Say you would like to retire on $50,000 per annum and plan to retire at age 60. What amount would you need in your superannuation and other investments to do this? A common formula often used in the investment industry in Australia is to multiply your required annual income by the number 15. This number takes into account life expectancy figures.

In the above example the amount required in your investment portfolio would be $750,000 ie ($50,000 x 15 = $750,000).

Examples at different retirement ages are as follows:

55    $50,000  x  17 = $850,000

60    $50,000  x  15 = $750,000

65    $50,000  x 1 3 = $650,000

As you can see, it is just the retirement age that is the variable. Have a go and work out what you need to have in retirement. Note this is today figures.

So using the 1^st example, someone planning to retire at age 60 on $50,000 needs $750,000 in today’s dollars. This last point is important. Who knows what inflation and interest rates will do in the next 25 years? No one, this formula is a reality check. If you are aged 40 and plan to retire at age 60 and have $100,000 in superannuation with no other investments then you know where you are at.

How do you compare?

Start working on your retirement income now.

If you are thinking, I earn $50,000 now and there is no way I will manage to have $750,000 in today’s dollars in 20 years time. Don’t panic. Do you really need $50,000 to retire on? The Australian Prudential Regulation Authority estimates that on average, most people need an income equivalent to about 60% of their annual salary. Therefore in this case $30,000 - $35,000 may be more realistic.

N.B. This formula is just a guide; however it is a start and provides a goal for people to aim for.

When they are getting closer to retirement say 10 years to go it is worth having a financial advisor to assist you through this period.