Retirement. It’s a time to finally enjoy the fruits of your labour, but what does that actually look like? When planning for your golden years, you’ll often hear the terms “modest” and “comfortable” retirement. But what do these terms really mean, and what are the key differences?
Understanding the ASFA Retirement Standard
The Association of Superannuation Funds of Australia (ASFA) provides a helpful benchmark called the ASFA Retirement Standard. It estimates how much income you’ll need for a ‘comfortable’ or ‘modest’ retirement lifestyle.
According to the December 2024 quarter ASFA Retirement Standard:
- Modest lifestyle:
- Single person: $30,777 per year
- Couple: $43,586 per year
- Comfortable lifestyle:
- Single person: $51,630 per year
- Couple: $72,663 per year
Modest Retirement: The Essentials Covered
A modest retirement lifestyle focuses on covering the basics and essential needs. It assumes you own your home and are relatively healthy.
Key features:
- Basic private health insurance Limited leisure activities (e.g., free or low-cost activities, occasional outings)
- Simple meals at home with occasional takeaways
- Infrequent domestic travel
- A reliable older car
Comfortable Retirement: Enjoying Life’s Extras
A comfortable retirement lifestyle allows for a broader range of leisure activities and a higher standard of living.
Key features:
- Comprehensive private health insurance
- Regular leisure activities (e.g., gym membership, hobbies, dining out)6
- More frequent domestic and occasional international travel
- A more modern car
- More flexibility for home improvements or unexpected expenses
Breaking Down the Differences
Here’s a table summarising the key differences between a modest and comfortable retirement:
Which is right for you?
The choice between a modest and comfortable retirement ultimately depends on your individual preferences, priorities, and financial resources.
- Consider your values: What’s truly important to you in retirement? Is it travel, hobbies, spending time with family, or simply having peace of mind?
- Assess your health: If you anticipate higher healthcare costs, you may need a larger retirement income.
- Factor in your assets: Do you have other assets, such as an investment property, that can supplement your super?
- Be realistic: Set achievable goals based on your current financial situation and future plans.
It’s not always black and white!
Remember, there’s a spectrum between modest and comfortable retirement. You might choose a lifestyle that falls somewhere in between, prioritising certain aspects that are important to you.
Planning is Key
Regardless of your desired retirement lifestyle, careful planning is crucial.
- Start early: The sooner you start saving and investing, the better.
- Review regularly: Your needs and goals may change over time.
- Seek professional advice: A financial advisor can help you create a personalised plan to achieve your retirement dreams.7
This blog post is intended for general information purposes only and does not constitute financial advice. It is essential to seek personalised advice from a qualified financial advisor to ensure the information is appropriate to your individual circumstances.
