Forman Financial Services

When Can You Afford To Retire?

Some people hope for the best rather than plan for the best. A little planning now could make a big difference at retirement.

Start with a ballpark calculation of your retirement needs. One rough rule of thumb is that you can retire comfortably on about 75% of your pre-retirement income. Another is that every $100,000 invested will provide a sustainable $3,500 per annum in income.

Say your salary is $60,000pa. This scenario suggests a retirement income of $45,000pa with $1,286,000 (today’s dollar value) in capital to support it. Of course, you could aim for less savings and run down your capital over time.

Do you need to save more?


We show in the table below savings that are needed to reach $100,000 in either 10, 20 or 30 years. If you need to save say $300,000, then treble the annual savings required.

Investment earning rate Annual savings rate in today’s dollars for each $100,000 in today’s dollars*
10 years 20 years 30 years
6% pa $7,157 pa $2,564 pa $1,194 pa
8% pa $6,391 pa $2,024 pa $818 pa
10% pa $5,704 pa $1,588 pa $553 pa

* The table assumes that the savings will keep up with inflation and ignores tax benefits,
tax costs and market volatility.

What about the Age Pension?


Your retirement planning will depend on the lifestyle you require, the savings you accumulate and the age at which you retire.

Some retirees expect to live well in the first years of their retirement and live solely on the age pension in their later years. Others expect to supplement their savings with an inheritance. Some expect to downsize their family home or redraw the capital in that home. But you have to recognise that the Age Pension is only intended to ensure you do not go hungry – on its own it certainly will not provide for a luxurious lifestyle.

Start thinking about your own retirement plans then talk to us about designing a long-term strategy to suit your needs… now, not later.

For a free subscription to our News Updates please click here