The Retirewise Manifesto

The amount of money needed to be a self-funded retiree in Australia varies depending on individual circumstances, lifestyle preferences, and financial goals. One way to estimate the amount required is to refer to the Association of Superannuation Funds of Australia (ASFA) Retirement Standard. This standard provides a benchmark for the annual budget needed by Australians to fund either a "modest" or "comfortable" retirement lifestyle.

As of September 2021, the ASFA Retirement Standard suggested the following annual budgets for singles and couples:

• Modest lifestyle: AUD $28,254 for singles and AUD $40,829 for couples.
• Comfortable lifestyle: AUD $44,412 for singles and AUD $62,828 for couples.

These figures are subject to change with inflation and shifts in the cost of living. To calculate the lump sum needed to support these lifestyles, you can use the "rule of 25" as a general guideline. This rule suggests that you multiply your desired annual income by 25 to determine the amount needed for a 25-year retirement.

For example, for a comfortable retirement lifestyle as per the ASFA guidelines, a single retiree would need approximately AUD $1,110,300 (44,412 x 25), while a couple would need approximately AUD $1,570,700 (62,828 x 25).

Please note that these are general estimates and should not be considered as personal financial advice. To determine the exact amount you need for your specific retirement goals and circumstances, it is recommended to consult a certified financial planner or retirement advisor.

A self-funded retiree in Australia is an individual who finances their retirement primarily through personal savings, investments, and assets, rather than relying on the government Age Pension as their main source of income. Self-funded retirees have accumulated enough wealth and financial resources during their working years to support their desired lifestyle in retirement without needing significant government assistance.

This can be achieved through various means, including saving and investing in superannuation funds, building investment portfolios (such as shares, bonds, or property), and managing other income-generating assets. The goal of becoming a self-funded retiree is to attain financial independence and security, which allows for greater control over one's retirement lifestyle, flexibility in spending, and potentially leaving a financial legacy for future generations.

It is essential for those aspiring to become self-funded retirees to plan their retirement strategies early, focusing on saving, investing, and growing their wealth in a tax-effective manner. Consulting a financial planner or retirement advisor can be beneficial in creating a tailored retirement plan and reaching the desired financial goals.

While self-funded retirees in Australia are primarily responsible for financing their own retirement, there are some government benefits, concessions, and schemes that can provide assistance. Some of these include:

• Commonwealth Seniors Health Card (CSHC): Self-funded retirees who do not qualify for the Age Pension may be eligible for the CSHC, which provides access to cheaper prescription medicines, bulk-billed doctor appointments, and potentially lower medical expenses.
• Seniors Card: Offered by state and territory governments, the Seniors Card provides various discounts on public transport, retail, and services. Eligibility and benefits vary between states and territories.
• Pensioner Concession Card (PCC): Some self-funded retirees with modest incomes may still qualify for a part Age Pension, which would make them eligible for the PCC. This card offers various discounts and concessions on healthcare, utilities, and transport.
• Low Income Health Care Card: Self-funded retirees with low incomes may qualify for this card, which offers similar benefits to the CSHC.
• Tax offsets: The Senior Australians and Pensioners Tax Offset (SAPTO) is available for eligible retirees who meet specific income thresholds. This offset can reduce or eliminate the amount of tax payable.
• Downsizer contributions: Self-funded retirees aged 65 or older can make downsizer contributions to their superannuation fund of up to $300,000 per person from the proceeds of selling their primary residence, provided they meet the eligibility requirements.

These benefits and concessions can help self-funded retirees in Australia reduce their living costs and maintain their financial independence. However, it's essential to check the specific eligibility criteria for each program and consult with a financial planner or retirement advisor to ensure you make the most of the available assistance.

In Australia, self-funded retirees may be subject to tax on their income, depending on the sources of their income and the amount they earn. Some types of retirement income, like superannuation pension payments, are tax-free for those aged 60 and over. However, other income sources, such as dividends from shares, rental income from property, or interest from bank accounts, may be taxable.

The Australian tax system uses a progressive tax rate structure, with different tax rates applied based on income levels. For the 2021-2022 financial year, the tax thresholds for residents are as follows:

• Up to $18,200: Tax-free threshold
• $18,201 to $45,000: 19 cents for each dollar over $18,200
• $45,001 to $120,000: $5,092 plus 32.5 cents for each dollar over $45,000
• $120,001 to $180,000: $29,467 plus 37 cents for each dollar over $120,000
• Over $180,000: $51,667 plus 45 cents for each dollar over $180,000

In addition to the general tax thresholds, self-funded retirees may be eligible for the Senior Australians and Pensioners Tax Offset (SAPTO), which can reduce or eliminate the amount of tax payable, depending on their income levels and eligibility.

It's essential for self-funded retirees to understand their tax obligations and plan their finances accordingly. Consulting with a financial planner or tax advisor can help ensure you're meeting your tax responsibilities and maximizing any available offsets or deductions.