Everyone has different ideas of how their retirement might ‘look’. How much super will be enough depends on many things, starting with what a ‘comfortable’ retirement looks like to you.
You might want to travel or you may want to dine out every week at a fancy new restaurant. It could be that just want to help your children and grandchildren or the chance to sit back and relax without any money worries.
Then there are one-off costs to think about, like a new car or a deposit on a retirement village. And you might need money for any health issues that happen in retirement.
Okay, how much super will be enough?
The important thing is to start thinking about all of this early on. Don’t wait until you’re 60. First, work out how much money you think you’re going to need in retirement. Use this to figure out how much superannuation is going to be enough to get you through a happy retirement.
There are lots of different ways to work out how much super will be enough for you in retirement, and lots of online calculators to help you.
The Association of Superannuation Funds of Australia’s Retirement Standard, for example, has done some number crunching. They estimate that by the age of 65, a single person who wants a ‘comfortable’ lifestyle (with annual living costs of $43,901), would need a lump sum of $545,000 in today’s money.
For couples a ‘comfortable’ lifestyle (with annual living costs of $62,083), they say you’ll need a lump sum of $640,000 by the age of 65.
In contrast, the lump sums needed for a modest lifestyle are relatively low at $70,000 for singles and couples. This is because the the base rate of the Age Pension (plus various pension supplements) is sufficient to meet much of the expenditure required at this budget level.
How much super will I need with inflation?
In 20 or 30 years, these numbers will look very different when you take the cost of living into account. However, the ‘Standard’ is updated four times a year to factor in the rising price of items like food and utility bills. It also looks at people’s changing lifestyle expectations and spending habits. Plus the costs of things like health, clothing, travel and household goods.
As the cost of living goes up each year and things get more expensive, the calculations for how much you’ll need in retirement are adjusted.
Can I rely on the Aged Pension?
If you’re thinking that you might be right with just the aged pension, you may want to first have a look at the current rates. The maximum rate for the Age Pension is $860.60 for a single person per fortnight. If you are a couple, the rate is $648.70 each per fortnight.
That won’t leave a lot for retirement lifestyle choices. You can’t rely on the aged pension, to afford the life you’d like in retirement, you’ll need to put extra money into your super.
How much super can I contribute to boost my retirement fund?
Make sure you check out our Superannuation Basics blog to see how this works from a tax perspective. Our blog covers all the Australian Tax Office rules and limits for how much you can add to your super.
Then head to the ASFA Retirement Tracker Calculator where you’ll be able to find out how much super will be enough for you in retirement. Start working it out now!