In Australia, age 65 is the sweet spot for retirement. At this age, you can access your superannuation regardless of whether you have quit work or not.
And you're also only two years away from potentially also receiving an Age Pension payment.
But for many Australians, retiring at 65 means they need to turn decades of super contributions into a reliable income stream that can support them throughout retirement.
But the question is, how do you know if you have enough in your super?
Lets investigate what a comfortable retirement starting at age 65 could look like, and how much it'll cost.
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The definition of a comfortable retirement
First, it's important to understand what a comfortable retirement actually looks like.
A comfortable retirement generally means having enough income to cover your everyday expenses while also allowing for discretionary spending such as travel, dining out, hobbies and entertainment, without having to significantly compromise your lifestyle.
Individuals and couples should be able to maintain a reasonable standard of living, perhaps afford the occasional small luxury, and still have some financial buffer for unexpected expenses.
Think top-tier private health insurance, regular leisure activities, funds for home repairs or renovations, the occasional meal out, and perhaps even an annual holiday.
How much does a comfortable retirement cost?
The Association of Superannuation Funds of Australia (ASFA) estimates that a comfortable retirement will cost around $55,923 per year for single Australians.
A couple living together can expect to spend around $78,566 per year combined.
How much do I need in my superannuation to afford this lifestyle?
In order to fund this lifestyle level, ASFA has calculated that at age 67, single Australians will need around $630,000.
Couples will need a combined superannuation balance closer to $730,000.
But the catch is that these figures are based on the understanding that you'll retire at age 67, that you will only need to fund around 10 years of retirement, will be eligible to receive a part Age Pension, and you own your home in full.
So, if you want to retire at a much earlier age of 65, you'll need to work towards a different goal to be able to fund those extra seven years.
I've crunched the numbers to work out the balance you'd need to quit work a couple of years earlier.
Your annual costs will be around the same: $55,923 per year for single Australians and $78,566 per year combined for a couple living together.
But, as I mentioned above, you'll need to fund an additional seven years that ASFA figures haven't accounted for.
At age 65, singles will need to have at around $742,000 in their superannuation.
Meanwhile, couples will need a combined balance closer to $888,000 at the same age.
But note, if you don't own your home outright, you'll also need to consider how you'll pay your mortgage or rent.
