The total amount required to fund your retirement depends on a number of factors. These are:
- Annual dollar amount needed to cover desired living expenses;
- Make-up of your portfolio of investments and the long-term returns on that portfolio;
- Life expectancy; and
- Inflation rate (the amount drawn should keep pace with inflation).
The following table takes all of the above factors into account and calculates the amount you should have in order to fulfil your lifestyle needs.
| Portfolio | Cash | Defensive | Conservative | Balanced | Growth | High Growth | High Growth + |
| Starting Amount | 2.90% | 4.50% | 5.10% | 5.80% | 6.60% | 7.10% | 7.50% |
| $30,000 | $695,855 | $574,704 | $537,000 | $497,409 | $457,232 | $434,542 | $417,595 |
| $35,000 | $811,831 | $670,488 | $626,500 | $580,310 | $533,437 | $506,965 | $487,194 |
| $40,000 | $927,807 | $766,272 | $716,000 | $663,211 | $609,642 | $579,389 | $556,794 |
| $45,000 | $1,043,783 | $862,056 | $805,500 | $746,113 | $685,847 | $651,812 | $626,393 |
| $50,000 | $1,159,759 | $957,840 | $895,001 | $829,014 | $762,053 | $724,236 | $695,992 |
| $55,000 | $1,275,735 | $1,053,624 | $984,501 | $911,916 | $838,258 | $796,660 | $765,591 |
| $60,000 | $1,391,711 | $1,149,408 | $1,074,001 | $994,817 | $914,463 | $869,083 | $835,190 |
| $65,000 | $1,507,687 | $1,245,192 | $1,163,501 | $1,077,719 | $990,668 | $941,507 | $904,790 |
| $70,000 | $1,623,663 | $1,340,976 | $1,253,001 | $1,160,620 | $1,066,874 | $1,013,931 | $974,389 |
| $75,000 | $1,739,639 | $1,436,760 | $1,342,501 | $1,243,521 | $1,143,079 | $1,086,354 | $1,043,988 |
| $80,000 | $1,855,615 | $1,532,544 | $1,432,001 | $1,326,423 | $1,219,284 | $1,158,778 | $1,113,587 |
| $85,000 | $1,971,591 | $1,628,328 | $1,521,501 | $1,409,324 | $1,295,490 | $1,231,201 | $ 1,183,186 |
| $90,000 | $2,087,566 | $1,724,112 | $1,611,001 | $1,492,226 | $1,371,695 | $1,303,625 | $1,252,786 |
| $95,000 | $2,203,542 | $1,819,896 | $1,700,501 | $1,575,127 | $1,447,900 | $1,376,049 | $1,322,385 |
| $100,000 | $2,319,518 | $1,915,680 | $1,790,001 | $1,658,029 | $1,524,105 | $1,448,472 | $1,391,984 |
| $105,000 | $2,435,494 | $2,011,464 | $1,879,501 | $1,740,930 | $1,600,311 | $1,520,896 | $1,461,583 |
| $110,000 | $2,551,470 | $2,107,248 | $1,969,001 | $1,823,831 | $1,676,516 | $1,593,319 | $1,531,182 |
| $115,000 | $2,667,446 | $2,203,032 | $2,058,501 | $1,906,733 | $1,752,721 | $1,665,743 | $1,600,782 |
| $120,000 | $2,783,422 | $2,298,816 | $2,148,001 | $1,989,634 | $1,828,926 | $1,738,167 | $1,670,381 |
| $125,000 | $2,899,398 | $2,394,600 | $2,237,501 | $2,072,536 | $1,905,132 | $1,810,590 | $1,739,980 |
| $130,000 | $3,015,374 | $2,490,384 | $2,327,001 | $2,155,437 | $1,981,337 | $1,883,014 | $1,809,579 |
| $135,000 | $3,131,350 | $2,586,168 | $2,416,501 | $2,238,338 | $2,057,542 | $1,955,437 | $1,879,178 |
| $140,000 | $3,247,326 | $2,681,953 | $2,506,001 | $2,321,240 | $2,133,748 | $2,027,861 | $1,948,778 |
| $145,000 | $3,363,302 | $2,777,737 | $2,595,502 | $2,404,141 | $2,209,953 | $2,100,285 | $2,018,377 |
| $150,000 | $3,479,277 | $2,873,521 | $2,685,002 | $2,487,043 | $2,286,158 | $2,172,708 | $2,087,976 |
Assumptions:
- Inflation rate of 2.5% per annum. The starting payment is increased by this amount every year;
- Payment period – 25 years;
- The portfolio into which the initial amount is invested will remain the same for the entire 25 year period;
- Incidence of income or other taxes has not been considered;
- The annual amount required is in today’s dollars. The amount you need should be adjusted for inflation for the years before your retirement. For example, if you need $50,000 in today’s dollars and retiring in 5 years’ time, then the annual amount required should be increased by the accrued inflation for the 5 years.
The left hand column contains the starting payment of your 25 year retirement period that requires funding. This amount is increased every year by the rate of inflation (assumed to be 2.5% per annum). The other columns contain the various portfolio types (Cash, Defensive, Conservative, Balances, Growth, High Growth and High Growth Plus) and their estimated returns.
You will note that the more conservative the investment portfolio, the lower are the expected returns and the higher amount that is needed to fund the retirement. Conversely, the more aggressive the portfolio (more growth oriented portfolio includes more growth assets such as domestic shares, property, international shares) the lower starting investment amount is required. However, a more growth oriented portfolio includes more investments in listed securities and, therefore, is much more volatile (in terms on investment value). As a result losses (reduced values) may be experienced at times. Please refer to ASIC’s Moneysmart for expected portfolio returns and risk.
You should consult your financial adviser for a plan that takes into account your own personal circumstances.