Co-author: Ellie McLachlan
It may seem like it will never really arrive, that it’s a distant dream on the horizon, but there will come a time when you can finally stop working and retire. And when you do, you want to be able to enjoy yourself. So how much super is enough to be able to enjoy retirement?
How much super do I need as a single or couple?
Australia’s super industry policy, research and advocacy body, the Association of Superannuation Funds of Australia (ASFA) calculated in 2016 that the average superannuation balance required to achieve a comfortable retirement was $640,000 for couples and $545,000 for singles. This covered expenses such as medication, rent, food and leisure activities.
How much super you need will depend on the standard of living you want to maintain. In short, it depends on what needs you have, and what extra perks you would like to be able to afford during your retirement.
ASFA estimated the yearly income a retiree would need to retire ‘modestly’ or ‘comfortably’. These figures assume that the retiree owns their own home outright and is relatively healthy. See below:
|Budgets for various households and living standards for those aged around 65
(September quarter 2017)
|Modest lifestyle||Comfortable lifestyle|
|Source: ASFA. Figures assume retirees own their home and relate to expenditure by household which can be greater than household income after tax where there is a drawdown on capital over the retirement period. Single calculations based on female figures.|
The table below displays a snapshot of 5-Star super funds on Canstar’s database, sorted by provider name (alphabetically). Please note the results are based on Australians aged 40-49 with a super balance of $100k – $250k. Use Canstar’s superannuation comparison selector for a wider selection of super funds based on your individual circumstances.
What is a modest retirement?
ASFA’s figures indicate that for a modest retirement at age 65, a single person would need $24,506 per year and a couple would need $35,189 per year. ASFA defines a modest retirement as better than the Age Pension, but the retiree can only afford fairly basic activities.
A modest retirement is a bit better than the Age Pension and might enable you to enjoy basic activities, like short holidays near where you live or occasionally eating out.
What is a comfortable retirement?
For a comfortable retirement at age 65, a single person would need around $44,011 per year and a couple would need $60,457 per year. ASFA defines a comfortable retirement as when a retiree can afford to be involved in recreational activities and buy household goods, private health insurance, a reasonable car, good clothes, electronic equipment and travel occasionally.
A comfortable retirement might allow you to eat out more regularly, travel further and enjoy more luxuries.
Does the retirement standard change as you age?
Yes, ASFA figures for the income needed when you reach 85 years old are slightly different from someone aged 65 years old. A modest retirement requires $24,097 per year for a single and $35,622 per year for a couple.
A comfortable retirement for an 85-year-old requires $39,702 per year for a single and $55,696 for a couple.
It’s also all about what feels ‘comfortable’ to you. It’s hard to say what super balance would be required in total because a retiree might also receive the Age Pension. A modest retirement might require $461,000 in total for a single who lived to 85 years old. A comfortable retirement might require $805,000 in total.
So where did the ‘$1 million retirement’ scare come from? A comfortable retirement of 20 years at $58,400 per year (for a couple) might require a total of $1.17 million in super, certainly. However, that figure doesn’t take into account that the cost of living lowers progressively from 65 to 85 years old, so it is not a completely realistic estimate of how much is needed.
Assuming an average life expectancy, you can expect to need $640,000 in super to maintain a couple in a comfortable standard or only $35,000 for a modest lifestyle, supplemented by the Age Pension. A good rule of thumb if you’re earning above the average is to assume that you will need two-thirds of your annual income now to maintain the same standard of living.
You can check what budget you will need in retirement with the Canstar Retirement Planner Calculator.
The more you can grow your super while working, the more comfortable of a lifestyle you can lead when you retire. Picking the right fund to grow your super is important because over the years small differences in fees and returns can make a large difference in the amount you will retire with.
How much should Australians expect to have in super?
In 2014-15, there were more than 3.6 million people in Australia who had retired from the workforce (ABS, 2016). But figures from ASFA show that around 155,000 retirees were drawing an income stream from their super in their retirement (ASFA, 2014).
With the seasonally adjusted unemployment rate stabilising down to 5.5% in December 2017, Australians are on average earning super at a solid rate.
But AIST estimates that most people approaching retirement have about $100,000 in super. Less than 5 in 1,000 super fund members have the coveted $1 million or more in super.
AIST CEO Tom Garcia said, “The reality is that most Australians – including most of those starting out in the workforce today – will not retire with the equivalent of $ 1 million in super.
“We need to stop focusing on the needs of a privileged few and start talking about how relatively small balances of super can still make a big difference to the quality of life in retirement.”
Mr Silk says, “Rather than despair, workers with $100,000, or even $50,000 in their super accounts should take heart. The super savings they’ve accumulated give them options they might not realise. The combination of Age Pension and a relatively modest super balance will boost a retiree’s weekly income enough to meet the modest retirement standard.”
We also receive the Age Pension over a longer timeframe than ever before. When Australia’s Age Pension began in 1909, the nation’s 4.2 million people had an average life expectancy of just 55 years, and few people were expected to reach the Age Pension at 60 (women) or 65 (men). In 2018, the Age Pension is still available at 65 – 67 years, while our life expectancy at birth is more than 80 years old for men and 84 years for women.
For more information on how the Age Pension in Australia works, read our explanation here.
What is the average superannuation balance at retirement?
According to the Australian Bureau of Statistics (ABS), during the years of 2015 and 2016, the mean superannuation balance at, or approaching preservation age (55-64 years) is $310,145 for men and $196,409 for women. The table below displays the ABS’ mean superannuation balances for all age groups and genders in 2015-16:
|Superannuation balance by age group (years)||Males ($)||Females ($)|
|70 and over|
|Total superannuation balance|
Source: ABS, Gender Indicators
You can work out how additional contributions to your super would boost your balance using the Canstar Superannuation Calculator:
The bottom line on super needs
In short, there’s no need for Aussies approaching retirement to feel afraid, or for working Aussies to feel discouraged about their super earning potential.
The requirements for a modest retirement could be achievable for the average Australian who has some super and receives a part-pension.