This guide to retirement planning in Australia will help you explore the right amount for your needs and answer, “How much super do I need?”
How much super is enough to lead the lifestyle that is right for you when you retire? It’s a question with no clear-cut answer. Different rules of thumb have been discussed over the years.
In reality, the amount of super needed to retire will be different for everyone and will depend on a variety of things, including when you retire, the type of lifestyle you’d like to lead and how many years you’ll spend in retirement.
What does a “comfortable” retirement look like?
It can be difficult to create a budget for your future needs when it comes to retirement planning in Australia. To provide some guidance, the ASFA Retirement Standard (which is updated quarterly) outlines the annual income needed by the average Australian for a ‘modest’ or ‘comfortable’ lifestyle for both singles and couples.
A modest retirement lifestyle is considered better than the government Age Pension, but still only allows for the basics.
A comfortable retirement lifestyle enables an older, healthy retiree to be involved in a broader range of leisure and recreational activities and to have a good standard of living past retirement age.
Both retirement planning budgets below assume that the retirees own their own homes outright and are relatively healthy.
How much income do you need for a comfortable retirement?
The ASFA Standard outlines general annual budgets for people in different circumstances, further information here.
How much super do you need?
According to the ASFA standard, these are the super balances required for a comfortable retirement, for people that own their own home:
Savings required for retirement at age 67
| Couple | Single |
|---|---|
| $730,000 | $630,000 |
Source: ASFA Retirement Standard
These are the super balances required for a modest retirement, for people that own their own home:
Savings required for retirement at age 67
| Couple | Single |
|---|---|
| $120,000 | $110,000 |
Source: ASFA Retirement Standard
It is assumed for both the above that the retiree will draw down all their capital and receive a part Age Pension.
The above is updated from time to time so please ensure you check the current available information on the ASFA website.
Factors that affect how much super you need
Understanding how much super you need starts with recognising that everyone’s situation is different. The super needed to retire comfortably will depend on several personal and financial factors.
Age at retirement
The earlier you retire, the longer your savings may need to last. Retiring at 60 instead of 67, for example, could mean funding several additional years without employment income. This can increase the super needed to retire sustainably.
Desired lifestyle
Your expected lifestyle plays a major role in determining how much super you need. A modest lifestyle with limited travel and lower discretionary spending will generally require less savings than a retirement that includes frequent travel, dining out or supporting family members.
Years in retirement
Australians are living longer, which means retirement can last 20 to 30 years or more. The longer you expect to be retired, the more carefully your super balance needs to support ongoing living costs, inflation and unexpected expenses.
Home ownership or other assets
Owning your home outright can significantly reduce living expenses in retirement. Renters may need a higher super balance to cover housing costs. Other investments or assets can also reduce reliance on super alone.
Health and medical costs
Healthcare needs often increase with age. While Medicare provides support, out-of-pocket medical, dental or aged care expenses can affect how much super you need to feel financially secure.
How your super works with other income
Retirement planning in Australia often involves combining super with other income sources. Some retirees may be eligible for a full or partial Age Pension, depending on income and asset tests.
Super that reflects what you stand for
Australian Ethical is an super fund for people who want their retirement savings to support positive change.
Ethical investing, built in
Every portfolio we manage is screened through our Ethical Criteria.
Backing a more sustainable future
We invest in companies working towards solutions, andthose causing harm.
Clear lines on what we won’t fund
We investment in industries and practices that can exploit people, animals or the planet.
What if you don’t have the amount of super you would like?
If you find that your super savings are not on track, you may consider boosting your balance1 through voluntary (or other) contributions or a transition to a retirement strategy. Remember to take into account annual contribution caps2, as there will be tax consequences if you breach those caps. You may wish to speak to a financial adviser to help develop strategies to get you on track.
The Age Pension acts as a safety net for retirement-aged Australians who need income support. The amount you receive depends on a range of factors, including your assets and income, age, and whether you’re single or in a couple.
Take the next step in retirement planning
Whether retirement is close or still years away, reviewing your super balance and income options can help you plan with greater confidence. Australian Ethical offers ethical pension solutions to support your long-term goals.
It may be possible, but it often requires reducing living expenses or supplementing income from other sources. As part of your retirement planning in Australia, it is important to consider life expectancy, healthcare costs and inflation before deciding to retire early.
Positive returns can grow your balance over time, while market downturns may reduce it, particularly in the short term.
If you do not reach your target balance, you may need to adjust your retirement expectations. This could involve reducing planned spending, delaying retirement, making additional contributions if eligible or supplementing income through part-time work or government support.
1 Australian Taxation Office (ATO) – Transition to retirement
2 Australian Taxation Office (ATO) – Salary sacrificing super
3 Please refer to our website for the specific awards we have won, including the specific categories.