If you are like most people we speak to, $50,000 a year is the minimum number that represents being financially comfortable. This figure represents about 70% of current joint earnings, and seems achievable and livable.

The big question is: How do you fund this annual income once the monthly work cheques have stopped?

The short answer is: With great difficulty.

By way of example, did you know that the average Australian male has a balance of $31,250 in his superannuation fund, with women having even less, at $18,500?

The age pension is not a great help either, and will only cover the basic needs. The maximum pension entitlement is about $17,000 per annum for a single pensioner and $25,000 per annum for a couple.

Assuming you retired today, how much would you need to have as a lump sum to provide you with income of $50,000 a year?

At a 5% return on your investment, you would need $1 million. This excludes the value of your family home, as you will still need a place to live when you retire, and your home is therefore not seen as a source of income.

The challenge is how to accumulate the funds needed for a comfortable retirement if you don’t have them right now.

Let’s be generous and assume that you have half of that amount covered with current savings and super, and with future super contributions i.e. $500,000. (For simplicity, we’ll exclude the impact of inflation and interest).

Let’s also assume you have 15 years to retirement. This means that you would have to save (or accumulate) $33,333 each year, in after-tax income. Are you able to save that amount each year? How does that compare to what you are managing to save each year, right now?

If this is an unrealistic amount, what are the options? To accept that you will be seriously under-funded in retirement, or to look for alternative sources of investment and wealth creation?

One thing is certain, with the wave of baby boomers heading for retirement, there is going to be a tsunami-like effect as the numbers and extent of under-funded retirees become apparent. Bear in mind that the majority will be living well into their eighties thanks to the longevity made possible by medical advances and lifestyle changes.

Which group do you want to be in - the financially comfortable and independent retirees who successfully implemented a strategy for their future needs while they were still working; or the 94 per cent who will be under-funded, and who will eventually fall back on the age pension as their super and savings run dry?

If you would like to learn more and discuss how McCarthy Group can assist you, click here.