How Much Superannuation do I Need to Retire Comfortably in Australia?

Written by: Chris Strano

The realisation of never working another day and relying on your super to provide you with an income for the remainder of your life can be daunting.

Well, let’s put your mind at ease and show you exactly how much money you need to retire comfortably in Australia.

How Much Super Do I Need To Retire?

How much is enough for retirement in Australia? It’s quite subjective, isn’t it? Thankfully, I’m going to keep it simple to give you a rough idea.

We all have different needs, desires and retirement goals. Or do we? Over the years that I’ve been helping people with their retirement plans, one thing remains constant: we’re not actually as unique as we think we are! Well, that’s a lie; we are all unique beings, but our retirement income goals are largely the same.

We all want somewhere between $50,000 – $70,000 per year in retirement income, plus around $5,000 – $20,000 per year for travel. Does that sound about right? On top of that, some of us want to do a few home renovations in the first few years of retirement and some of us are considering downsizing our home at some point in retirement.

In Australia, the amount of money you need to retire will usually range between $70,000 and around $1,500,000 depending on a number of factors, including:

  •  Whether you live a modest, comfortable or a-little-bit-lavish lifestyle;
  • The age you intend on retiring at (determines how many years your investments need to provide an income for);
  • Whether you are single or a member of a couple; and
  • Expected investment returns

How Much Super Do I Need To Retire Comfortably?

A comfortable retirement income in Australia is defined as a debt-free, healthy retiree being involved in a broad range of leisure and recreational activities, holding private health insurance cover, having a good standard of living with a reasonable car, nice clothes and regular travel.

A modest retirement lifestyle is having basic needs a little bit above just relying solely on the Age Pension.

The table below compares the annual budgets for households of both modest and comfortable living standards for 65-year olds:

  Moderate Lifestyle Comfortable Lifestyle
  Single Couple Single Couple
Expenses per year $27,902 $40,380 $43,687 $61,909

Source: AFSA Retirement Standard

 

Based on this, the amount of superannuation you need for a modest retirement at age 65 is:

  Super Balance Required At Retirement
Modest Lifestyle (couple) $70,000
Modest Lifestyle (single) $70,000

Source: AFSA Retirement Standard

And the amount of superannuation you need to retire comfortably at age 65 is:

  Super Balance Required At Retirement
Comfortable Lifestyle (couple) $640,000
Comfortable Lifestyle (single) $545,000

Source: AFSA Retirement Standard

The main reason for such a large disparity between the super balances required by the two types of lifestyles is due to the Age Pension. Only a small amount of super is required to support a modest lifestyle because the Centrelink Age Pension supports a large portion of the expenses required to cover a modest lifestyle; whereas the difference in expenses between a modest and comfortable lifestyle needs to be fully funded from super.

So, you could say that the average person needs around $545,000 for a comfortable retirement, or $320,000 (each) for members of a couple.

How Much Super Do I Need To Retire at 60?

Not everyone wants to wait until age 65 to retire. Retiring sooner will require you to have more in super, as your super balance will need to provide you with an income for longer. 

Here is how much super you will need to retire at age 60:

  Moderate Lifestyle Comfortable Lifestyle
  Single Couple Single Couple
Super Balance at 60 $220,000 $295,000 $775,000 $965,000

Calculated using AFSA Retirement figures, plus five additional years using the same assumptions.

As you can see, the amount of super required to retire at age 60 is considerably more than retiring at age 65. This is because your super alone needs to cover your expenses, with no assistance from the Age Pension until age 67.

How Much Super Do I Need To Retire at 55?

Accessing your super at age 55 is no longer possible. It’s important to remember that you generally need to have met your superannuation preservation age prior to being able to access any part of your super. The superannuation preservation age ranges between age 55 and 60, depending on when you were born.

Also, if you plan on starting an income stream with your super, the income will usually only be received tax-free if you are over age 60.

Your preservation age and potential tax on income under age 60 are two factors that really need to be considered if you plan on retiring and accessing your super prior to age 60.

It is likely that you will need to use your non-superannuation investments to cover your expenses prior to reaching age 60, if you plan on retiring under age 60.

Here is how much super you will need to retire at age 55:

  Moderate Lifestyle Comfortable Lifestyle
  Single Couple Single Couple
Super Balance at 55 $370,000 $520,000 $1,005,000 $1,290,000

Calculated using AFSA Retirement figures, plus five additional years using the same assumptions – not taking into account potential income tax.

How Much Super Is Enough?

So how much super do you need to retire? Are you content with a modest retirement, would you prefer a comfortable retirement, or are you planning on living it up?

The first step is to check your superannuation preservation age, so that you know what age you can access your super. Then, decide on what age you would like to retire, how much you need between now and being able to access your super and what your super balance needs to be once you can access it.

 

ABOUT CHRIS
Chris Strano created SuperGuy to help the average punter navigate through the complex and ever-changing super rules. It has since become one of Australia’s leading digital super resources.

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