If you are in your 40s, then retirement may not be something you are actively thinking about.
But it is important at this stage in your career to be aware of how you stand when it comes to superannuation.
After all, if you want to have a comfortable retirement, you are well-placed to ensure that happens by making changes today.
But what actually is a comfortable retirement?
A comfortable retirement
The Association of Superannuation Funds of Australia (ASFA) describes a comfortable retirement 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.
Of course, if you want more international trips (who doesn't?), you may have to save a little bit more than the comfortable retirement target to cover that.
Speaking of which, ASFA notes that a single person that is retiring at 67 years old would require an estimated superannuation balance of $595,000 and a couple of 67-year-olds would require a combined balance of $690,000 for a comfortable retirement.
The alternative to a comfortable retirement is a modest retirement. This is described as follows:
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.
I know which retirement I would prefer!
What's the average superannuation balance at 45?
AFSA's most recent data shows that the average superannuation balance for Australian men aged 45 to 54 is $219,300 and for women it is $136,000.
However, it is worth noting that this is the average and is unlikely to be a true representation of what a 45-year-old would have. After all, a person who is 54 should have significantly more than someone 9 years their junior due to being in the workforce for longer. This is likely to be skewing the data.
So, let's look at more data.
Men aged 35 to 44 have an estimated average super balance $107,700 and for women it is $76,900.
I think it is reasonable to say that someone that is 45 could realistically have a superannuation balance in the middle of these combined ranges.
So, that would be $163,500 for men and $106,450 for women.
Is this enough?
If we imagine that your superannuation grows at 8% per annum for the next 22 years and your employer adds an average of $6,000 a year to it, the above balances would grow to be worth approximately $1.2 million and $940,000, respectively.
Clearly, this would be more than enough to fund a comfortable retirement when you're 67 based on current standards.
Though, it is always worth remembering that inflation could mean that you need more once retirement comes around. So, it is always best to play it safe and try and build as big a nest egg as possible. It's certainly better to have too much super than too little.
And if you are behind the curve when it comes to superannuation, then look to make additional contributions each year. The more you put in today, the more it can compound over the next 22 years.
