How much do I need for retirement?

Noel Whittaker
Noel Whittaker

“HOW much do I need to retire?” is the question everybody asks. Unfortunately there is no simple answer, for it  depends on many factors that include how long you will live and the state of you health.

A simple rule of thumb is 12 times your expected annual expenditure.  Therefore, if you believed you could spend $50,000 a year when you retire you should be aiming for total financial assets of $600,000. 

The sum you need to invest along the way depends on how soon you start and the rate of return you achieve.  For example, if a  21 year old wanted to retire at  65 with an income of $3 500 a week in today’s dollars, they would have to invest only $235 a month if the contributions were increased in line with inflation.   It’s a different matter for a person aged 40 as they don’t have time for compound interest to work its magic.  They would have to invest an indexed amount of $880 a month. 

That’s the effect of time; now consider the rate of return.  The calculations above assume an inflation rate of 3% and a net earning rate of 9%, which gives a real rate of 6%.  If the investor managed to achieve only inflation plus 4%, the figures change dramatically. The 21 year old would have to invest an indexed $523 a month while the 40 year old would have to invest $1471 a month. .

Fortunately, we still have a generous aged pension system.  If a couple had only $300,000 in financial assets in retirement they would be eligible for a combined aged pension of $26,416 a year.  This should be enough to make up the gap.

Noel Whittaker is a director of Whittaker Macnaught Pty Ltd. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. His email is

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