Working out what superannuation balance you need at any retirement age depends entirely on your living situation, financial situation, and the lifestyle you want to live when you finally stop working.
The average retirement age in Australia is 65. But some like to wait a little longer, until they can (if eligible) access the Age Pension at age 67. Meanwhile, others might delay their retirement into their 70s to let their superannuation compound a little longer.
Don't want to wait any longer than the average Aussie? Let's break down what retiring at 65 might look like and how much money you will need.
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What type of retirement do you want?
In Australia, retirement is generally split into two broad categories: modest and comfortable.
A modest retirement, according to the Association of Superannuation Funds of Australia (ASFA), is defined as being able to cover expenses slightly above what the full Centrelink Age Pension would provide from age 67. This would cover things like basic health insurance and home repairs, but wouldn't leave much room for leisure activities, and certainly not a holiday.
ASFA defines a comfortable retirement as one that enables retirees to maintain a good standard of living well beyond the age pension. It budgets for expenses beyond a modest retirement, including top-tier private health insurance and regular leisure activities. It allocates funds for home repairs or renovations, and perhaps even an annual holiday.
What will a modest or a comfortable retirement cost me?
ASFA estimates that a modest retirement will cost around $36,434 per year for singles and $52,473 per year for couples. These figures assume you'll also receive a part Age Pension.
For many Australians, a modest retirement is achievable, but it'll require a tight budget, strict financial goals, and careful planning. But it goes without saying that every Australian strives to live a comfortable retirement far above the bare minimum.
A comfortable lifestyle means your budget will be a lot more flexible.
ASFA data shows that a comfortable retirement is estimated to cost around $55,923 per year for singles and $78,566 for couples. Again, it assumes you'll receive a part Age Pension and that you own your home in full.
What do I need in my superannuation by age 65 to be able to afford that?
In order to fund a modest retirement, singles will need around $110,000 in their superannuation when they retire, and couples around $120,000. This should be achievable by the majority of Aussies by the time they reach age 65 and want to retire.
A comfortable retirement requires a lot more, though. Single Australians will need around $630,000 in their superannuation by age 65, and couples will need around $730,000.
There's another catch
Keep in mind also that ASFA calculates these figures assuming you'll access your superannuation from age 67. If you want to retire a little earlier at age 65, you'll need to account for those two extra years of funds.
You'll also need to take into account your life expectancy from that point.
For example, $54,840 per year on a balance of approximately $640,000 means ASFA's data assumes you'll only need to fund around 11 years of a comfortable retirement.
Add an extra two years on that, and your superannuation money will need to be spread more thinly.
Also, if you don't own your home outright, you'll also need to consider how you'll pay your mortgage or rent on top of your other bills.
It's also wise to have an emergency fund set aside.
