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How much do I need to retire?

Many financial planners use a complex projection to work out how much you need in retirement. The reality is, the more complex the calculation, the more likely it is to be wrong.

The effect of assuming franking credits within your super fund pales compared to getting the inflation rate wrong by 0.5%.

Choices you make, such as where you will live or whether you can earn a small income in retirement, are more likely to affect the amount of money you need to retire.

Having said that, MoneySmart’s calculators can crunch some of the relevant numbers and give you an indication of how much you need to retire (click on the “How it works” cog to change assumptions in the back end).


For an even quicker idea of what you will need to retire, work out roughly how much you will need to live each year in retirement (assume zero debt and the kids have moved out). Divide this number by 0.05.

This figure is what you would need to save by retirement, assuming your retirement balance will return 5% p.a. and keep up with inflation (after inflation, this figure often is not far off reality – at least, its a beginning – and you can do this calculation while you read this page).

If you are wondering how much you need to contribute each year to get to that figure, start by subtracting your current super balance and then dividing that amount by the years you have left until retirement.

Very simple, but it’s a start (and most people have never come this far).

This figure can be reduced by:

  • Reducing tax (eg. salary sacrifice)
  • Investment returns (compounding is crucial)
  • Lowering fees
  • Additional employer contributions
  • Borrowing to invest
  • Adding additional capital at retirement (eg. by downsizing your home)

If you are in your last few years of earning an income, you may also benefit from strategies such as Transition to Retirement.

Contact me if you want to discuss a retirement plan.


How much do I need to retire?