How Much Superannuation Do I Need To Retire?

 March 24, 2022

By  Chase Edwards

how much money do you need to retire comfortably in australia?

How much money do you need to retire? It’s a question that Australians ask themselves at some point in their life, and usually too late. You may have heard that you need around a million dollars, this is the figure that gets thrown around as the ideal number for financial independence.

However, the truth is there is no one-size-fits-all number. A comfortable retirement is going to look different from person to person.

Whilst 7 figures in Superannuation sounds ideal, in reality, most people won’t have anywhere near that amount when retirement is thrust upon them. According to a 2019 report by the Association of Superannuation Funds of Australia Limited (ASFA), Australians aged between 60-64 are retiring with a median balance of $154,452 for men and $122,848 for women.

It is important and often helpful to have a figure in mind for your retirement savings goal. What is even more crucial, is having a strong understanding of what a ‘comfortable retirement’ looks like for you. Once you know that, then you can go about figuring out how much money you will need for retirement. For help working out how much super you will need to retire, here are a few things to consider:

Think About The Kind Of Lifestyle You Want In Retirement

what sort of retirement will you live with no super?

Determining how much money you will need for retirement, at the crux, comes down to the lifestyle you want to live once you’re finished in the workforce. For some, retirement means slowing down and spending more time with their loved ones. On the other hand, for some retirement is the time to do all the exciting things you never had time for, such as travelling.

If you see yourself living with the same level of comfort as you did during your working life, then you will need to figure out how much you need to cover those costs, minus what you are currently spending on work-related expenses.

However, if you’re content to live a more modest lifestyle after you retire, then you won’t need as much.

As previously mentioned, ‘comfortable’ means something different to each person. This is why it can be quite helpful to have a ‘standard’ to compare against.

The Association of Superannuation Funds of Australia’s (ASFA) Retirement Standard provides an estimate on how much money you need for a ‘modest’ or ‘comfortable’ retirement, for both singles and couples. It also explores what a comfortable retirement looks like, versus and modest one. The table below also compares these standards to the Government Age Pension. (Note: these estimates assume you own your home.)

Budgets for various households and living standards for those aged around 67

WHAT CAN IT AFFORD?Regular leisure activities Dining in restaurants regularly A reasonable car Budget for home improvements Domestic and occasional overseas trips Premium private health insurance Occasional leisure activities Take away and cheap restaurants A basic car Budget for small home repairs One domestic holiday or a few short breaks Basic private health insuranceNo or low-cost leisure activities Inexpensive takeaway or club special meals No car, or no budget for repairs No budget for home repairs Very short breaks or day trips in your city No private health insurance
$45,239 per year$28,775 per year$22,937 per year (maximum basic rate) 
$63,799 per year$41,446 per year$34,580 per year (maximum basic rate) 
The Association of Superannuation Funds of Australia’s (ASFA) Retirement Standard
* Excludes the pension supplement and energy supplement. Services Australia. Applicable 20 September 2021 to 19 March 2022.

Know Where Your Money Goes – Day-To-Day Expenses

work out where your spending goes and how much super you will need to replace your income

Figuring out how much super you will need for retirement will largely depend on the lifestyle you lead and your daily expenses. To Work our your daily expenses consider:

  • How much do you spend on groceries and everyday items?
  • How often do you eat out at a restaurant or café?
  • (Before COVID) How many local, domestic or international holidays do you take each year?
  • Does your house need some work done?

Beyond everyday expenses and the occasional splurge, you also need to plan for unexpected costs. You will also need to factor in any outstanding debts, into your budget. 

Consider How Long You’ll Spend In Retirement

how long will you spend in retirement?

Thanks to things like better nutrition, public health, and overall medical advances, the average Australian is living longer. For example, roughly 40% of women and 26% of men who are 65 today are estimated to live to 90 years old, which is well above the average life expectancy.

An increased life expectancy means you need to plan for a longer retirement or consider slowly transitioning into retirement.

Current AgeMaleFemale
Current Life Expectancy in Australia

Life expectancy calculators use data to calculate roughly how long you’re going to live so that you can begin preparing to fund your retirement. However, it is important to remember that algorithms only play the averages and can’t actually predict anything. It is a far smarter idea to estimate you will live longer than the average when calculating how much income you will need for retirement.

Know Your Eligibility For The Government Age Pension 

the pension is available for those who can’t fund retirement on their own

The Age Pension is available for people who don’t have the financial resources like super to fund their retirement. The Pension is a government payment, essentially a safety net for people who meet the age and residency requirements. Roughly 62% of Australians over 65 receive some form of government pension.

The amount you receive comes down to a wide range of factors, such as your assets, how much super you have, and any other income that you may receive in retirement, for example, rental returns from an investment property.

Consider A Transition To Retirement 

For most people, once you hit retirement age, completely stopping work can be a massive lifestyle shock. Instead, you may want to think of ways to ease your way into retirement. This is where something like a Transition to Retirement (TTR) strategy can come in handy. A TTR allows access to your super while you keep working. If you have reached your preservation age, and you are still in the workforce, you can do this to help supplement your income whilst you work fewer hours. If you’d like to keep working full-time, you can boost your super while saving money on tax.

If you are concerned that you won’t have enough super saved in time for your ideal retirement, then a TTR strategy could be an option. You can use TTR income to top up your take-home pay. This means you can work less and save more.

Get The Right Advice For Your Retirement Planning

follow chaseedwardsau for further tips and info

Each individual will live a unique life and retirement. Whether you’re in the stages of planning or are already retired… Chase Edwards Can Help. Our team of financial advisors can provide relevant information that’s tailored to your personal circumstances and financial goals, so you can make an informed decision about managing your super to get ready for retirement.

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