How much do you think is needed in superannuation for a comfortable retirement? ASFA (Association of Superannuation Funds of Australia) suggests $595,000 for singles and $690,000 for couples, assuming you own your home outright. Personally, those numbers seem a bit low to me. Many people talk about the "magic number" being $1 million. What are your thoughts?
How Much Super Do You Need?
confusedhuh on 15/12/2024 - 08:45
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depends on age you retire, might be ok if you do at 67, I would plan try for 60 then need a fair bit more.. prob 1.2-1.5 but then get to use it up while still able to do some stuff
yup true
This site, and the media spend lots of time talking about rich people problems.
Those super balances and accompanying pension/part pension will allow a quality of life similar to average income earners in retirement.
It assumes you own a home, and don’t live lavishly.If you want to live more lavishly , the easiest way is to work an additional year or two - one year more of contributions, growth and one year fewer of drawdown makes a big difference.
The thing that makes me angry is the million dollar figure and other advice that means normal people will have a substantially reduced quality of life now in the hope they live long enough to use their pot of gold.
And the reality is almost all younger people face such an uphill battle for housing that telling them to save more for retirement is impossible , so just adds to their financial anxiety.That said, if you are well off, like four fifths of people nearing retirement in Australia thanks to our insane housing market and golden economic run for the last three decades, you can get a much bigger benefit from the government than the age pension will ever be worth by taking advantage of the low taxes in super.
Might as well avoid all that tax so you can write letters when you are older claiming to be a “self funded retiree” outraged at everything ."self funded retiree” outraged at everything"…haha too good
"well off, like four fifths of people nearing retirement " …I think you overestimate the numbers to whom this will apply. I suspect due to the 3 D's (death, debt and divorce) the number is closer to 20%, with many people living pay cheque to pay cheque with very limited assets such as super, shares, bit coin etc.to fall back on.
I agree there are a bunch of people who haven't had a good share of the huge wealth that has been generated in older age groups, but >80% own their own home, with the accompanying massive wealth gain that has occurred in the second half of their lives:
https://www.housingdata.gov.au/visualisation/home-ownership/…All of those same people will qualify for the age pension if they have other limited assets/income. And the average house price is nudging $1m, so I'm pretty relaxed about 4/5ths of the elderly.
They have plenty of options to live well, though no doubt many will choose to live meagerly to pass on a massive inheritance.The other 20% can at least be assured of an age pension, though they will have to face the same punishing housing costs younger people face. They are certainly big parts of the community in areas away from the big cities, because they aren't tied down by work, so can at least relocate for lower costs.
If you want to live more lavishly , the easiest way is to work an additional year or two
This, but also another way is to work a couple of more years part time (easier said than done because of job constraints) - can mentor younger staff, but best value is after tax - you don't earn as much p.a. and maybe fall down a tax bracket or two so get to put aside more for your efforts.
Yeah, a bit of easier, part time work is pretty healthy for the mind and rest of the body too. The fittest and most alert older people I know are still working occasionally.
lavishly has many meanings……..my 2nd hand Nissan Tiida with 2000000 KMs on the clock or my AMG whose ash tray is full and so I'll swap it for a new one?
My dad retired at 65 died 6 months later. Worked his guts out his entire life life is too short.
Unless you absolutely love your job retire at first opportunity you can allways go back and work part time. I know plenty of guys who retired and are now working casual. They disappear for a few months travelling then come back work a bit then headboffvagain.
I think too many people hoard super when they could retire earlier and get much more out of their lives while young enough to do so, even if it means a more frugal lifestyle. People in their 70s have slowed down and don't do so much, and their super hoard goes to their kids.
Retirement isn't a great option for many people, and can be the start of a slow or not-so-slow death. Most people need a purpose in life, and for many thier job provides that.
We made the decision to balance work and travel etc whilst we are relatively young and can climb mountains etc. Once I can't do that, I think I'd rather be working than not. (If I can find a decent job. Employers don't seem to put a lot of value on experience.)
If you don’t own home, then maybe $5m
At 3% interest, it’s about gross $150k/year
It's too contextual and depends on your needs.
For example I've calculated for my lifestyle and yearly spend I'd need about 3.5 million (this includes inflation) by the time I retire. That's about $75,000 a year yearly spend for the rest of my life (again, accounting for inflation) using the 4%/25x rule.
$700,000 wouldn't give me a lot of international travel or other things I enjoy.
$3.5m seems high for $75k income. Did you allow for no growth of the $3.5m or only live off the income, that is, never run down the capital?
Includes growth.
The $75k is today's money, so I believe it's over $100k yearly in future (accounting for inflation).
It'd be closer to 2-2.5 million in today's dollars.
$3.5m would earn more than $100k a year in income without even touching the capital. Even if it earned nothing it'd take you 35 years to run down that balance.
Plus by the time you're 90 you'll find your international travel will drop off, unless some kind of magic anti-aging treatments have come along by then. $1.5m while earning interest and slowly decreasing the balance should be more than enough.
$3.5M in super will give you a minimum $140K/year for age 60-65 (4%), $175K/year age 65-74 (5%). You can’t take out less than that. If you want $75K/year, aim for $2M in super, noting that over the long term, super grows faster than inflation.
I aim to retire at 45-50, and count money both in and out of super. Just needs to be 3.5 million in total at the time, and the income will be $100k+ each year (75k indexed for inflation).
Super is highly regulated, unless you plan around the regulations, it won’t meet your aims. eg. How will you get $3.5M into super by age 45-50, and how will you take an income stream from it prior to your preservation age?
3.5M wow good work man..unfortunately I dont think I can get to that number thought :(
That's ok. That's my number! Doesn't have to be yours.
I beg you to get some better advice. I listened to 45 seconds before it was clear this advice was inappropriate for Australian retirement planning.
Soz, I may misunderstand your statement. Did you say you aim for 3.5m super with $75k current salary? Also, do you currently own a home or mortgage? Just trying to do the math in my brain.
How Much Super Do You Need?
Depends on:
- Expenses - annual expenditure in retirement including rent if you don't own your own property - non-discretionary and discretionary
- Income - from super
- Income - passive income (from investments) outside of super
- Income - (part) pension
- ^ all 3 sources of income should cover your expenses
- Return - return on your super and investments after tax
- Time - your life expectancy
- Volatility - unless the investments are in cash, you need to allow for volatility, including medical advances, etc., where you live longer than expected - you can add a margin and also manage it by drawing down less for non-discretionary in poor years and more in good years
- Leftover - what you'd like the kids to inherit, donate to charity, etc.
- Inflation - either allow for it explicitly or factor it into your return.
Basically it's the formula for the present value of an annuity: (Super plus other assets) = Annual income * [1 - 1/(1+r)^n] / r
How long is a piece of string?
same dimensions as a ball of string
I have $2000, I think once it went much below that due to fees and automatically enabled insurance.
Based on the comprehensive information you’ve given
$1,269.420
Sorry to point this out, however I have identified an error in your calculation. You forgot to carry the 3. It should be $1,269.720.
Those figures look extreme low imo
You’re probably not counting the up to $30k - $45k p.a. of tax free pension that supplements these figures. If a couple has combined $45k pension, and $500k in super, they can have a household income after tax around an average household earnings.
If you add in no mortgage or rent because they have a paid off house it looks pretty good.True… at this rate I see myself working till like 99 before I can retire.
Either that or retire tomorrow and live till next week.
For what it’s worth, most people die with the bulk of the wealth they had when they retired. That is, they lived a much less lavish lifestyle than they could have during their retirement. Good for their estate beneficiaries, but poison when you consider they could have had years of less work or better living.
https://www.smh.com.au/money/super-and-retirement/the-scienc…Not everyone can strike the right balance. But I agree, who guarantees you’ll live to enjoy your Super.
Healthy individuals are known to die in their 30s & 40s, enjoy life while you still can.
My answer was downvoted. I suppose I did not give explanation. Here is my view.
You’d need $5,000,000 in super so that you can get gross $150,000 as interest from that every year at 3% interest. $150,000/year should be ok to live by.
Once you pass away, the savings go back to your children ( I suppose). It assumes you do not have any home bought or paying any mortgage.
Is it impossible to achieve $5 million in superannuation? While it is highly risky and challenging, it is not entirely unattainable.
Throughout our lives, we have witnessed numerous opportunities, though many of us have not acted on them. Note: This is not financial advice, and I am not advocating for any specific actions. Please do your own research. I am not a financial advisor.
I chose to invest my superannuation through a Self-Managed Super Fund purchasing Bitcoin. This investment has appreciated significantly, yielding higher returns than my standard superannuation did over the past 15 years. Had I made this move earlier, I would be closer to achieving my superannuation goal.
What does this indicate? I can either retain my funds in a traditional superannuation account and aim for an annual return of approximately 10–12%, or I can take substantially higher risks and set a goal of reaching $5 million within a decade.
A portion of my super is still with INGSuper. Most of my super is through SMSF
investing in one asset class like bit coin is in the same strategy as putting it all on the winner of the Melbourne cup, followed by betting on the ALP getting re elected, followed by double 00 at the Crown. Some one may win but on a risk / return basis most every one else will not.
There was a recent article on ABC news about this and I can't find it!
These were the main points from my memory.
- The amount people really need is smaller than many expect. Remember you won't need to 'fund' work related stuff e.g. office clothes, work commutes.
- Super funds tend to inflate the super balance needed for retirement. The figures they recommend can be biased.
- Whether you own your own home is a big factor in how much is needed.I kind of agree and disagree.
- Many of us work from home. Hence, need for work related stuffs may not be too much of a difference
- Cost to educate a child will likely not be there unless the kid ends up staying with us forever. That would be bummer
- Owning a home makes a huge deal here
- Reasonably medical and tourism costs may go up as well.
During my employment, I worked with lots of retirees, mostly pensioners, but some self funded retirees. There was a common theme. Those who owned their own home were enjoying life, travelling, dining out, buying new cars etc. Those who were renting were fearful of rent increases & eviction. I also dealt with the occasional retiree who found themselves homeless. Not a pleasant thought. My advice would be to make home ownership a priority when planning retirement. Once this major "plank" is in place then other strategies can be considered.
Agree - if you are lucky enough to finish your mortage before you retire then that makes a huge difference.
a lot more than I have…even more if labor and greens get their policies implemented.
How much Super? Or how much savings? I have a good amount growing in super but I'm also saving outside of super. The rules around how you can access your super will only get tighter, they will never become looser. I want to be able to buy a new car, say 10 years after retirement and have an overseas holiday at least every second year. I'm working to fund that bit now.
Have you done your figures properly? IMO the tax advantages of super far outweigh the risk of having restrictions on accessing it.
Unless my super was maxed, I wouldn't be investing outside of super.I'd also consider whether you'd enjoy those holidays more now than when you're older.
I’m 56 and due to a stroke stopped my normal work a few years back. Current balances 351k in super. We are Living off another 350k of HISA and Dividend shares, plus a simple contract job paying 1k a month. Grown up kids moved back home due to cost of living and they pay some board - we are living OK on all this, drawing down some from savings each year. I have a fancy spreadsheet that tracks everything going forward until I am 99! Everyone is different. Can plug in how much I want to withdraw each month, adjust high interest savings account rates, adjust for CPI Inflation, estimated super gains etc etc. As added fun I can move around a date when the mother in law will die and we get a cash injection - which is a ‘fun’ thing to do but she will probably outlast me! We include 2 Asia type holidays a year and one euro trip every 2 years for 6 weeks. We do live quite ‘simply’ and our total expenses are less than 60k. Own our home outright however. Would be bad if we did not. Since my stroke, I am happy to just live in a van but the wife says no. I’d like to sell the house, give the 3 kids 700k each and live a simple life in a van with just food, rego and insurance plus private health insurance to think about.
Amazing and thank you for sharing your story :). Having a spreadsheet is a great idea - I will try it myself.
You can retire on a part pension as well. Be aware a lot of the number spruiked by the super companies is to get extra contributions.
But if your young put a bit extra in now it will make a lot of difference and later on house repayments, life etc can get in the way.
Surprised nobody has mentioned Die With Zero given some of the relevant comments here.
You can read it for free through Kindle on Amazon: https://www.amazon.com.au/Die-Zero-Getting-Your-Money-ebook/…Basically instead of trying to preserve the principal and live off the earnings, aim to draw down on most of it (with a safety buffer).
And also ensure you are putting your money to good use now rather than after you die. That charity can help people NOW, your kids can buy a house NOW, not once you die with millions in the bank.I have been helping a relative with some admin after their spouse passed away, and have helped them organise their finances. This is for an 80yro in Sydney who owns their own home and does not qualify for an aged pension.
I have been very surprised how little spending they have. Some things to consider:
- after 80yro interest in luxury or adventure travel withers. A visit to family costs very little.
- they have a ten year old car with 50,000km on it. So very low fuel and maintenance costs. Cheap insurance too. And it looks and drives like new, so is probably the last car they will need.
- groceries for one or two are inexpensive, even if you buy the lamb cutlets and fancy bread.
- very low spending on ‘stuff’. They have literally everything they need, and are more concerned with getting rid of clutter and too much.
- regular activities are very low cost; knitting/book club, men’s shed, coffee date, family visits, lunch out
- a couple of “service’ expenses like mowing, cleaner and handyman.
- cheap nbn and mobile plans are plenty.
- lots of health expenditure and medicines are free or heavily subsidised
- plenty of time to make a cake or cook a casserole instead of buying in the same
- no real desire for a new kitchen or bathroom renovation etc. They are happy with how they have things set up, and wouldn’t like the hassle of renovations.I think from the statements I’ve seen they would be living well on $25-$30k, which is substantially less than I would have expected.
Need or want, these two are often confused. You don't really need much to survive, however you need a fair bit to enjoy retirement without having to compromise on things which is what a lot of us want.