One of the age-old questions in relation to retirement is “How much will I need in super to support myself for the rest of my life?”. It’s a difficult one to answer as everyone’s circumstances are different.
You’ll probably have a good idea how much you already have in super (and if you don’t it’s a good idea to go and find out). However, working out how much you’ll have and whether you can afford the life you want when you eventually stop work, can be a little more challenging.
Working towards the right superannuation target for you
Because Australia has an ageing population, many people can now expect to live well into their 80s, 90s and beyond, so you need to plan to have enough money not just up until your life expectancy, but beyond that as well. If the average person retires around age 67 but lives until their late 80’s, that means they’ll have to plan for at least 20+ years of retirement, remembering that they may live even longer.
How much money you’ll need throughout your retirement isn’t just about how much you’ll need to withdraw to live on, it’s also about some of the other big money items that you might need to cater for. Some of these may include:
- Whether you’re a couple or a single person
- Whether you’ve paid off your mortgage or not, or will your super need to help you pay off your home
- If you don’t own your own home, will you need to rent and cover this expense throughout your retirement years
- What other assets you have
- Will you qualify for the Age Pension, and when might you qualify, if you don’t qualify immediately
- Do you want to travel regularly, or are major renovations to your home a consideration
- What are your medical needs and will you have any big expenses to cater for
- Will you need to purchase a new car now or some time in the future
- How long you might live in retirement – whilst no one knows the answer to this question, your family history and your current health status can be key indicators.
This is not an exhaustive list, but it’s worth thinking about what some of those big money items might be that are relevant to you, so that you can cater for them.
The other key determinant for how much money you’ll need to save for your retirement is your lifestyle, as well as what other assets outside super you have to support you. This could include investments, other property you may own and any cash reserves.
To help you with this, the Association of Superannuation Funds of Australia (ASFA) has developed a retirement standard that estimates how much money you may need, depending on the lifestyle most relevant for you.
Below is an overview of the ASFA standards, and they estimate that for a couple looking for a comfortable retirement lifestyle, they’ll need to have at least $640,000 in accumulated savings, and for a single person, they would need at least $545,000 in todays dollars. These calculations assume that a partial Age Pension would be received from the Government.
ASFA Retirement Standard | Annual living costs | Weekly living costs |
Couple – modest | $41,929 | $803 |
Couple – comfortable | $64,771 | $1,241 |
Single – modest | $29,139 | $558 |
Single – comfortable | $45,962 | $880 |
The ASFA standard above includes a detailed budget breakdown. To review the calculations, access the report here.
For you, the calculation might be different and here is a link to the MoneySmart budget planner. Completing a budget planner is an important step that will highlight information relevant to you, to base your calculations on. This easy to use tool will help you identify:
- How you spend your money
- Customise your spend on essentials as well as life’s pleasures, so you can calculate what your annual requirements are.
You can also refer to the MoneySmart Retirement Planner calculator. This calculator can help you find out:
- What your income is likely to be when you retire from your super and the Age Pension. (Note: it’s a good idea to have your superannuation details handy when you’re using this tool. You can refer to you latest superannuation statement or access your superannuation details via your MyGov account).
- How contributions, investment options, fees and your retirement age will impact your retirement income.
- How working part-time or taking a career break from work may impact your superannuation balance
Once you’ve completed these, you’ll have a better idea on how much money you’ll need annually in retirement, which will help you determine whether your current super projections will deliver what you need. If there’s a shortfall, you can work on what you need to do to meet that shortfall.
How regularly should I monitor my super account?
It’s fair to say that the closer you get to retirement, the more important your superannuation balance becomes and deciding whether you’ll have enough money to support your lifestyle.
Whilst it’s different for everyone, it’s a good idea to check your account balance and your funds performance at least annually.
Make sure you’re comfortable that your super is tracking well towards what you’ll need in retirement. You may not know what’ll happen in the future, but it’s always better to make sure you’ve done everything you can to prepare for it. If you’re unsure what to look for or if you have questions, you don’t have to go it alone. Reach out to your super fund or speak to your financial adviser. If you don’t have a financial planner, reach out to the Financial Advice Association Australia who as an independent body, can help put you in contact with one.
One of the age-old questions in relation to retirement is “How much will I need in super to support myself for the rest of my life?”. It’s a difficult one to answer as everyone’s circumstances are different.
You’ll probably have a good idea how much you already have in super (and if you don’t it’s a good idea to go and find out). However, working out how much you’ll have and whether you can afford the life you want when you eventually stop work, can be a little more challenging.
Working towards the right superannuation target for you
Because Australia has an ageing population, many people can now expect to live well into their 80s, 90s and beyond, so you need to plan to have enough money not just up until your life expectancy, but beyond that as well. If the average person retires around age 67 but lives until their late 80’s, that means they’ll have to plan for at least 20+ years of retirement, remembering that they may live even longer.
How much money you’ll need throughout your retirement isn’t just about how much you’ll need to withdraw to live on, it’s also about some of the other big money items that you might need to cater for. Some of these may include:
This is not an exhaustive list, but it’s worth thinking about what some of those big money items might be that are relevant to you, so that you can cater for them.
The other key determinant for how much money you’ll need to save for your retirement is your lifestyle, as well as what other assets outside super you have to support you. This could include investments, other property you may own and any cash reserves.
To help you with this, the Association of Superannuation Funds of Australia (ASFA) has developed a retirement standard that estimates how much money you may need, depending on the lifestyle most relevant for you.
Below is an overview of the ASFA standards, and they estimate that for a couple looking for a comfortable retirement lifestyle, they’ll need to have at least $640,000 in accumulated savings, and for a single person, they would need at least $545,000 in todays dollars. These calculations assume that a partial Age Pension would be received from the Government.
ASFA Retirement Standard
Annual living costs
Weekly living costs
Couple – modest
$41,929
$803
Couple – comfortable
$64,771
$1,241
Single – modest
$29,139
$558
Single – comfortable
$45,962
$880
The ASFA standard above includes a detailed budget breakdown. To review the calculations, access the report here.
For you, the calculation might be different and here is a link to the MoneySmart budget planner. Completing a budget planner is an important step that will highlight information relevant to you, to base your calculations on. This easy to use tool will help you identify:
You can also refer to the MoneySmart Retirement Planner calculator. This calculator can help you find out:
Once you’ve completed these, you’ll have a better idea on how much money you’ll need annually in retirement, which will help you determine whether your current super projections will deliver what you need. If there’s a shortfall, you can work on what you need to do to meet that shortfall.
How regularly should I monitor my super account?
It’s fair to say that the closer you get to retirement, the more important your superannuation balance becomes and deciding whether you’ll have enough money to support your lifestyle.
Whilst it’s different for everyone, it’s a good idea to check your account balance and your funds performance at least annually.
Make sure you’re comfortable that your super is tracking well towards what you’ll need in retirement. You may not know what’ll happen in the future, but it’s always better to make sure you’ve done everything you can to prepare for it. If you’re unsure what to look for or if you have questions, you don’t have to go it alone. Reach out to your super fund or speak to your financial adviser. If you don’t have a financial planner, reach out to the Financial Advice Association Australia who as an independent body, can help put you in contact with one.