If you're hoping to retire at 65, getting your superannuation in shape should be a top priority.
A recent study conducted by the Association of Superannuation Funds Australia (ASFA) has shown what it takes to enjoy a comfortable retirement.
And retiree beware. The figures are quite startling, given the higher cost of living and growth in house prices.
But where does that leave most Australians, and what should your super balance look like by key ages? Let's see what the experts say.
How much superannuation do you need?
This is probably the most common question asked by clients who are serious about their retirement.
The question should actually be, how much super is needed for a comfortable retirement? And that means first defining what 'comfortable' is.
Thankfully ASFA also has a set of retirement standards to go by in the standard definitions. It says the following:
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.
It also factors in one domestic and international travel "once every seven years".
The ASFA study indicates that to enjoy a comfortable retirement by age 65, you'll need around $595,000 if you're single and $690,000 as a couple.
This could take various forms, but it would likely consist of a combination of shares in the S&P/ASX 200 Index (ASX: XJO) and fixed-income instruments.
What's the distribution of this annual cost?
As of June 2024, the data shows a 'comfortable' retirement costs singles about $52,085 a year, while couples require $73,337 annually.
About $1,000 and $1,400 per week, respectfully.
But what about a modest lifestyle in retirement?
If you're aiming for a more modest lifestyle, ASFA suggests $33,134 for singles and $47,731 for couples per year, or about $640 to $920 per week, depending on the scenario.
It is defined as living "slightly above the age pension" and being able to afford health insurance and leisure activities.
In either case, it's important to factor these weekly and annual figures in.
And for those looking to retire comfortably, ASFA recommends hitting these superannuation targets by age 67.
Recommended super balance by age
The Australian Bureau of Statistics (ABS) provides insight into super balances by age and gender. The average superannuation account includes the following:
- Ages 25-34: Men average $42,100; women average $34,500.
- Ages 45-54: Men average $219,300; women average $136,000.
- Ages 65-74: Men average $435,900; women average $381,700.
This is helpful information for determining where you stand with respect to the average and the recommended balances at each age milestone for a modest or comfortable retirement.
To reach a comfortable retirement by 65, your super balance should ideally look like this, according to ASFA via SuperGuru (we'll go by decade here):
- Age 30: $59,000
- Age 40: $156,000
- Age 50: $281,000
- Age 60: $453,000
- Age 65: $549,000
These figures can act as a milestone check-in, giving you a snapshot of whether your retirement planning is on track or needs an extra boost.
Key takeaways
If you're looking to retire at 65, aligning your superannuation with recommended balances can make a world of difference.
Tracking your balance, increasing contributions, and adjusting for inflation can help keep you on the path to a secure retirement.
As always, thinking long-term is the key, no matter what part of the chain you sit along.
