How much super will I need when I retire?
This is a difficult question to answer because everyone has different retirement goals. That said, the Association of Superannuation Funds Australia (ASFA) provides some comprehensive assessments of how much money a single or couple would need in retirement for either a modest or comfortable lifestyle. Each quarter, ASFA release their Retirement Standard benchmark, which calculates the amount of annual income, in today’s dollars, required to meet either a modest retirement lifestyle or a comfortable retirement lifestyle. As at June 2016 a couple aiming for a modest retirement require an annual net income of $34,216, while a couple aspiring to a comfortable lifestyle must be able to generate $59,160 per annum.
For retirees aged around 85, a modest lifestyle for a couple equates to $34,598 per annum and a comfortable lifestyle requires income of $54,460.
According to ASFA, an Australian couple will need to save $130,000 more for a comfortable retirement following changes to the Age Pension and increases in the cost of living; ASFA now estimates that Australians will need a super balance at retirement of $640,000 for a couple and $545,000 for a single, an increase of $130,000 and $115,000 respectively from 2014 estimates.
Back to the question though: what is modesty and what is comfort?
According to ASFA:
A modest lifestyle – is better than the Age Pension, but still only funding fairly basic activities. These activities currently allow around $160 per week for food, $78 per week for health and around $100 for transport. Around $35 per week is allocated to household goods and services and just under $17 per week for communications (the free library internet service is looking good!) Just over $110 per week is allocated to leisure. It might involve owning an older, less reliable car
A comfortable lifestyle – is one which enables an older, healthy retiree to be involved in a broad range of leisure and recreational activities. It allows funding for private health insurance, a reasonable car and regular holidays (domestic and occasionally international). Based on current figures, there is an additional $40 per week allocated to food expenditure, an extra $50 per week for household goods and services and a total of just over $300 per week for leisure activities.
Crucially however, both of the definitions (and allocations of money) above assume that the retired couple own their own home.
|Comfortable retirement||Modest retirement||Age Pension|
|One annual holiday in Australia||One or two short breaks in Australia near where you live each year||Even shorter breaks or day trips in your own city|
|Regularly eat out at restaurants. Good range and quality of food||Infrequently eat out at restaurants that have cheap food. Cheaper and less food than a ‘comfortable’ lifestyle standard||Only club special meals or inexpensive takeaway|
|Owning a reasonable car||Owning an older, less reliable car||No car or, if you have a car, it will be a struggle to afford repairs|
|Afford bottled wine||Afford cask wine||Home brew beer or no alcohol at all|
|Good clothes||Reasonable clothes||Basic clothes|
|Afford regular haircuts at a good hairdresser||Afford regular haircuts only at a basic salon or pensioner special day||Less frequent haircuts or getting a friend to cut your hair|
|Take part in a range of regular leisure activities||Take part in one paid leisure activity infrequently. Some trips to the cinema||Only taking part in no cost or very low cost leisure activities. Rare trips to the cinema|
|A range of electronic equipment||Not much scope to run air conditioner||Less heating in winter|
|Replace kitchen and bathroom over 20 years||No budget for home improvements. Can do repairs, but can?t replace kitchen or bathroom||No budget to fix home problems like a leaky roof|
|Private health insurance||Private health insurance||No private health insurance|
Source: ASFA Retirement Standard
Click here for more information about the ASFA retirement standard.