How much do you need to retire?

Jeremy Cooper (Financial Review April 19th 2015) proposes that the focus upon the lump sum required to support a comfortable lifestyle in retirement is misplaced. Given the current low interest rates (which could persist for some time), $1M would only generate $33,177 pa, equivalent to the full age pension plus supplements for a couple aged 65. Alternatively, $666K would generate $22,365 pa for a single person.

Consequently, he suggests that something more like $2M would be required to provide a comfortable living standard over a couple’s lifetime, without taking on riskier investments or drawing down capital, either of which could potentially deplete savings and end up reducing one’s living standard.

Finally, he cautions the government to consider this issue before changing the tax regime for retirement savings, such as the prososed taxation of contributions and pension income which would also impact middle income earners.

 

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