A 30-year-old worker earning the median wage of $75,000 per annum for the rest of their life will have enough for a comfortable retirement after 1 July, according to Australia's peak superannuation association.
This is because the Superannuation Guarantee (SG) is increasing to 12% from next Tuesday.
The Guarantee is the minimum percentage of a staff member's wage that an employer must pay into their superannuation account.
The change on 1 July is the last of the legislated increases to the mandatory superannuation payment.
Are you interested in a little history?
The Superannuation Guarantee was 9% for a decade from FY03 to FY13.
Then it increased to 9.25% in FY14, then it was 9.5% from FY15 to FY21, and then it went up to 10% in FY22.
It rose again to 10.5% in FY23, 11% in FY24, 11.5% in FY25, and will now be 12% from 1 July through to FY28 and beyond.
Here's what the 12% Superannuation Guarantee means
The Association of Superannuation Funds of Australia (ASFA) says the lift to 12% will make all the difference for a 30-year-old worker.
ASFA said:
With the 12% super guarantee in place, a 30-year-old with a super balance of $30,000, earning the median wage of $75,000 until retiring at age 67 should accumulate $610,000 in super, well above the $595,000 the latest ASFA Retirement Standard estimates is needed to fund a comfortable retirement for single people who own their own home.
ASFA CEO Mary Delahunty commented:
This is a major milestone in Australia's retirement system.
With the super guarantee increase to 12%, we are seeing super fulfill its objective of providing a dignified retirement for ordinary Australians, with today's 30-year-olds reaping the rewards of decades of progress in our world-class super system.
The association projects that the increase from 11.5% to 12% will result in an additional $20,000 being paid to today's 30-year-old worker over a lifetime of earning the median wage.
Delahunty added:
The ASFA Retirement Standard has been providing Australians with guidance towards what a comfortable retirement might look like for over 20 years.
With the 12% super guarantee coming in, we can now say that the system foundations are cemented for young, working people to have a comfortable retirement. It's a moment all Australians should be proud of.
How much does a comfortable retirement cost per year?
Last week, ASFA released its latest quarterly update to the Retirement Standard.
A comfortable retirement now costs $73,875 per annum for couples and $52,383 per annum for singles, according to the new numbers.
ASFA defines a 'comfortable' retirement as having a good standard of living with the ability to easily cover life's essentials, plus many other expenses.
These include top-level private health insurance, a reasonable car, good clothes, fast internet and a mobile phone, lots of exercise and leisure activities, occasional restaurant meals, a domestic trip once per year, and an overseas holiday every seven years.
A 'modest' retirement costs $48,184 for couples and $33,386 for singles.
ASFA defines a modest retirement as having basic private health insurance, a cheaper car, basic internet and mobile phone, infrequent exercise and leisure activities, few restaurant meals, and one domestic holiday per year.
All of these living costs assume a retiree owns their home mortgage-free and is relatively healthy.
For the first time, ASFA has also produced a living expenses budget for retirees who rent their homes.
This reflects the high cost of housing in Australia and the increasing expectation that more people will rent throughout their retirement.
How much superannuation do you need for a comfortable retirement?
The amount of superannuation needed by age 67 to fund a comfortable retirement is $690,000 for couples and $595,000 for singles.
For a modest retirement, couples and singles require $100,000 in superannuation.
These figures assume a retiree owns their home outright.
They also assume a retiree receives a part-pension and an average 6% per annum total return on their superannuation savings.
ASFA said the superannuation needed for a modest retirement is relatively low because the pension covers most of the living costs.
The full pension, including all supplements, is $45,037.20 per year for couples and $29,874 for singles.
Retirees who rent their homes require higher superannuation savings to fund a modest retirement.
