To answer this question regarding our superannuation balance, I think it's best to work backwards.
Let's first consider how much we need to save for a comfortable retirement. Then we can work out whether our superannuation savings are sufficiently on track.
According to the recently updated AFSA Retirement Standard, single Australians need $595,000 in superannuation savings by age 67 to achieve a comfortable retirement. Couples need $690,000.
These amounts assume we own our own home, receive a part pension, and that our superannuation balance is drawn down and invested with a 6% annual return.
AFSA defines a 'comfortable' retirement as being able to pay for the essentials plus private health insurance, exercise and leisure, occasional restaurant meals, a domestic trip once per year, and an overseas holiday every seven years.
AFSA reckons all of this costs $51,814 per year for singles and $73,031 for couples.
Are your superannuation savings on track for your age?
The age pension and superannuation are the two most common forms of income for retirees, according to the Australian Bureau of Statistics. This underlines their importance to you later in life.
Let's deal with superannuation first.
The tool we'll use to calculate whether your superannuation balance is adequate for your age is the Super Balance Detective Calculator on the Super Guru website.
If you were born between 1958 and 2003, you can use this calculator to find out what your superannuation balance should be today to ensure a comfortable retirement as per the AFSA standard.
Here are some examples.
- For people aged 30 (thus born in 1994), your superannuation balance should be $66,500
- For people aged 40 (thus born in 1984), your superannuation balance should be $168,000
- For people aged 50 (thus born in 1974), your superannuation balance should be $296,000
- For people aged 60 (thus born in 1964), your superannuation balance should be $469,000
If your superannuation balance is in line with the Super Guru calculator, you are on track to achieve the required $595,000 by age 67 for single people to enjoy a comfortable retirement (with a part pension).
Now, let's talk about the eligibility criteria for a part or full-age pension.
Do you qualify for the age pension?
Australians become eligible for the age pension when they reach their 'retirement age'. For people born on or after 1 January 1957, the retirement age is 67 years old.
You only qualify for the pension if you pass the assets and income tests set out by the government.
In terms of the assets test, to qualify for the full age pension, single homeowners can't own more than $314,000 in assets outside their home. Single non-homeowners can't own more than $566,000 in assets.
For a part-pension, the cut-off point for single homeowners is assets of $695,500, and for single non-homeowners, it is $947,500.
To qualify for the full age pension, couple homeowners can't own more than $470,000 in assets outside their home. Couple non-homeowners can't own more than $722,000 in assets.
For a part-pension, the cut-off for couple homeowners is assets of $1,045,500, and for non-homeowners, it is $1,297,500.
In terms of income, single pensioners can earn $212 per fortnight and couples can earn $372 combined per fortnight and still qualify for the full pension.
For a part pension, the cut-off point for single pensioners is income of $2,500.80 per fortnight, and for couples, it is $3,822.40 per fortnight.
