Will you have enough in superannuation when you retire?

Is your nest egg going to be big enough?

Australian dollar notes in a nest, symbolising a nest egg.

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Superannuation is an extremely useful tool to help people save for retirement. More than half of Aussies are reportedly worried about not having enough money to retire.

The increased cost of living doesn't make it any easier for Aussies to save for retirement or to live within their retirement budget. But, that doesn't mean we can't reach our golden years in a really good financial place.

Superannuation is great for retirement savings because contributions and earnings are taxed at a cheaper tax rate than what a full-time worker would see if they invested in their own name.

Everyone's finances are different, with varying spending intentions. So, let's look at what the official guidance is for what's required to retire comfortably.

How much is needed to retire?

Based on the AFSA retirement standard, a retired couple aged between 65 and 84 currently needs a budget of $71,700 for a comfortable lifestyle and $46,600 for a modest lifestyle. A single retiree currently needs $51,000 per year for a comfortable lifestyle and $32,400 for a modest lifestyle.

The above budgets assume that the retirees own their home outright and are "relatively healthy". So, retirees still paying for a roof over their heads may need more cash flow.

In terms of a superannuation balance to fund those spending targets, the AFSA has suggested that for a comfortable retirement, a couple would need $690,000 and a single retiree would need $595,000.

For a 'modest' retirement, the AFSA suggests $100,000 for both a couple and a single retiree.

Those balances reflect an assumed investment earning rate of 6%. Receiving the age pension is why the same savings is required for both couples and singles. Those superannuation balances take into account receiving the age pension immediately and in the future, which is adjusted regularly by an increase in CPI or wage growth, whichever is higher.

However, there are a lot of people who don't have these superannuation balances needed for a comfortable retirement.

Of course, it's worth noting that households may have cash flow or assets beyond the pension of their superannuation. There could be assets outside of superannuation such as ASX shares or savings accounts/term deposits in their own name. Being able to downsize the home and unlock some equity could also boost the investable amount.  

A qualified financial planner may be able to help figure out the best moves retirees can make (or for people planning for retirement).

Helpful ways to boost retirement cash flow

One of the best things to consider could be part-time work to boost money coming in through the door, assuming it doesn't affect anything like someone receiving the pension. Receiving $5,000 a year for part-time work could be the same as having an extra $100,000 in superannuation.

Higher interest rates are helping retirees who have sizeable cash sums. Instead of earning almost nothing, cash is currently paying solid yields.

ASX dividend shares offering a good dividend yield could help reduce the superannuation balance required to generate a good amount of investment income. For example, a $300,000 balance produces $12,000 of passive income with a 4% yield and it makes $18,000 with a 6% yield.

Investing in ASX dividend shares is how I'm planning to build my retirement nest egg to ensure I'm getting enough income.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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