Many of us think of retirement as a given – you work hard for your middle years, and then you get to bow out of the workforce and enjoy a well-deserved rest, take those bucket-list trips and enjoy the best life has to offer. After all, you’ve made your contribution and now you’ve earned the right to kick back.

But unfortunately, retirement isn’t that simple or straight-forward for many of us, even those who have lived their lives with the promise that compulsory superannuation contributions would accumulate and keep us better off than if we were on the pension! Afterall, we all have different needs and ambitions for how we want to spend our post-work life, and if you don’t take an active role in planning for your retirement – even if you’re in the earlier phases of your career at the moment – the reality might not match the dream.

What we get wrong about retirement

As a study by global investment manager Schroders found, people significantly underestimated the cost of living in retirement. They expected to spend an average of 34% of their retirement income on basic living expenses, but in reality, they required nearly 50%.

Similarly, wealth and career consultant Mercer has discovered that Australians are also poor at estimating how long they might live. Its research shows that younger people greatly underestimate their life expectancy while older people significantly overestimate it.

According to Mercer, many people assume they will spend less money in later retirement and the age pension will be sufficient for their needs, but this isn’t the case. Studies show that while spending on travel and entertainment decreases, this is matched by a corresponding increase in medical, care and housing needs.

The facts and figures of retirement in Australia

According to the Association of Superannuation Funds of Australia (ASFA), single people require about $28,165 a year to maintain a modest lifestyle in retirement. They will receive more than they would through the Age Pension but will only afford the basics.

ASFA says single people require around $44,146 a year to maintain a comfortable lifestyle in retirement. This will allow them to be involved in a broad range of leisure and recreational activities and to be able to buy household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment and domestic and occasionally international holiday travel.

Both budgets assume that retirees own their own home outright and are relatively healthy.

Of course, everyone is different and their expenses and activities will vary in retirement. They will stop work at different ages and will have different reasons for retiring.

Australian Bureau of Statistics (ABS) figures for 2016/17 show that 36% of men and 22% of women chose to retire when they became eligible to draw on their superannuation and/or the age pension.

The average age for retirement of this group was 62.9 years – men at 63.6 years and women at 62.1 years.

But the figures also show that people retire for other reasons, for example, to care for someone, because of retrenchment or an inability to find work, or as a result of sickness, illness or injury. That means that their time of retirement was not within their control or came earlier than planned.

All these uncertainties complicate retirement planning. Thus, it’s no wonder that a new survey commissioned by Industry Super Australia shows that almost 40% of recent retirees are struggling and that more than a quarter had to go back to work, many to keep the lights on.

That said, many Australians are enjoying a comfortable retirement. How they achieved it is no secret: through good retirement planning.

How do I plan for retirement?

Start with you and your specific circumstances and requirements. Look at your spending, income, assets, savings, current investments, insurance, taxes and estate management. And consider how you should approach your retirement saving as you move through different life stages.

All this may require some tough decision-making. For example, do you want to live frugally now for future financial freedom through the FIRE movement, or would you like to take steady and consistent saving steps? Are you comfortable with more risky investments which may offer better growth but could keep other people up at night? Would you prefer to let the experts manage your savings or to make the investment decisions yourself? Are there ways you could boost your super while enjoying tax benefits? Should you salary sacrifice? And, do you need protection through insurance?

Money & Life, FPA