The amount of superannuation you need to retire at age 70 depends almost entirely on the type of lifestyle you expect to have in retirement.
In Australia, your retirement is generally split into two options: modest and comfortable. Both assume you own your home outright.
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What is a modest retirement, and how much does it cost?
A modest retirement, according to the Association of Superannuation Funds of Australia (ASFA), is defined as being able to cover expenses slightly above the full Centrelink Age Pension.
This includes basic health insurance with limited cap payments, a cheaper model of car, and infrequent exercise. It also includes a limited home repair budget, minimal utility expenses, limiting dining out, and maybe an annual domestic trip.
Unfortunately, thanks to the rising cost of living, the benchmark for a modest retirement has just climbed higher. Australians now need $35,503 per year, or $51,299 per year for a couple.
To fund that, ASFA estimates you need a superannuation balance of around $110,000, or a couple would need $120,000.
What is a comfortable retirement, and how much does it cost?
A comfortable retirement lifestyle is defined as one that allows Australians to maintain a good standard of living.
This includes top-level private health insurance, ownership of a reasonable car brand, regular leisure activities, funds for home repairs and renovations, occasional meals out, and an annual domestic trip.
Again, the benchmark for a comfortable retirement has also recently increased. Now, Australians need $54,840 a year, or $77,375 a year for a couple.
That lifestyle requires a superannuation balance of around $630,000 for a single person, or $730,000 for a couple.
The benefits of waiting until age 70 to retire
Many government or association estimates around retirement are based on the understanding that you'll retire at age 67.
Age 67 is also when you're eligible for the age pension.
While this is around the average retirement age in Australia, there are significant benefits to delaying retirement by just a couple of years.
Rising cost of living, higher health and transport costs, and a longer life span will all see you eat away at your superannuation balance much more quickly.
Retiring at age 70 gives you time to build more superannuation, and it means there are fewer retirement years to fund. After all, even 3 to 5 years would raise your superannuation balance and also give your investments more time to grow.
Superannuation funds are heavily invested in the Australian share market, particularly the S&P/ASX 200 Index (ASX: XJO). Over long periods of time, the ASX 200 generally delivers positive returns. That means the longer you wait to access your balance, the more time your balance has to benefit from compounding growth.
Great, so how do I know if my superannuation is on track?
According to ASFA, for a comfortable retirement, your superannuation balance at age 40 should be $178,000.
By age 50, this should be around $313,500, and it should be close to $496,500 by age 60.
By your late 60s to early-70s, you need to be at or close to your superannuation goal of $630,000 to $730,000 (for a couple) if you want to retire comfortably.
