Rethinking retirement financial goals

I was born in 1961 and so I am right on the tail end of the Baby Boomer Generation. I have got the Australian Government’s message! I know that superannuation and saving for retirement is now more of an imperative than it was in the past. Unfortunately, the full meaning of this has remained elusive to me. How much money do you need to retire? Over the years I have tried to figure out the net worth required at retirement to fund a pleasant and useful retirement. It is always a large, seemingly unattainable number. As well, the uncertainty surrounding future cost of living, effective returns on investments, taxes and government pensions definitely muddies the water for me.

Net worth at retirement includes the value of properties (less outstanding mortgages), superannuation fund balances, shares, cash and ownership of businesses and other assets.

The other day I realised that a retirement goal could be framed in such a way that we do not need to see into future. I realised that Australian’s could aim to retire with an average Australian net worth (or to retire with a top 40% Net Worth, for example …). Framing a retirement goal this way allows us to check progress towards this goal, by comparing ourselves with others at our stage of life!

On April 26th, this year, the Australian Bureau of Statistics (ABS) released the latest information on this very subject. The ABS released 6554.0 – Household Wealth and Wealth Distribution, Australia, 2003-04 which among other things provides us with the following data about the average wealth of Australian households at different stages in our life:

Life Stage Average Household Net Worth 2003-04
Single, <35years A$94,000
Couple+Kids<5yrs A$366,000
Couple+Kids<14yrs A$469,000
Couple+Kids<24yrs A$685,000
Couple <65yrs A$895,000
Couple +65yrs A$714,000

Unfortunately the ABS data only provides an average – the quintiles for each of these life cycle categories would be very interesting and give more information.

Using this table, we can compare our net worth with others who are at our stage of life. This is very practical and concrete. How are you doing towards saving for retirement? My guess is … Not as well as you hope, but probably no where near as badly as you fear!

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