Most of us dream of the day we can stop working and start ticking off our bucket list. Whether you dream of cruising Alaska, watching the sun rise over Uluru, improving your golf handicap or spending time with the grandkids, superannuation is likely to be a major source of your retirement income.
The more money you squirrel away in super during your working years, the rosier your retirement options will be. The question is, how much is enough?
Estimating your needs
Financial commentators often suggest you will need around two thirds (67 per cent) of your pre-retirement salary to enjoy a similar standard of living in retirement.i Lower income households may need more because they typically spend more of their income on necessities before and after retirement.
The latest ASFA Retirement Standard estimates that a couple retiring today needs a retirement super balance of $640,000 to provide a comfortable standard of living. This would provide an annual income of $60,977.ii
Singles need a lump sum of $545,000 to provide a comfortable income of $43,317 a year. These figures assume people own their home and include any entitlements to a full or part Age Pension.
How do I compare?
According to the latest figures, the mean super balance for all workers is $111,853 for men and $68,499 for women. The mean balance at retirement (age 60-64) shows most people retiring today fall well short of the amount needed for a ‘comfortable’ retirement. ii
The gap between men and women persists at all ages. By the time women reach their 60s they have 42 per cent less super than men on average and are more likely than younger women to have no super at all.
How can I boost my super?
If your super is not tracking as well as you would like, there are ways to give it a kick along. When your budget allows, or you receive a windfall, consider putting a little extra in super. Even better, set up a direct debit or salary sacrifice arrangement.
To work out the difference extra contributions could make to your retirement nest egg, try out the MoneySmart retirement planner calculator.
As the end of the financial year approaches and with the federal election looming, this is a great time to utilise your annual contribution caps and get a tax deduction for voluntary concessional contributions. If you would like to talk about your retirement income strategy, give us a call.
This article is general in nature. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your particular investment objectives, financial situation and individual needs. Principal Wealth Management Pty Ltd trading as BMO Financial Solutions ABN 53 109 336 601 is a Corporate Authorised Representative of McPherson & Associates Pty Ltd Australian Financial Services Licence (AFSL) 229883. McPherson & Associates Pty Ltd and its Authorised Representatives do not accept any liability for any errors or omissions of information supplied in this article.
i Moneysmart, Last updates 27 Aug 2018, https://www.moneysmart.gov.au/superannuation-and-retirement/how-super-works/super-contributions/how-much-is-enough
ii ASFA Retirement Standard, 1 December 2018, https://www.superannuation.asn.au/resources/retirement-standard
iii Superannuation Statistics, March 2019, ASFA, https://www.superannuation.asn.au/ArticleDocuments/269/SuperStats-Mar2019.pdf.aspx?Embed=Y
The Lunar New Year begins on 12 February, as we usher in the year of Read on...