Although the current system of compulsory superannuation has been in place since 1992, the system is still not entirely understood or fully appreciated by many Australians. It may be because we never see (or are entitled to access) the 9.5% of our wages that go into super – until we retire, that is.
But the reality is for many of us, super remains our best bet for a healthy and stress-free retirement. Since the 1980s, the Age Pension has shifted from a right afforded to every Australian to a means-tested 'safety-net' – designed as a back-up for super.
Today, we don't really know how sustainable the pension will be in a decade's time, let alone 3 or 5 decades.
That's why I believe a lifelong, laser-like focus on our super is absolutely essential these days. Knowing exactly how much we should all have in super is a tricky business – everyone has different standards of living, and we don't know what kind of returns to expect from the markets over our lifetimes. And there's the age-old conundrum of not knowing exactly how long we'll actually be around in the first place.
Luckily, a report from businessinsider.com.au has attempted to answer this question.
The report quotes the managing director for Financial Spectrum, Ben Tong, who has come up with a set of numbers we should all be aiming for.
"Ultimately, you want to have around 16 times your annual expenditure in super by the age of 60… This will allow you to fund most of your cost of living from income and by the time the capital runs out, you're 100 years of age." Mr Tong is quoted as saying.
So here are the numbers that Mr Tong has come up with:
- At age 30, you should have $88,000 in super.
- By age 40, you should have $262,000.
- At age 50, you should have $604,000.
- By age 60, you should have $1,252,000 in your super fund.
If these numbers seem daunting, they include an assumption of some additional contributions – which may (depending on your individual circumstances) be beneficial from a tax perspective.
Foolish takeaway
Although some of these numbers might seem high, I think its always a good idea to try and maximise your super contributions as well as ensuring the fees you are paying are as low as possible. I think if these two things are pursued, achieving a stress-free retirement is achievable for everybody!
