How much super is really enough for retirement? This always seems to be a hot topic. There are lots of different sources that talk about the magic number that you have to have in your super account when you retire, and the regular income you’ll need to help your savings go the distance.
Probably the most important thing that determines how much you’ll need for retirement is…well…you! How much you need will really depend on what sort of things you’ll need, or want, to spend your money on when you start living off your super.
There are a couple of ‘rules of thumb’ or tools that might help you start thinking about what sort of number is right for you:
About these figures:
|Age Pension||$23,572 pa||$34,952 pa|
|Modest retirement||$23,996 pa||$34,560 pa|
|Comfortable retirement||$43,372 pa||$59,619 pa|
Once you know what level of annual income you’re likely to need in retirement, the next step is seeing if your current super position is on track to get you there.
While we’d all love to have a crystal ball tell us exactly how much money we’ll have in retirement, it’s not going to happen.
You can, however, use some simple tools and calculators as a starting point to get an estimate or indication of how much retirement income your super might provide for you at retirement, based on where it’s at now. Here are a few calculators you might want to try:
Calculators are a useful way to look at different scenarios, tweak some settings and learn what may and may not work for you, but they won’t provide you with an exact answer based on your personal circumstances. It's always a good idea to consider seeking professional advice before finalising any decision that might have an effect on your financial future.
One of the most important things to remember is that, even if your ‘will need’ and ‘will have’ figures aren’t quite matching up at the moment, there are always options to try to improve your outcomes.
There are a few factors that can influence your potential retirement outcomes:
(There’s also another way – earning more, which means your employer would be contributing more – but that might not always be something you can control!)
Changing the dial on one or more of these factors is likely to have a flow-on effect on the others, which means that even if you can’t or don’t want to change one of them, changing another might still get you to a similar outcome.
You may be able to continue working for longer and/or adjust your expectations for the annual income that may be available to you in retirement.
You may be able to adjust your expectations for the annual income available to you in retirement and/or top up your super with extra contributions.
You may be able to top up your super with extra contributions and/or remain working for longer in order to accumulate more super to meet your income goal.
Try this handy calculator to work out your likely income when you retire, and how contributions investments, fees and age can affect this. (Source: MoneySmart)
In this video, 'Barefoot Investor' Scott Pape talks about being prepared for retirement and tips to help you along the way. (Source: ASIC MoneySmart)