of the things that they dreamed about doing during their working life. Some of the things you might like to consider include:

Where will you live (e.g. nursing home, with your family, overseas)?
What utilities will you require (e.g. internet, water, electricity, access to aged care and medical facilities)?
How often would you like to eat out at restaurants and enjoy other leisure activities like visiting the cinemas, playing bingo, and watching the ballet?
Will you have a car and how often will you use it?
What sort of budget would you like to have for extra expenses like birthday gifts, haircuts, new clothing, and home improvement?
How often would you like to take vacations and holidays?
What sort of health insurance would you like to have, and who will pay for your funeral and end-of-life expenses?

2. Creating a financial plan

After you’ve roughly worked out how you would like to spend your money during your retirement, it’s important to add up all of your costs and create a financial plan. You can do this many ways, but one of the easiest and simplest solutions for managing your income in your retirement is to use a program like Financial Mappers.

With Financial Mappers, you can easily calculate how much money you are likely to need each year of your retirement and work out how you would like to manage your assets in the future. The program allows you to budget for things like replacing your car or painting your house and consider what might happen to your nest egg if the share market crashed or your super fund suffered a big drop in value. Financial Mappers can help you determine what strategies will help your retirement assets last the longest.

3. Monitor your progress

Although your financial plan can help guide you in the right direction and keep you on track, it’s important to continually monitor your progress and review your retirement strategy regularly. Your retirement goals and financial circumstances (e.g. new job, inheritance, unexpected expenses, etc.) will change frequently, and you will need to adjust your savings calculations accordingly.