Talk Investing Podcast
The Talk Investing Podcast & Blog discusses investment advice from our previous podcasts and radio shows by Remo Greco & Marco Mellado. Learn all things around retirement and investing.
Talk Investing Podcast
How Much Super You Need For A Comfortable Life
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$80,000 a year, tax-free, just to live “comfortably” after work? That headline number can feel like a punch in the guts, especially when you open your super statement and realise you’re not close. We sit down with superannuation specialist Marco Millardo to break down what sits behind the ASFA Retirement Standard, why the cost of a comfortable retirement is rising with inflation, and how those annual spending targets translate into the lump sums people talk about (around $730,000 for couples and $630,000 for singles under common assumptions).
From there, we get practical. We walk through how to build a retirement budget that actually matches your life, using your current spending as the base, then checking it against tools on the ASFA site and the government’s MoneySmart calculators. We also talk about the “retirement spending curve”: why the first five to ten years can be the biggest spending window, why many retirees underspend out of fear, and how planning in stages can reduce anxiety without cutting joy.
We answer listener questions on transition to retirement, including the 10% annual draw cap and the easy-to-miss tax detail that it’s not automatically in a tax-free environment. We also tackle the big issues that change everything: renting versus owning, mortgage pay-down versus investing, aged care and nursing home costs, and how the age pension can affect the gap you need to fund.
If you’re 50+ and doing the mental maths right now, this is a calm, numbers-based reset. Subscribe, share with someone who’s planning their retirement, and leave us a review so more Australians can find the help they need.
DISCLAIMER: This podcast contains general financial information only. That means the information does not take into account your objectives, financial situation, or needs. Because of that, you should consider if the information is appropriate to you and your needs, before acting on it. If you’re confused about what that means or what your needs are, you should always consult a licensed and trusted financial planner. Unfortunately, we cannot guarantee the accuracy of the information in this podcast, including any financial, taxation, and/or legal information. Remember, past performance is not a reliable indicator of future performance. The Rask Group is NOT a qualified tax accountant, financial (tax) adviser, or financial adviser. Access The Rask Group's Financial Services Guide (FSG): https://www.rask.com.au/fsg
Why Retirement Costs Keep Rising
SPEAKER_00The Talk Investing Podcast and blog discusses investment advice from our previous podcasts and radio shows by Remo Greco and Marco Millardo. Learn all things around retirement and investing.
SPEAKER_01On the money.
SPEAKER_0316 past ten, Marco Millardo's superannuation specialist is in the house. Good morning, Marco.
SPEAKER_01Hi Lisa, how are you doing today?
SPEAKER_03Well, I'm okay, but it's a bit worrying, isn't it? This comfortable retirement reaching you high. I mean, we're not surprised, cost of living, but how high are we talking?
SPEAKER_01Yeah, so it's probably not surprising that things get a little bit more expensive every year. So we should expect our needs to go up a bit. But this is probably gone a little bit higher than we would normally expect, and that's probably inflation playing a role. So the ASFA, which we've talked about in the past, which is the Australian Association of Super Funds, I think I got that right. So they do some modelling, which is really, really helpful for people looking at retirement. And they start with what a typical retirement budget may look like, and they divide it up between a modest lifestyle and a comfortable lifestyle. Modest is a bit better than the age pension. Comfortable is pretty good, right? We've got private health cover,
The ASFA Comfortable Budget Explained
SPEAKER_01we're eating out, we're taking holidays. So they're now saying to hit that kind of lifestyle, you're going to need about $78,000 a year. So let's call it $80,000. It's quite a bit of money. That's tax-free. So that has to come from your assets because you're retired. You don't have an income anymore. So the numbers are getting up there. It's high. And so, you know, I I reckon just about everybody over 50 is thinking at least a little bit about retirement. And some are very focused on retirement, and they're thinking, well, this number keeps going up.
SPEAKER_03Because what does that mean for a lump sum then? Let's say we retire at 67.
SPEAKER_01They start with the budget, which is the most important thing. You've got to work out what kind of lifestyle you think you're going to live, right? That's going to help you. And then they now I'm going to sound smart, they then they do a net present value calculation and they go, right, if we need this amount of money for this number of years and we expect inflation to be X, and we think we can get an investment return of X, what's our lump sum? They're getting to a lump sum of about $730,000 for a couple. So combined, if we can get to that $730,000, $750 odd thousand, we can be pretty confident that you could then generate the $78,000 per annum right up into your 90s.
SPEAKER_03And what is it for solo?
SPEAKER_01Solo's a bit less. Not a lot less, though. It's only about $100,000 less. And that's because, you know, it doesn't mean you spend half the electricity because you're just solo in your house, right? So it's pretty tough. So it's just a bit harder when you're solo, which makes it doubly hard because then you have to accumulate on your own, you're not accumulating with someone else. So it's a it's a it's a lot tougher. But it's not a lot less. The figure is $630,000. It's only $100,000 less than the $730. That's only generating $56,000 of income. Trevor Burrus, Jr.
SPEAKER_03So, Marco, if we've just opened up our superannuation letter and we're looking at the number there, and you've told us a a number, and we're like, oh God, I'm not even close to that. I mentioned this retirement budget and let's start now. So, what are some of the useful tools we can use to have a look at this retirement budget? Because really just getting that right at the start is probably the helpful thing.
SPEAKER_01Really important to do. Really important. And I think it's it's it's uh important
The Lump Sum Targets That Follow
SPEAKER_01to understand what stage you're at as well. So if you're really near retirement, you're probably living close to what a retirement budget would be, right? And so you can start with your own budget, and then you can go to either the Money Smart website or the ASFA website, which is superannuation.asn.au, I think it is. And they have got actually written budgets. So all the things that you might not think about, you can find on these websites and go, oh, yeah, I didn't think about that, I do spend on that. And so I would start with those budgets and then compare them to yours, and then just think about what the first five or ten years of your retirement might look like. They're your biggest spending years. You're still healthy, you want to travel, you want to do the things you haven't done before. They're gonna be the ones that really take up uh, you know, a lot of the income you're earning. And then there's very solid evidence that once you get into your 70s, your retirement spending goes down. And once you get into your 80s, it goes down significantly. And so you probably need to think about it in stages as well. Really important.
SPEAKER_03All right. It is 20 past ten on ABC Radio. You're with Lisa Leong, and we do have Marco Millado here, our super specialist. We're doing on the money right now, and we are talking about retirement. We're welcoming your questions. 1-300-222-774. Um a good question here from uh Geelong. Lisa and Geelong. Uh, how does transition to retirement work?
SPEAKER_01Oh, this is a great question. So, transition to retirement is kind of like an idea, but also a strategy that allows you to gradually step into retirement. So, what do I mean by that? I mean that instead of just ceasing work completely and then being fully retired, there's a way to gradually reduce hours, reduce the number of days you're doing. And while you're doing that, because obviously you're then drawing less income because you're working less, as long as you're 60 or over, you can start to tap your superannuation and it's called a transition to retirement pension. So it allows you to reduce your work hours. Yes, you earn less income, but you can replace that with a transition to retirement pension from your super. There's a few restrictions around that. You can only draw so much, you can't take lump sums, but it's a very good way to just gradually step out of the workforce and A, give you a taste and make sure that that's what you want to do, and B, give you some confidence that you're not drawing your super too early, too much of it.
SPEAKER_03Are there any tricks to transition to retirement that we should know about?
SPEAKER_01Yeah, so one, you can't draw more than 10% of your balance per annum, so be aware of that. So if you've got a nice round, say $500,000 in your fund, the most you're about to draw is $50,000. It's pretty good.
Build A Realistic Retirement Budget
SPEAKER_01Uh, and you can't draw any lump sums out of it, so you're a bit restricted there. And the other one that a lot of people miss is normally when you start a pension from your super, it becomes a tax-free environment. That's why most people do it. So all the income and all the gains are tax-free. A transition to a retirement pension is not. It's still a normal 15% tax environment. Uh well, I think when this first started, you had a lot of people starting these pensions and actually not reducing their work. Oh, really? Just really to get the tax-free environment kicking in and they drew money out, and then we essentially put it straight back in. So it wasn't really used in the spirit of the law, and so that's been changed.
unknownYeah.
SPEAKER_03All right. Uh 23 past ten on ABC Radio. So just in terms of this retirement um budget, are there any critical mistakes to avoid when making this budget?
SPEAKER_01Uh so this might sound a bit surprising, but what we're finding, and the evidence is now getting um yeah, pretty substantial, is that and we say this in our business, is most new retirees probably don't spend enough. And that's very odd, but the thinking goes, they're very cautious, they're very conservative, they're not sure if their money is going to last, markets are uncertain, inflation's higher than they're used to, and so there's this natural human instinct to protect their balance, and they may be protecting it a little bit too much, particularly in the years when they can do things, and they're just not spending enough.
SPEAKER_03Aaron Powell So does that mean they're missing out on doing things when they're still active and then it's a little bit too late? You can't do the traveling later.
SPEAKER_01You want to do your you know, the stuff that requires lots of energy, uh, mental and physical. You want to do that early in your retirement. And I think some people just hold themselves back because they're not sure how long they're going to live. They might be worried about what the kids might need, the grandkids might need, and we're just finding this pattern now of holding back more than they need to, when in actual fact they could go a bit harder earlier, and then we can slow things down.
SPEAKER_03Okay, Marco, I'm gonna go to some of these questions now. Do these figures for retirement assume no mortgage and home ownership?
SPEAKER_01Yeah, good question. So they do assume no mortgage and home ownership. There's a separate set of numbers that you can look at if you're renting, so they've covered that. But yes, the assumption, the assumptions are important, so let's just go through them really quickly. It's home ownership, it's an inflation rate of 2.75% each year. Uh it's exhausting all the capital. So we're running out of money at age 92, and we have an earnings rate of about six and a half odd percent. So they're the assumptions. They're pretty important to know. I think they're all really reasonable assumptions. Like, you know, they're meaningful and they're reasonable.
SPEAKER_03Okay. Um Luke here from Crib Point is on the text line. I'm 50 years old. I have a superannuation balance of around $250,000. I own a unit which I have a mortgage mortgage on. It's the mortgage is
Transition To Retirement Made Simple
SPEAKER_03$300,000. How am I looking at the moment?
SPEAKER_01Hmm. Not bad. We'll do a bit of work. We'd need to know a bit more about uh your income, things like when we're looking at retiring, the value of the unit, but it's a pretty good start. $50,000, $250,000, we've got a unit probably with some equity in there. You got work to do, but I think you're in a pretty good strong starting position at a pretty young age.
SPEAKER_03So let's say um for Luke and people in a position where they're looking at their super and then going, okay, there is this gap between what you've just said I need when I'm 67. What is the best way to start I guess saving for retirement?
SPEAKER_01So there's just no magic wand for this, so let's be really honest. But it's living within your means and finding an ability to save and invest. That's the most important thing. The longer you can invest for, whether it's in super, outside super, a share portfolio, a property, whatever it is, the magic of investing is in time. It's compounding. The longer it goes, the more you're going to have. So we need to start early and then you just use superannuation really well. It's the most tax-effective structure. And if we look at what's come out of the federal budget in terms of some of these new thresholds around capital gains tax and potential taxing of trusts, boy, it's made super just a lot more appealing, a lot more attractive. So use that fund structure really, really well.
SPEAKER_03Now there's putting money away in super, but then also that choice of paying off or paying down a mortgage. So another text is that number assuming home ownership, and we just said yes. Increasing numbers of people are still renting at retirement. Do you want to make some comments about renting, paying down your mortgage or or versus sorry, paying down your mortgage?
SPEAKER_01Yeah, so uh really tough if you're renting. So this is the difficult thing I think we have to solve in this country is that there is rent assistance, of course, but rent's just high. So it it takes a big chunk of what you're earning away from you in terms of lifestyle. So it's a difficult problem. I don't think anyone has a solution yet.
SPEAKER_03Obviously the housing supply and what we're working on in terms of just And even just the asset test, the fact that it's baked in a home ownership, it's like it that is kind of what you have to do if you can.
SPEAKER_01Yeah, so again, lots of commentary around being a homeowner again has become so much more favorable because it's not counted for anything. And so like I don't think we've got the mix right. You know, it's above my pay grade to try and work it all out. But I I don't think the mix is right. And so uh probably a more common question we get is the one, you know, around mortgage. Do I pay off my mortgage entirely and then start investing? And you know, what do I do about that? And I think the answer's not necessarily that black and white, but you don't have to get your mortgage to zero and then start investing. I think you can do a bit of both.
SPEAKER_03All right, Joan is here. Hello, Joan.
SPEAKER_06Hi, how are you? Good. Thank you for taking my call. Pleasure. Um, you talk about spending assets um when you're younger and and 70s and all the rest of it, and that you need decreases at 80. But what about nursing homes and things like that? They're a huge
The Risk Of Spending Too Little
SPEAKER_06cost.
SPEAKER_01Fantastic point.
SPEAKER_06Yeah, fantastic point.
SPEAKER_01So again, we probably haven't got the mix right, but if you're a homeowner, it's very likely that the value of your home is going to be more than the bond you might need to pay, for example, in a nursing home. That gets complicated by the fact that if you're a couple and only one of you are going into a nursing home, one of you needs to stay in the family home. So we need to have some assets. Bonds in nursing homes don't necessarily always need to be paid as a lump sum. There are ways to pay them over time. It's got to be built into your retirement planning, and I don't think there's enough people talking about it.
SPEAKER_03And it's not in the ASPA standard. It doesn't say nursing home costs or medical costs. No, it's exclusive. I mean it's got insurance.
SPEAKER_01There's some medical costs there, but there really isn't the cost for, say, high-level care or paying rads or accommodation bonds. So this is an area that we're just gonna find more work is gonna be done over time. I mean we've got about two and a half million Australians retiring in the next decade. It's a lot of people, right? So 20 or 30 years after that, we're gonna have a lot of people entering care.
SPEAKER_03Thank you, Joan. Great question. And John's got a question on the text line, Marco. Uh great discussion. Thanks so much. General question. Wife and I are both over 65 and retired. We're on the pension and also other income. Are we both still required to submit a tax return?
SPEAKER_01So it totally depends on how much income you earn. So if you earn income under, I'm going to say about $20,000 each, uh, you probably don't need a tax return. Uh if you earn more income than that, you might need to lodge on because there may be some tax payable. But also if you own, and a lot of people have just a handful of shares, and they come with what's called franking credits, if you get some dividends. You don't need to submit a tax return, but you can submit a refund of franking credits form and you can get a little refund back. So that's pretty helpful.
SPEAKER_03I've never understood what those are. For another show, perhaps. For another show. Jackie from Geelong is here. G'day, Jackie.
SPEAKER_05Hello, hello. Um, Lisa, I love your show every Sunday.
SPEAKER_03Oh yay, Jackie. Love you back.
SPEAKER_05Um, so we're wondering we um we're in our early 60s, we're both still working. We we have a big gap in what we um uh hope our super balance would be is in reality. Um but currently I'm uh with our savings, I'm just putting our savings into long-term deposits and uh things like that, and when they mature, I just roll them over, roll them over. Is it can I, instead of doing that, should I be putting that money into my super? Is that like a better form of savings kind of?
SPEAKER_01Probably. Uh so I'm gonna make some assumptions here, but if you're both working, you probably have a higher tax rate than the 15% inside super, which means that interest you earn on your term deposit is getting taxed at your personal tax rate, which is higher than 15%. So I don't know what that is, but I bet you it's higher. So the little trick is if you have that money inside super, and you could still buy a term deposit inside super
Housing Renting And Mortgage Trade-Offs
SPEAKER_01or something very low risk if that's what you want to do, the trick is in the tax. The interest then earned is only taxed at 15% rather than your 30 or 37% as an individual. So that's why we use super, because we want to get money in there so the tax rate's really low, which means you get to keep a lot more of your return. That's how you compound your balance. So Yes, we need to know a lot more about you, but uh on the surface I would say yes, it makes sense to have it in super, grow it more quickly, and then of course at 65 you have access to your super anyway. So you're really not that far away from access if you need it.
SPEAKER_03Sounds like you're onto something here, Jackie. I think really worthwhile going deeper on this. Thank you, Marco, for that as well. Taking your calls, 1-300-322-774-0437-774-774. We are doing on the money right now. We have Marco Mulato here. He's our superannuation specialist. And we're looking at retirement and what the things you need to do right now to get you ready for retirement, because we've just found out that as we thought, the figures for a comfortable retirement, well, they're going up, aren't they? Because of cost of living and other things like that. So, how are we going to be ready? What are the things that we can do? All right, Susan is here. Good morning, Susan.
SPEAKER_04Good morning, Lisa. Good morning to your guests.
SPEAKER_03Yes, Marco is here for you, Susan. What question did you have?
SPEAKER_04I was just wondering if this comfortable lifestyle figure is a bit paddered to make us all a bit scared and put more into super because the ABS website and the current median income in Australia, which is what most people earn, is $1,452 a week, which works out at less than $76,000 per year. So I would have thought a comfortable lifestyle is what most people actually have right now, not more than what most people can afford right now. And I would have thought kind of maybe matching median income was a more sensible approach.
SPEAKER_01Yes, I'm not sure about the median income figure. I haven't looked at that. But I think uh what we look at is the breakup of the various items in your budget in retirement and then look at the value of those and think are they reasonable? And so when we break down the AS for budget and we look, and you can do that because it's quite detailed, and you look at what they're allocating for each item, for example, utilities, internet, eating out, shopping, you'll find they're very reasonable. Trevor Burrus, Jr.
SPEAKER_03I wonder whether there's this it's just definitional potentially, because there's the other category of modest lifestyle. And so maybe the median is more like a modest lifestyle where Susan, so comfortable you do have a little bit of flex to have holidays. Correct. And to have private health insurance. And I don't know whether many people in if we're talking about median income Marco, it's probably more like a modest.
SPEAKER_01Necessarily.
SPEAKER_03What are the numbers for a modest?
SPEAKER_01So modest is really just above age pension. So there's Oh, that's really modest.
SPEAKER_03It's really no holidays?
SPEAKER_01There's the odd domestic holiday compared to say comfortable retirement where you're taking an annual domestic holiday and then an international holiday every six or seven years. So it's a pretty good lifestyle. Yeah. Like we say comfortable, but it's actually somewhere in between. So maybe it's just how we perceive. Yeah.
SPEAKER_03But good pickup season, I love that. And yes, then it calms us down because sometimes looking at the figures can make you panic a little bit, and that's the worst place.
SPEAKER_01So I think it's really important to look at the breakup, look at the items, and just say, right, what am I spending now?
SPEAKER_03Yeah.
SPEAKER_01Are Asph's numbers meet relevant to me?
SPEAKER_03And what we're saying is make your own budget. Of course. I can use the ASPAR, but then go, what do I want to do as well?
SPEAKER_02Without doubt.
SPEAKER_03Let's go to Belinda here. Belinda, hello, good morning.
SPEAKER_02Oh, good morning, Lisa. Good morning, um, Marco. Uh just a general question. Uh asking for a friend. Um how does a full pension play into this scenario if you're on a full pension? Uh in terms of In terms of what you need to retire.
SPEAKER_01Okay, so I think what you need to do. Understood. So I think what you need to retire is a you thing. It's it's about you determining the sort of lifestyle you want to live and getting to your number or range. And so everyone's
Age Pension Gaps And Next Steps
SPEAKER_01going to have a different number, of course. The full age pension, which for a couple, just as an example, uh, is about forty-seven to fifty thousand dollars a year, that may be just fine for many couples. And there are many, many couples on purely the age pension, and there are no other assets. However, for a very different couple, that might be just far too low. So the the magic is in you trying to forecast and work out what your lifestyle wants to be realistically, and then understanding, well, am I going to get any age pension? So you need to do some calculating around that, and what will that amount be, and therefore what's my gap? So, what assets do I need to fill that? So it's a bit of a combination of things.
SPEAKER_03Thank you so much, Belinda. And um can you tell us the website for budgeting again, please, Marco?
SPEAKER_01I would go to so there's two websites there's superannuation.asn.au, so that's the ASFA website. And then I would go to the government's Money Smart website, and they've got some really good new tools that help you do a lot of this calculating for you.
