How much superannuation do I need to retire

How much superannuation do I need to retire?

How much super is enough for a comfortable retirement? Read on to find out.

Each year thousands of Australians contemplating retirement face a very tricky question: “Do I have enough super?”

Once you leave the workforce and are no longer earning an income, your financial security will depend on how much superannuation you have accumulated.

So, how much super do you need to fund your retirement? Let’s take a closer look.

How much super do I need to retire comfortably?

If you’ve followed financial reports in the media in recent years, you’ll probably have heard the claims that Australians need a super balance in excess of $1 million in order to enjoy a comfortable retirement. However, the amount of super you need varies depending on a number of factors, including:

  • The type of lifestyle you want
  • When you retire
  • How long you live
  • Your future medical costs

In other words, you’ll need to think about what needs you’ll have in retirement, what sort of lifestyle and perks you’ll want to enjoy, and how long you’re expecting to spend in retirement. However, it’s worth remembering that you’ll typically need less income in retirement than you did while working full-time.

How much super is enough?

When working out how much super you’ll need for retirement, it can be difficult to calculate with accuracy how much money will be enough to spend during each year of retirement to live the lifestyle you desire.

To help make this easier, the Association of Superannuation Funds of Australia (ASFA) has created the ASFA Retirement Standard. This outlines the annual budget Australians will need to enjoy either a modest or comfortable standard of living once they leave the workforce. The Standard for the 2017 June quarter is detailed in the table below:

ASFA Retirement Standard

Modest lifestyleComfortable lifestyle
Singles aged 65-85$27,368 per year($524.29 per week)$42,764 per year($819.22 per week)
Couples aged 65-85$39,353 per year($753.88 per week)$60,264 per year($1,154.49 per week)
Singles aged 85 and above$25,841 per year($495.03 per week)$40,636 per year($778.47 per week)
Couples aged 85 and above$36,897 per year($706.83 per week)$56,295 per year($1,078.45 per week)

*NB: This Standard is updated regularly in line with the cost of living. The figures above are taken from the Standard for the 2018 March quarter.

According to ASFA, a modest lifestyle is better than the lifestyle you could fund with an Age Pension, but would mean that you could still only afford fairly basic activities.

A comfortable lifestyle after retirement “enables an older, healthy retiree to be involved in a broad range of leisure and recreational activities and to have a good standard of living through the purchase of such things as: household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, domestic travel and periodic international holiday travel”.

How much super is enough for my retirement?

Taking the ASFA Retirement Standard as a guide, how big a super lump sum will you need when you retire? This depends on the age at which you retire, how long you live and the lifestyle you desire.

Let’s assume that you want to have enough retirement funds to last you until 90 years of age. The table below breaks down the lump sum required by singles and couples to live either a modest or comfortable lifestyle. These figures assume that singles and couples will also access the Age Pension, in addition to drawing down their full super balance.

Modest lifestyleComfortable lifestyle
Lump sum required for singles$70,000$545,000
Lump sum required for couples$70,000$640,000

*NB: The figures above are once again taken from the March quarter 2018. The fact that the lump sum required to live a modest lifestyle is the same for both singles and couples is due to the rules around means-testing the pension.

As you can see, even living a modest lifestyle requires a significant super balance. Other variables will influence the amount of money you require in retirement, such as whether you own your own home or rent, whether you own any pets, plus your health and general lifestyle. Though you may need less than the oft-quoted $1 million mark in some circumstances, you’ll still need a sizable amount of super to your name to afford funding your retirement.

It's never too early or late to pay heed to the performance of your current super fund. By ensuring your fund delivers a strong performance relative to other funds while at the same time charging reasonable fees, you can maximise your earnings over the period when you are at work to deliver a strong balance come retirement.

Compare super funds

Name Product Past 1 Year Performance Past 3 Year Performance Past 5 Year Performance Calculated fees on $50,000 Insurance Included
10.70%
8.61%
9.84%
$553.00
Death, TPD
Earn a Retirement Bonus of up to $4,800 when you open a new Income account. T&Cs apply.
10.62%
New fund
New fund
$348.00
Death, TPD
Earn Velocity Frequent Flyer Points for making contributions to your super. T&Cs apply.
N/A
N/A
N/A
$683.00
Death, TPD, Income Protection
Choose between 14 different investment options, including a socially responsible option.
11.08%
9.30%
10.51%
$421.76
Death, TPD, Income Protection
Enjoy discounted rates on banking products with ME Bank and health cover with GMHBA health insurance.
9.63%
7.84%
8.88%
$535.00
Death, TPD, Income Protection
Socially responsible and ethical investment options available.
7.57%
8.08%
N/A
$450.00
Death, TPD
Pay no entry, exit or switching fees and enjoy a range of different investment options with QSuper.
10.57%
8.12%
9.51%
$573.53
Death, TPD, Income Protection
Get access to one-on-one professional advice at no additional cost.
6.70%
6.26%
7.52%
$662.00
Death, TPD, Income Protection
Choose investment options that align with your personal values.
11.43%
7.73%
8.76%
$703.00
Death, TPD
Access offers, deals and discounts through the BT Super Benefits Now program.
10.95%
9.39%
10.41%
$565.00
Death, TPD, Income Protection
Enjoy discounted health insurance with HCF.
8.79%
8.51%
9.59%
$646.76
Death, TPD
Get fee-free advice on your superannuation as a BUSSQ member. T&Cs apply.
7.41%
6.24%
7.89%
$601.76
Death, TPD
Receive a complimentary financial planning session with a Suncorp financial planner.
12.50%
10.17%
11.02%
$621.76
Death, TPD, Salary Continuance
Enjoy discounted rates on banking products with ME Bank.
9.39%
8.60%
9.93%
$535.88
Death, TPD
Access simple personal advice at no cost.
8.14%
6.50%
N/A
$703.00
Death, TPD
Gain access to lifestyle offers and benefits on NAB financial products and services.
8.76%
7.14%
8.81%
$497.60
Death, TPD, Income Protection
Earn rewards and vouchers through the AIA Vitality program.
10.45%
8.61%
10.14%
$361.00
Death, TPD, Income Protection
A flexible industry super fund for people who work in Australia’s higher education and research sector.

Compare up to 4 providers

The information in the table is based on data provided by Chant West Pty Ltd (AFSL 255320) which is itself supplied by third parties. While such information is believed to be accurate, Chant West does not accept responsibility for any inaccuracy in such information. Chant West’s Financial Services Guide is available at https://www.chantwest.com.au/financial-services-guide . Finder offers no guarantees or warranties about the data and we recommend that users make their own enquiries before relying on this information. Performance, fees and insurance data is based on each fund's default MySuper product. Where the performance, fees and insurance data for the MySuper fund vary according to the member's age, results for individuals between 40-49 years of age have been shown. Past performance is not a reliable indicator of future performance.

How much super should I have at my age?

OK, so now you’ve got a rough idea of how much super you’ll need when you actually retire, but how do you work out whether you’re on track to reach that goal? For example, how much super do you need at age 40 or 50 to be able to afford to retire whenever you want, be that at 65, 70 or any other age?

There are plenty of handy online calculators that you can use to work out how your super is tracking and whether you’re on target to reach your retirement goal. Many super funds offer these calculators through their websites or member portals, while there’s also a handy retirement planner available on the Australian Securities and Investments Commission’s MoneySmart website.

You may also want to take a look at the average super balances for Australians in your age bracket. Use the table below to get an idea of how you’re tracking relative to your peers:

Mean Superannuation Balance 2015-16

AgeBalance
15 to 19 years$485
20 to 24 years$5,501
25 to 29 years$21,372
30 to 34 years$38,386
35 to 39 years$56,715
40 to 44 years$80,899
45 to 49 years$114,616
50 to 54 years$135,290
55 to 59 years$180,689
60 to 64 years$214,897
65 to 69 years$207,105
70 to 74 years$76,049
80 to 84 years$42,912
85 years and over(estimated) $14,374

Source: Survey of Income and Housing, Australia, 2015–16, Australian Bureau of Statistics

Do Australians have enough super?

Unfortunately, many Australians simply do not have a large enough superannuation balance to see them through their retirement years. In 2015-16, average superannuation balances at the time of retirement (assumed to be age 60 to 64) were $270,710 for men and $157,050 for women. As you can see in the table above, these average amounts fall well short of the lump sum needed to enjoy even a modest lifestyle.

MLC’s Quarterly Australian Wealth Behaviour survey has also produced some alarming data, with the latest survey revealing that more than half of Australians don’t think they’ll have enough super to retire on. Even worse, one in three Australians believe they’ll have “far from enough” super to call on when they leave the workforce.

However, there is some good news. ASFA has reported that while only around 20% of Australian retirees have reached a comfortable standard of living, this figure is expected to increase to about 40% by 2040. This forecast includes the scheduled increases in Super Guarantee (SG) payments, which should see them rise to 12% of your earnings by 2025.

Can my super be supplemented by the Age Pension?

If our mean superannuation balances are well below what’s needed to live comfortably or even modestly in retirement, how do current retirees survive? This is where the Age Pension comes in. The pension is actually the principal source of income for 70% of retirees aged 45 and over, and depending on your assets you could qualify for a part or full pension.

The maximum basic amount payable per single person is $814 per fortnight, or $21,164 per year. If you qualify for a part or full Age Pension, this, along with your super balance, can be used to help fund your retirement. So even if you only have a modest super balance of, say, $150,000, this can still provide you with a weekly income over and above the Age Pension.

How to make sure you have enough super

Worried you won’t have enough super to live the lifestyle you want in retirement? Keep the following tips in mind to help boost your retirement savings:

  • Search for lost super. Changed jobs, changed address or changed your name? By finding your lost super, you could provide a dramatic boost to your retirement funds.
  • Consolidate your super. If you have multiple superannuation accounts, consider consolidating them into one single account to save on fees. However, make sure you’re aware of any exit fees before you consolidate, and remember to check whether you will still have adequate insurance cover in place.
  • Consider your investments. You may wish to think about how your super is invested. For example, if you want maximum possible capital growth, you may need to switch to a more aggressive investment portfolio to increase the chances of reaching your financial goal.
  • Salary sacrifice. If your employer offers salary sacrificing, you can contribute extra funds to your super and take advantage of the fact that they will be taxed at a reduced rate. It’s a great way to automate the process of boosting your super balance.
  • Make personal contributions. You may also want to consider making personal tax-deductible contributions (capped at $25,000 per year) to your super, as well as making after-tax contributions (capped at $100,000 per year).
  • Plan for a long retirement. How long do you think you’ll spend in retirement – 15 years? 20? 30? While the retirement age is going up, so too is the average life expectancy in Australia, with retired men expected to live to 86 years and retired women to the age of 90. Make sure you’ve got enough super to cover you right through your golden years.
  • Know your tastes. The ASFA Retirement Standard is an extremely useful tool when calculating how much super you need; however, it’s worth remembering that the definitions of modest or comfortable lifestyles are extremely personal. What represents a modest lifestyle for one retiree might seem like borderline luxury to another, so make sure you’ll have enough to fund the exact lifestyle you desire.
  • The 67% rule. Another method sometimes suggested to calculate how much super you need is to assume that you need 67% (or two-thirds) of your yearly income in retirement. So if you were earning $100,000 a year, you’d need enough super to cover annual living expenses of $67,000. However, this method is only viable for people who earn an above-average income.
  • Think of your children. Remember to not only consider how much super you need to see out your retirement, but also whether you want to leave money to your children when you pass away. If you do want to leave a little nest egg behind, you may need a bigger super balance than you think.

Retirement may seem like it’s still a long way off, but taking action now could be crucial to ensure that you have enough super tucked away. Now is the perfect time to review your super balance, calculate how much you’ll need to enjoy a comfortable retirement, and then start thinking about how you can make those two figures meet.

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