Retirement planning: five steps to take control of your future

Most of us have a picture of what retirement could look like, whether that means travelling the world, catching up with friends or simply slowing down. But, while it’s easy to imagine the lifestyle, turning it into reality means making sure your money can go the distance too.

How much do you need in super to retire?

While there’s no single ‘magic number’ you’ll need to achieve your goals for life after work, Canstar crunched the numbers on how much super you might need to retire, depending on your age and the lifestyle you want.

For example, to retire at age 60, withdrawing  $70,000 from your super each year, you probably need $1,450,000 of super when you finish working. If you’re 30 today and looking ahead to retirement, a balance of $200,175 will put you on track for that goal.

Does your current balance fall short of this? You’re not alone. Aussies aged 60-64 have a median super balance of $163,218 for women and $219,773 for men, according to data from the Association of Superannuation Funds of Australia (ASFA).

Want to bridge the gap? Here are five steps you can take to boost your retirement, no matter your starting position.

How to start planning for retirement

1. Build a retirement budget

Knowing how much you’ll need starts with understanding what you’ll spend. Break your expected costs into three buckets:

• Essential costs: These include groceries, utility bills, transport,  insurance, and home maintenance. A practical rule of thumb is to set aside at least 1% of your home’s value each year for repairs and general upkeep.
• Lifestyle costs: This covers discretionary spending like dining out, hobbies and travel. These tend to be higher in the early, active years of retirement, so factor in some flexibility.
• Healthcare costs: Out-of-pocket medical expenses typically increase over time. Build in a buffer for this, as it’s one of the most common costs people underestimate.

Don’t forget to factor in inflation. The cost of living increases over time, and it might be worth assuming prices will rise by around 2% to 3% a year when estimating future expenses. If you’re worried about how your balance is looking, check whether you’re eligible for extra support. For instance, government concessions like the Commonwealth Seniors Health Card could meaningfully reduce your essential living costs.

2. Think carefully about when you want to retire

There is no fixed retirement age in Australia, so it’s up to you to decide when to say goodbye to the workforce. There are two key milestones to understand in your planning:

• Preservation age: The earliest age you can access your super, provided you meet a condition of release. For anyone born after 30 June 1964, this is generally age 60.
• Age Pension age: This is currently 67, which is the age you become eligible for government support, subject to income and asset tests.

The impact of early retirement

Your retirement age can have a major impact on your finances later in life. Planning to retire in your 50s? You’ll need some savings outside of super to cover your living costs until you reach your preservation age. Retiring at 50, for example, means self-funding your lifestyle for roughly a decade before you can touch your super, and 17 years before any potential Age Pension support. Delaying retirement, even by a year or two can make a noticeable difference  to your final balance.

3. Take stock of what you’ve got

Once you have a budget and retirement age in mind, identify where your retirement income will come from. While superannuation is the foundation for most Australians, money held outside super offers more flexibility, since it’s accessible at any age. This matters most if you’re planning an early exit from work.

Your investment strategy is also important. Most funds let you choose between higher-growth or more conservative investment options, which can significantly affect your final balance. As you move closer to retirement, it’s also worth thinking about how you’ll eventually access this money. Moving super into an account-based pension, for example, allows you to receive a regular income while the remaining balance stays invested.

4. Find ways to grow your super

Once you’ve assessed your financial position, the next step is finding simple ways to grow your nest egg. Small, regular contributions can add up over time and help increase your retirement balance.

Start with a few quick checks:

• Review your super fund’s performance and fees
• If you have multiple accounts, consider consolidating to avoid paying multiple fees and insurance premiums across each one
• Search for any lost super from previous jobs via the ATO’s free online service. Bringing everything into one place can make your savings easier to manage

If you’re in the position to contribute more, there are several ways to top up your super:

• Salary sacrifice: You can contribute part of your pre-tax income, which is usually taxed at a lower rate than your take-home pay
• Voluntary or non-concessional contributions: You can add money from your after-tax income, such as savings or a tax refund, up to the annual contribution cap
• Government co-contribution: If you meet the income thresholds, the government may add to your super when you make personal contributions (up to set limits)

Keep in mind there are annual limits on contributions. Going over these caps can result in extra tax, so check the latest thresholds or seek advice from a professional.

5. Review your plan regularly

Your financial situation and goals will change—and your retirement plan should too. Set a reminder to review your budget, investment mix and contribution strategy at least once a year, or whenever your circumstances shift.

If you haven’t already, speaking with a licensed financial adviser can help clear up any questions and concerns you may have. A good adviser can help you map out Age Pension eligibility, navigate contribution rules and structure your assets in a way that makes them last.