How Much Super Is Enough?

Calculating the costs

According to ASFA, and assuming you own your home, the annual cost to fund a ‘comfortable’ lifestyle is $43,255 annually for a single person and $61,061 for a couple, while a ‘modest’ lifestyle will cost $27,646 a year for singles and $39,848 for couples.[1] Those without retirement savings must rely on a less-than-modest lifestyle offered by the Age Pension – a full Age Pension is currently worth $21,933.60 for singles and $33,066.80 for couples.[2]

The ‘comfortable’ figures translate to total retirement savings of $545,000 for singles and $640,000 for couples.[3] But of course, these are only average amounts that don’t take into account your personal lifestyle circumstances.

For those on higher incomes, the Australian Securities and Investments Commission (ASIC) says your retirement income needs to be around two-thirds of your pre-retirement income if you want to maintain your current standard of living. You can find more information on ASIC’s MoneySmart website.

Planning for the future

What if you’ll be retiring several years from now? Of course, there’s no calculator that can tell you what you’ll need in future-dollar terms because it’s impossible to take all potential economic movements into account. But you can probably get a rough estimate by allowing for the compounding effects of the Consumer Price Index (CPI), which measures spending patterns of Australian households.

If we assume that the CPI sits at 2.5%[4] a year between 2021 and 2049, here’s how ASFA’s retirement cost estimates might increase accordingly[5]:

As you can see, the effects of inflation can have a dramatic impact over time. When other contributing factors are taken into account – such as Aged Pension rules, market fluctuations and the ageing population – it makes sense to start planning seriously for your retirement sooner rather than later.

[1] ASFA Retirement Standard, March 2019 quarter. [2] Department of Human Services, Centrelink, A Guide to Australian Government Payments, 1 July – 20 September 2019. This is the basic rate of age pension. Eligible pensioners may also receive Pension Supplement and Energy Supplement. [3] ASFA Retirement Standard, April 2018. [4] ASIC media release, 19-129MR ASIC amends relief conditions for superannuation and retirement calculators, 5 June 2019. [5] Figures for 2029, 2039 and 2049 have been calculated based on a compounding rate of 2.5% pa.

Get the right advice

When working out how much super you’ll need, it’s always a good idea to speak to a licenced financial advisor. They can help you set a super target based on your retirement needs and goals, with a personalised financial plan to keep you on track.

Making the decision to see engage with our financial planning services means that you want to make a positive difference to your personal financial future. We truly believe everyone needs a financial plan. We can help you to understand the intricacies of investing, taxation, and the ever-changing legislation around superannuation.
Our strategic financial advice can really make a difference to you by helping you identify realistic goals, and put strategies in place to achieve them.

Are you ready to take control of your personal finances? Get the SMART team working for you.

Call SMART Business Solutions Financial Planning on 03 5911 7000 or reception@smartfinancialplanning.com.au.

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Important information: This document contains general advice. It does not take account of your objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision.