An $800,000 superannuation balance sounds like a substantial amount of money.
But retirement could last for 20 or 30 years, and that money may need to cover everything from everyday expenses to travel and unexpected costs.
So, could $800,000 really be enough for a comfortable retirement?
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What does a comfortable retirement cost?
One place I would start is the Association of Superannuation Funds of Australia's Retirement Standard.
ASFA estimates that a single homeowner aged 65 to 84 needs roughly $56,000 a year for a comfortable retirement, while a couple needs around $79,000.
That budget is designed to cover more than the basics. It allows for things such as private health insurance, leisure activities, eating out, maintaining a car, household repairs, and occasional travel.
Of course, everyone's spending will look different. Someone who enjoys frequent overseas trips with Qantas Airways Ltd (ASX: QAN) may want considerably more, while another retiree with relatively modest expenses could live comfortably on less.
How does $800,000 compare?
This is where I think an $800,000 balance starts to look encouraging.
ASFA estimates that a single homeowner retiring at age 67 needs around $630,000 in superannuation to fund a comfortable retirement. For a couple, the estimated combined balance is around $730,000.
On those benchmarks, $800,000 sits above both figures.
Importantly, those calculations do not assume someone simply lives off the investment income and leaves the original capital untouched forever.
Retirement savings are there to be used. ASFA's modelling assumes retirees gradually draw down their superannuation and may also receive some Age Pension support as their balance declines.
That means an $800,000 balance does not necessarily need to produce the entire annual spending requirement through dividends or interest alone.
I would still keep investing
If I retired with $800,000, I would not suddenly move the whole balance into cash.
Retirement could still last 20 or 30 years, and inflation will continue increasing the cost of living throughout that period.
I would therefore want part of the portfolio invested in growth assets such as Australian and international shares or exchange-traded funds (ETFs).
The aim would be for investment returns to help replace some of the money being withdrawn and give the balance a better chance of supporting rising expenses over time.
I would also keep some more defensive assets available so I was not forced to sell shares after a major market fall.
That balance between growth and stability would become increasingly important once the portfolio was funding my lifestyle.
There are some important assumptions
Whether $800,000 is enough would depend heavily on personal circumstances.
Owning a home outright makes a substantial difference. A retiree still paying rent or a mortgage would generally need considerably more income.
Retirement age also matters. Someone stopping work at 60 needs their savings to support more years than someone retiring at 67.
Health costs, travel plans, family support, and other major expenses could also change the amount required.
For that reason, I would treat the $800,000 figure as part of the retirement plan rather than the whole plan.
Foolish takeaway
I think $800,000 in superannuation could provide a comfortable retirement for many Australians, particularly homeowners retiring around the traditional retirement age.
It is already above ASFA's current comfortable retirement benchmarks for both singles and couples.
For me, the key would be making sure the money remained invested sensibly, withdrawals were sustainable, and there was enough flexibility to deal with whatever the next few decades brought.
