Retirement Planning: How Much You Need to Save to Live Comfortably in Sydney

Are you getting closer to retirement and feeling a little anxious about how you’re going to afford it? Don’t worry, you’re not alone. Saving for retirement can be a daunting prospect, but with prior planning and care, it is very possible to have a comfortable retirement living in Sydney.

Sydney is a beautiful city, with amazing beaches and plenty of activities to enjoy. But it’s also one of the most expensive cities in Australia, making retirement here a costly affair. How much money do you actually need to retire in Sydney?

The answer is not an exact figure – everyone’s financial situation is different and there are many variables that influence how much people will need in order to live comfortably in retirement. Each person has their own unique lifestyle needs and retirement goals, so it’s important to plan for your own retirement, according to your particular circumstances.

In this blog post we are going to outline a few things you should consider when deciding how much money you will need to retire.

The Largest Factor – Home Ownership

Owning your own home can make your transition into retirement much easier. Not only will it help you to avoid the ongoing cost or instability of renting. But it will mean that you won’t need as much in investment assets to fund your retirement lifestyle goals as someone who will need to pay rent in retirement. 

If you own your own home and are mortgage-free, you will have a great headstart on retirement planning. This isn’t to say that those who rent can’t ever retire in Sydney – it just means that you need to factor in this cost into your retirement plan and ensure you will have enough money to fund your lifestyle covers and pay your rent. 

If you have a property that still has a mortgage attached to it a downsizing strategy may be the right option for you to pay off your mortgage and potentially boost your super balance with any surplus sale proceeds. 

Your Lifestyle Factors

Since 2004, ASFA (The Association of Superannuation Funds of Australia) has been researching the retirement needs of Australians, to provide a rough guide on what you need to retire. 

Their current recommended amounts for a comfortable and modest retirement lifestyle are outlined below: 

Assumptions for above figures 

  • You own your own home with no mortgage 
  • Assets are drawn to zero at life expectancy 

While ASFA do a great job of finding the Australian average, it’s important to note that your retirement needs will always differ a little from the average. Factors such as the location you choose to retire in, extra holidays or hobbies you may want to have, or a desire to help out family members financially, can all impact the amount of money you will need in retirement.

Lifestyle factors that affect your retirement living standard

Here are the main categories that ASFA looks at to determine the cost of the average retirement lifestyle options they report on. You will want to consider how you may compare to the average Aussie retiree and adjust from there.

Location

The location you live in can have a major impact on how much money you need to save for retirement. Sydney is one of the most expensive cities in Australia, and living costs are higher than in other states. The cost of housing alone makes Sydney significantly more expensive than other locations.

At the same time, not all areas of Sydney are the same. Living in an outer suburb may be much more affordable than living right in the CBD or the eastern suburbs.

Groceries & Food

You will want to consider how often you eat out, whether you cook from scratch or buy pre-packaged meals, and even the cost of the produce. For example, boutique supermarkets will likely cost more than Aldi or similar supermarkets. You should also factor in any dietary requirements you may have.

Transport

The cost of transport varies from person to person – do you need two vehicles in retirement if you are a couple? If so, you will want to factor in the cost of petrol, registration and insurance. Are you able to take public transport? This may be cheaper but still needs to be factored into your budget. Public transport is more affordable for retirees in Sydney.

Clothing

Are you someone that likes to keep up with the latest trends? Do you like to wear higher quality pieces? Or do you prefer to shop at budget stores and buy fewer, more classic pieces? Each of these necessitates a different amount of money for your clothing needs in your retirement.

Staying Fit & Healthy

This can range from Gym memberships, yoga classes and also includes the cost of health insurance, doctor visits and any medications you may need. As we age, we usually do need more medical care, which may need to be thought about and budgeted for within your plan. 

Staying Socially Engaged

What do you do for fun? What do you envision yourself doing for fun? While there are many free activities, you may want to plan for some of the costlier activities such as travel, hobbies or special events. If you are someone that loves going to live music events or plays, you may want to plan for a budget that can facilitate this.

Travel

You may be accustomed to travelling for a few weeks of the year, and you may want to increase your travel as a retiree. There are many different types of travel that all require varying budgets. Will you be travelling within Australia or overseas? Will you stay in luxury accommodation, hostels, AirBnB’s or in a caravan/motor home?

You will want to keep in mind the cost of the destinations you will visit, the cost of getting there and activities you will do. You may want to create a travel fund specifically for this so that it doesn’t impact other areas of your retirement budget.

Aussies are in the top 10 most common travellers with an average of 3.4 domestic trips and 0.4 international trips per year. While the ASFA standard counts for some travel. You will want to consider your own lifestyle and the costs associated as the amounts included in the comfortable retirement option above are quite limited – one annual domestic trip and one international trip every seven years. 

Connecting with Family and Friends

ASFA includes travel within this category, however we thought it needed its own category. Other things to consider apart from travel are:

– Gifts for family

– Phone bills

– Internet plans

– Special occasions such as birthdays or wedding anniversaries.

Your family and friends may be accustomed to affluence and you may want to maintain this lifestyle. If you are unable to, it is best to educate your family and friends before retirement about the potential lifestyle shift that you may experience. 

It is essential to establish clear expectations upfront so everyone can be honest about differences in spending habits or budgeting goals.

While there are many more things to consider in retirement, no retirement plan is ever going to be followed to the letter. This is where the above figures are useful to be used as a guide but will need to be updated for you and your retirement goals based on your lifestyle, travel plans and retirement goals. 

Your Income Streams

It is important to consider what income streams you will be relying on for your retirement income. Are you planning to use and are eligible for the age pension? What will your investments, both inside and outside of superannuation be worth? Will you have any passive income from property you own or a business you have ownership of?

The Takeaway

Planning for retirement is one of the most important things to get right as you get older and closer to your desired retirement date. To retire comfortably in Sydney, you need to consider all aspects of your budget and your estimated income in the years leading up to retirement. We find that our clients who are mainly based in the Sutherland Shire & Sydney area, are accustomed to a higher standard of living than the average. So therefore the retirement income targets we are planning for are higher than the averages documented by ASFA. 

We suggest that if you are planning on retiring in Sydney, it is important to consider the costs associated with this lifestyle. We recommend speaking to a qualified financial planner who will be able to tailor your retirement plan according to your needs and lifestyle in retirement. With proper advice and budgeting strategies, you can make sure that when you retire in Sydney, you can maintain the lifestyle you desire and experience an enjoyable retirement.

Catalyst Wealth Group works with you to understand your wants and needs working up to and in  retirement, and works with you to create a flexible and robust retirement plan to ensure you can retire comfortably in Sydney. If you would like to speak about your retirement goals get in touch today.