How Much Is Enough To Retire On?

The Running Accountant Piece Of String

As an accountant, I get asked many questions a day let alone each & every week. Lately though, many of the questions seem to revolve around “How much is enough to retire on” or “How much do I need before I should retire”?

The answer to this question is a bit like the old saying “How long is a piece of String”!

The answer will vary according to each person’s goals and expectations. Everyone’s life style is totally different, everyone’s circumstances are totally different, and everyone’s picture of retirement is also totally different.

There are some guidelines around which an answer could be derived.

I believe that to achieve a “comfortable lifestyle”, retirees should aim for an annual income amounting to 70 to 80 per cent of their final salary.

The question is: does the ‘final salary’ refer to the gross or net pay?

I don’t know if there is a rule of thumb but I like to always use net (after-tax or ‘cash in hand’) income and suggest that it would be ideal to retire on 75 per cent or more of this. In other words, if the family is receiving an annual after-tax income of $100,000 while working, then an after-tax retirement income of $75,000 would be more than appropriate.

As an aside, a couple retiring when they both reach 65 years of age, will need about $1.2 million in super to provide a tax-free pension beginning at $75,000 a year (indexed at 2 per cent annually to partially keep up with inflation).

However, one must always be prepared for the unexpected. If, instead, one becomes ill before the other and needs to enter a nursing home, it can throw the family’s budget into turmoil.

In simple terms, the earlier you start a savings plan and accumulating wealth, the easier it will be later on in life!

A few questions that should be considered to get you started would be: –

  • At what age do you want to retire?
  • Where will you live when you’re retired?
  • What will you do with your time?
  • How much money will you need?
  • Where will the money come from?

Never ever underestimate how much one needs in retirement! You never know what is just around the corner.

Thinking about these questions along with others will help you form a starting point and probably lead to more questions, but at least you can start getting the help you require.

Talk with your accountant. We are here to help, look us up at

Happy Running…


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