I speak at a lot of retirement seminars and the most common question is, “How much do I need in my superannuation to fund a comfortable retirement?”
The answer is very individual because it depends on what sort of retirement lifestyle you choose. Everyone is different, with different spending habits, hobbies and passions.
ASFA benchmarks: your guide
But as a benchmark, I always refer to The Association of Superannuation Funds of Australia (ASFA) retirement budgets for a modest and a comfortable lifestyle.
ASFA has just updated its retirement benchmarks for the first time in three years. And the shift is significant.
For a comfortable retirement – one that covers a decent lifestyle, a reasonable car, private health insurance and a modest amount of travel – couples now need $730,000 in super at retirement, up from $690,000. For singles, that figure has risen to $630,000, up from $595,000.
If you’re planning a more modest retirement, relying largely on the full age pension with very little discretionary spending, the benchmarks are lower but have also jumped. Couples need $120,000 in super (up from $100,000), and singles need $110,000 (also up from $100,000).
For couples who rent in retirement and want a modest standard of living, factoring in rent assistance and the full age pension, the retirement savings target is $385,000. For single renters, it’s $340,000.
What it costs annually
A comfortable retirement now costs couples $77,375 a year and singles $54,840. A modest retirement costs couples $51,299 a year and singles $35,503. For renters on a modest budget, those annual figures rise to $67,639 for couples and $50,055 for singles.
Even the “comfortable” budget only includes one frugal international holiday every seven years. So if you’re dreaming of exploring the world in retirement, you’ll want to plan beyond the benchmark.
Planning beyond the numbers
These figures are a useful guide, but they aren’t a one-size-fits-all answer. Your retirement goals, health, lifestyle expectations, and where you live will all affect how much you need to save.
If you’re now thinking you may fall short, there are several ways to build your super and move closer to your retirement goals:
- Add to your super: Consider making voluntary contributions from pre-tax income (including salary sacrifice) or after-tax savings. If you haven’t used your full concessional caps in previous years, you may also be able to make catch-up contributions.
- Use available incentives: Eligible low and middle-income earners may receive a government co-contribution when they add after-tax money to super, and contributing to a partner’s super may also attract a tax offset.
- Check your investment settings: Make sure your super is invested in options that match your risk tolerance and time frame, particularly as you move closer to retirement.
The key is paying your super some attention. Things like starting early, reviewing your fund regularly, and making small extra contributions where possible can make a significant difference over time.
For anyone unsure where they stand, a financial adviser can help map out a personalised retirement strategy – taking into account your individual financial circumstances but also lifestyle choices.
Having an idea of how much super you need to save to fund YOUR version of retirement, can help you stay on track.
