Most Australians wait until around age 65 to retire. At this point you can access your superannuation, and you're just two years away (if you're eligible) from receiving your Age Pension payment.
But did you know that you can retire a few years earlier and still access your superannuation? When you reach the "preservation age" of 60 you can start living off your balance, provided you have retired.
The only issue is you need to have enough money to support the retirement lifestyle you want.
Retirement lifestyles for Australians are generally split into two categories: modest and comfortable.
The Association of Superannuation Funds of Australia (ASFA), defines a modest retirement as being able to cover expenses slightly above the full Centrelink Age Pension. This includes basic health insurance, a cheaper model of car, and infrequent exercise. It also includes minimal utility expenses, limiting dining out, and maybe an annual domestic trip. It assumes you own your house outright.
Meanwhile, a comfortable retirement is one that allows you to maintain a good standard of living. This includes top-level private health insurance, ownership of a reasonable car brand, regular leisure activities, some funds for home repairs, occasional meals out, and perhaps an annual domestic trip. Again, it assumes you own your house outright.
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How much superannuation do I need at age 60 to fund a comfortable retirement?
The benchmark for a comfortable retirement increased earlier this year off the back of higher inflation.
The increase serves as a reminder that long-term returns from markets like the S&P/ASX 200 Index (ASX: XJO) play an important role in building retirement savings.
In order to live a comfortable retirement lifestyle from age 60, individuals will need to spend around $54,840 a year, or for couples, this can be closer to $77,375 a year.
To fund that, you'll need a superannuation balance of around $630,000 for a single person, or $730,000 for a couple.
How much do I need for a modest retirement?
The cost of a modest retirement is a lot less. In order to live a modest retirement lifestyle at age 60, individual Australians can expect to need $35,503 per year, or for a couple this would be closer to $51,299 per year.
To fund that, ASFA estimates you need a superannuation balance of around $110,000, or a couple would need $120,000 at age 60.
How do I know if my superannuation is on track to be able to retire at age 60?
According to ASFA, in order to be able to fund a comfortable retirement starting from age 67, your superannuation balance at age 40 should be $178,000.
But if you want to retire much earlier, at age 60, then you'll need to stay significantly ahead. At age 40 you should aim to have around $267,000 in your superannuation instead.
By age 50, Aussies who want to reach the superannuation balance needed for a comfortable retirement by age 60 should have around $439,500.
This would then put you on track to meet your final $630,000 balance on time.
