How much money do you really need in super for a comfortable retirement? Good question—and one of the most frequently asked questions we get asked at National Wealth Advisory.
In this article we will look at:
- What is considered a comfortable retirement?
- How early access to your super fund during COVID will affect you in the long-term?
- How much should you have in your super fund by ages 30, 40, 50 and 60?.
What is considered a comfortable retirement?
Many Australians, when they are asked “What does a comfortable retirement” look like, their answers inevitably include being able to explore the parts of Australia they’ve never seen, the occasional overseas holiday (even if it’s only across the Tasman to visit our Kiwi cousins), and being able to pay for recreational activities, groceries and utilities without having to watch every last cent.
If you want to maintain a comfortable standard of living, it’s not unusual for an individual to underestimate how much money they require. Figures released by the Association of Super Funds of Australia report the average couple will need around $640,000 and $545,000. These figures assume you own your own home and don’t have ongoing medical issues.
The amounts released are only recommendations.How much money you really need for a comfortable retirement will be dependent on your individual situation. For example; you’ll need more if you are still renting or paying off a mortgage, or have ongoing costs such as paying for medical care. Additional avenues of income and investments, along with whether or not you qualify to receive the pension will also play a role in whether your retirement is the retirement you always dreamed of.
How early access to your super fund during COVID will affect you in the long-term?
The Australian Prudential Regulation Authority (APRA) reported $15.9 billion was paid out to 2.1 million Aussies who had requested early access to their super. While the short-term relief from financial stress may have provided some solace, the consequences of early withdrawal can have far-reaching effects.
Australia’s largest independent researcher, Canstar analysed the effects of an early draw-down from the perspective of a 25-year-old taking advantage of the two $10,000 lump sums the Government made available during the height of the COVID pandemic. The findings were astounding and showed that a $20,000 withdrawal could result in a loss of $102,824 by the age of retirement. It could mean the difference between a comfortable retirement and having to count every cent.
How much super should I have based on my age?
You’ll be surprised just how many Australian underestimate the amount they need to retire comfortably. Even at 30 years of age—though retirement seems like light years away—you may be focused on other goals. For example; on purchasing a home and growing a family. In your thirties. It is not unusual to think retirement is something that happens to old people, yet surprisingly retirement age has a habit of sneaking up on you.
Let’s take a look at the age breakdowns and what your estimated superannuation balance should be.
The APRA Annual Superannuation Bulletin reports, the average Aussie male aged 30 years has $27,182, compared to a $22,850 super balance for females. However, the ASFA Super Balance Detective calculator to work out how much super you need by 30 for a comfortable retirement recommends your super balance should be around $54,000—a significant difference between the average and the recommended goalpost. Each year you should be contributing between $9,000-$11,000.
Once you reach 40, you may feel like you have at least 10 years before you really need to be concerned about your super balance. ASFA projects you should have approximately $143,000 for a comfortable retirement Increasing by $10,000-$11,000 each year.
It’s time to start getting serious about your super balance. If you’re not on track, it can be a little unsettling particularly if you still don’t own your own home. By the age of 50, ASFA Super Balance Detective recommends your super balance should be sitting on about $257,000.
With the government downsizer incentive, the eligibility age has dropped from 65 years of age to 60. Announced as part of the 2021-22 budget, homeowners who choose to sell their family home are able to deposit up to $300,000 into their superfund without it affecting their eligibility for the pension. The incentive was introduced as a means to free up more stock for the property market. If your super balance is under $400,000 this is a quick-fire way to play catch up for a comfortable retirement.
Source: The Association of Superannuation Funds of Australia Super Balance Detective calculator.
If your super fund is showing significant gaps and you’re concerned about your retirement lifestyle, National Wealth Advisory can connect you with our network of trusted financial advisors to provide guidance on the best way to grow your super fund balance. Contact us today to ask about the downsizer contribution, super consolidation, investment opportunities or salary sacrificing.