How much is enough?

Being financial planner’s, we’re frequently asked by clients and friends “how much capital should I have to retire on and how long will it last?”. The answer is generally….depends!


We all carry very different financial needs and capabilities into retirement and there is no single ’one size fits all’ answer. A convivial BBQ conversation could lead to a mistaken belief and an incorrect comparison of your own financial freedom could result in misguided choices.

For example, the optimal retirement capital can vary between families and decisions may depend on some of the following factors:-

  • How much of my personal wealth is invested in lifestyle assets with no income potential?
  • Do I intend to downsize my family home to release investment capital to meet future lifestyle spend?
  • Do I want to leave a financial legacy for my children?
  • Am I happy to deplete all my retirement capital during my lifetime?
  • Will I benefit from a family inheritance during my retirement?
  • Am I supporting other family dependants and will this continue in retirement?
  • What is my health horoscope?  Long-life family genes?
  • Am I retiring at an early age or well beyond normal retirement age?
  • Am I a cautious or confident investor?
  • Is my capital invested tax-effectively?
  • In addition to a lump sum super scheme, do I have a fully-indexed lifetime Government super pension to underpin future lifestyle needs (removes market and mortality risks)?
  • Is my spouse much younger than myself who will also rely on my retirement income/capital?
  • Defined Government super pensions generally reduce to 2/3rds on death when passed to a surviving spouse, will this be enough for my spouse to survive on?
  • Am I eligible for an Age Pension?
  • Am I concerned to retain sufficient capital to meet possible aged care accommodation needs?
  • Will my spend decrease as I age?
  • And of course, do I want or expect to maintain the same lifestyle in retirement?


Clearly any of the above factors could alter the answer to ‘how much is enough’ in retirement and will challenge your analysis on what combinations of potential solutions would be appropriate for your needs. What is suitable for one person may not be so for the next. Maybe having a pragmatic conversation with your financial advisor will provide clarity and an answer to what financial outcome is right for your unique situation, not just right for the person holding the BBQ tongs.

Having noted the above, as a guide, a 65 year retiree with $500,000 invested in a Balanced portfolio within an Account-Based Pension, seeking to receive say $48,000 p.a. pension, would fully exhausted their capital in 17 years (assumes 6.5% p.a. return). Similarly, a male/female with $1.2m invested and seeking to exhaust their capital by life-expectancy, could seek to spend $105,000 p.a. (84 years – male) or $98,000 p.a. (87 years – female). All scenarios exclude any Age Pension benefit or inflation.

What is the right answer for you…..… depends!