Planning for retirement often starts with one simple question: how much superannuation is enough? And for many Australians, the target income in retirement is around $50,000 a year — a figure that sits just under the ASFA benchmark for a comfortable retirement for a single person.
But what super balance do you actually need to generate that level of income?
While there's no perfect number — everyone's circumstances are different — we can look at some estimates based on current modelling to give you a sense of what to aim for if you're planning to retire at age 67.
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What super balance do I need?
According to Superguide and modelling from the Telstra Group Ltd (ASX: TLS) owned TelstraSuper and its Lifetime Income Calculator, a single person aiming to retire at 67 with an income of $50,000 per year would typically need around $350,000 to $400,000 in super.
This assumes your income in retirement will come from a combination of super drawdowns and Age Pension payments — which is how the majority of Australians structure their retirement income.
But keep in mind, this estimate assumes you own your home and have no mortgage, you're investing in a balanced or cautious portfolio, you'll live to around age 89 to 92, and have super income that will be supplemented by partial or full Age Pension entitlements.
What if you're retiring earlier?
If you're planning to retire before age 67, you'll need more super to carry you through the gap before Age Pension eligibility kicks in.
According to estimates retiring at age 60 might require around $515,000 and retiring at age 65 requires around $360,000.
These figures are based on the assumption that your super remains invested and continues to generate returns throughout your retirement.
These are forecasts — not guarantees
It is very important to understand that these numbers are modelling-based estimates only. They rely on assumptions around future investment returns, inflation, lifespan, age pension eligibility and rates, and your chosen investment mix
No calculator can perfectly predict the future. A variation in investment returns or expenses could result in you running out of funds earlier.
That's why most experts suggest reviewing your plan regularly and adjusting based on how your retirement unfolds.
Aim for more
It may be better to aim beyond what is suggested. After all, it is better to have too much than too little.
There are several strategies that can help boost your super balance over time.
This includes making extra contributions into your super and reviewing the performance of your super fund. While a year or two of underperformance from a super fund is understandable, sustained underperformance should not be tolerated and it could pay (literally) to switch to a stronger performing fund.
Foolish takeaway
If your retirement income target is $50,000 per year, you're aiming just under the benchmark for a comfortable single retirement lifestyle.
A super balance of $350,000 to $400,000 is generally considered sufficient when retiring at 67 under current conditions. But this is only a guide. Markets change. Personal circumstances differ. And that's why these figures should be treated as a starting point, not a fixed rule.
