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How much superannuation do you need?

Tags Retirement Planning Retirement Savings
Category Retire SMSF

Senior enjoying retirement

For many Australians, asking “How much super do you need?” is like questioning the length of a piece of string.

Your magic number depends on your lifestyle and the level of freedom and comfort you expect from your retirement. This often prompts advice centred on the Association of Superannuation Funds of Australia (ASFA) Retirement Standard benchmarks.

But these figures lump the annual budgets that Australians need to fund their retirement standard of living into either “modest” or “comfortable”. However, these generalisations may be different to your own retirement dreams

So perhaps Australians should be asking themselves “Where do I fit within the ASFA benchmarks?” before asking “How much super do you need?”

What luxuries do you want in retirement?

To understand what the government and super fund watchdogs consider to be benchmarks for the standard of living in retirement, it’s worth breaking down these figures.

For example, the most recent national figures released show a couple looking to achieve a comfortable lifestyle in retirement needs to spend $55,213 a year. Meanwhile, those seeking a modest retirement lifestyle will get by on $31,760 a year.

If you are shooting for the modest lifestyle, you might consider yourself savvy with your savings and thrifty when it comes to weekly shopping. However, it could be worth finding out exactly what that $31,760 will allow you in terms of lifestyle perks.

The weekly budget will be $609 a week, with just $105 of this set aside for leisure including dining out and holidays. So if your retirement dreams include eating out each week and the odd getaway, those expecting to scrape into the modest retirement bracket may quickly require funds more like that of the comfortable retirees.

How “comfortable” is enough?

Even when breaking down the figures, the comfortable lifestyle for a couple is considered to be achieved with around $1,058 a week and $55,213 a year. This budget allows for $295 a week for leisure and gives those expecting to travel overseas or interstate a little more to play with.

Depending on your idea of holidays and leisure, you may need to bolster your own retirement savings to ensure they are already performing harder.

How basic is “basic super”?

At the other end, Australians who haven’t contributed to their retirement savings at all may be more concerned when considering what income is required for the most basic retirement. The basic age pension is around just $28,000 for a couple, far less than the average single Australian’s earnings.

Super contributions still suit average earners

However much is enough for your particular lifestyle, it is almost never too late to make changes to your superannuation and boost your retirement income. The government recently began ensuring more than eight million working Australians would receive a new superannuation guarantee rise – up from 9 per cent to 12 per cent by 2019. It means today’s 30-year-olds, on average full-time earnings, will retire with an extra $118,000 in their super fund.

Government incentives for your own superannuation contributions may have changed in recent years, but there is still great room for salary sacrificing. If you are on the average wage of about $70,000, you can still make pre-tax contributions of up to $18,700 a year. For many, this may still be a high figure that could greatly influence retirement lifestyle.

The superannuation climate may be ever-changing, but knowing what you want from a lifestyle in retirement can help you better answer the question “How much is enough?”

Important Information

Taxation considerations are general and based on present taxation laws, rulings and their interpretation as atthe date of this article. You should seek independent professional tax advice before making any decision based on this information