If you are targeting a comfortable retirement, your goal is likely to accumulate as much superannuation as possible by the end of your career.
But how much should you have when you retire? And just as crucially, how much should you have by age 60 to ensure you reach your retirement goals?
Let's now explore the superannuation industry's recommendations for future Australian retirees.
How much superannuation should I have at 60?
To begin with, let's determine just how much would be needed for a comfortable retirement.
But what exactly is a comfortable retirement? Well, the Association of Superannuation Funds of Australia (ASFA) Retirement Standard describes it as follows:
The comfortable retirement standard allows retirees to maintain a good standard of living in their post work years. It accounts for daily essentials, such as groceries, transport and home repairs, as well as private health insurance, a range of exercise and leisure activities and the occasional restaurant meal. Importantly it enables retirees to remain connected to family and friends virtually – through technology, and in person with an annual domestic trip and an international trip once every seven years.
If that is enough for you, then ASFA says that couples will need $690,000 in superannuation and singles will need to have $595,000.
Of course, if you think you would want more holidays or luxuries in retirement than specified above, you may need to increase your goal appropriately to cover these expenses.
Conversely, if you feel that this comfortable retirement is more than you need, you could aim for a modest retirement. This retirement would allow the following, according to ASFA:
The modest retirement standard budgets for a retirement lifestyle that is slightly above the Age Pension and allows retirees to afford basic health insurance and infrequent exercise, leisure and social activities with family and friends. Both budgets assume that the retirees own their own home outright and are relatively healthy.
AFSA estimates that a modest retirement would require just $100,000 of superannuation for both couples and singles when they reach 67 years old.
How much superannuation should I have at 60?
At present, according to BT Funds Management, the average superannuation balance for 60 to 64 year olds (male and female) is $361,543.
If you are 60 years old and have this in your super, I have some good news for you.
Based on an average future return of 7.5% per annum, which is of course not guaranteed, and annual employee super contributions of $10,000, after seven years your superannuation balance would grow to approximately $690,000. This means that you would have what AFSA recommends for a comfortable retirement.
What if you are behind the curve?
Don't worry if you are behind the curve when you turn 60. That's because there's still time to make a difference.
If you can add extra to your super each year, you could reach your goal thanks to the power of compounding.
For example, if you only had super of $275,000 at 60, you could look to add an extra $14,000 a year to your fund. Combined with employee super contributions of $10,000 and a 7.5% per annum return, your balance would grow to approximately $690,000 in seven years.
In addition, while retirement may be only around the corner, it is always worth researching how your super fund performs in comparison to others. Past returns may not be indicative of future returns, but if your super fund seems to consistently underperform others, it could be in your best interests to switch to one that has a better track record.
The main thing is to understand where you are and where you want to be. Once you understand this, you can adjust your super contributions accordingly. This will put you in the best position to have a happy retirement.
