Claim 19 of 22
Retirement savings: work out your number and time your state pension
Can a retirement be priced as one number?
Verdict
Holds with conditions
A retirement can be priced against a published benchmark in the UK and Australia, and in the US against the Elder Index for basic needs and a rule of thumb expressed as a share of earnings, provided the price allows for home ownership, the withdrawal rate and how long the money has to last. The 4 per cent rate the pots lean on is tested in claim 20, and the best age to claim depends on how long the person lives.
The cost, from the book's own figures. Taking the homeowner's number as the number leaves a single renter on a modest budget in Australia A$230,000 short of ASFA's own sum (A$110,000 against A$340,000). In the UK, a single Comfortable life priced on the after-tax method needs a pot of £821,310 at a 4 per cent withdrawal rate, which is £232,990 less than the £1,054,300 that Pensions UK's before-tax figures give, because withdrawals from a pension are taxed.
Made by: Matthew, Thurman, Chatzky.
Test it on your own numbers
- United States: my Social Security account (ssa.gov/myaccount), to read your earnings record and benefit estimates at each claiming age.
- United Kingdom: MoneyHelper pension calculator (moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics/pension-calculator) and Check your State Pension forecast (gov.uk/check-state-pension), to see your forecast amount and the date you can claim.
- Australia: Moneysmart retirement planner (moneysmart.gov.au/retirement-income/retirement-planner), to see income from super and the Age Pension together.
The full test, with every figure dated and sourced, is in chapter 19 of the book.