Determining how much super you need to retire
There are a number of factors to consider when determining how much super you need to retire.
How long your super needs to last
The longer you expect to spend in retirement, the more you’ll need. Estimate how long you’ll be in retirement, considering your health and life expectancy.
If you're planning to retire at around age 65, it’s likely you’ll live for another 20 years or so - the life expectancy in Australia is currently 85 years for women and 81 years for men2.
Your retirement lifestyle
Having a clear idea of the type of retirement lifestyle you’re after, is a key factor in determining how much super you’ll need to live on.
This may be hard to know if you’ve still got a while to go before retiring, but the sooner you start thinking about it, the sooner you can implement a plan to turn your retirement dreams into a reality.
Some of the things you might consider are:
- How often you would like to travel
- Downsizing – or upsizing your home
- The types and frequency of any recreational activities
- If you intend on providing financial assistance to your family
Once you’ve decided on your retirement lifestyle, you can work through the likely cost of your expenses and where your retirement income will come from.
Your sources of retirement income
Once you have a clear understanding of how much you'll need for your retirement, you can begin developing strategies to generate that income. Your retirement funds will likely come from several sources, including:
- Super: knowing how much super you have—and are likely to have in the future—is a crucial part of planning for retirement, as it generally forms a substantial part of your retirement savings
- Age Pension: depending on your circumstances, income and assets, you could be eligible for a full or part Age Pension, or alternatively, may not be eligible for government assistance at all
- Investments, savings and inheritance: you may be planning to downsize your house, sell shares or an investment property, or use money you’ve saved in a savings account or term deposit to contribute to your retirement. Or perhaps an inheritance or the proceeds from your family’s estate may help you out in your later years.
Ways to build up your super
After using a retirement calculator, you may get an indication that there’s a shortfall between how much you’ve estimated to have and how much you’ll need in retirement. But there are steps you can do now to address the situation.
Some of these include:
- Consolidate your super into one account: bringing your super together into one fund will make it easier to manage. You may avoid paying multiple fees.
- Make extra super contributions: adding more into your super is a great way to increase your retirement savings. If you don’t exceed the cap, it can also have tax benefits too
- Review your super investment options: choose investment options that align with how much risk you’re willing to take on and how much time you have until retirement—generally the more time you have, the more risk you can afford to take on. Diversifying your portfolio across many asset classes can also help to manage risk.
Frequently Asked Questions
Can I retire at 60 with $500k?
According to the ASFA Retirement Standard, to have a ‘comfortable’ retirement, single people will need $595,000 in retirement savings, and couples will need $690,000, if they retire at age 67, assuming they receive part Age Pensions.
How much does the average Australian retire with?
There is no average retirement income for Australians. It varies depending on each person’s individual circumstances including the type of lifestyle they want to have, everyday expenses and health care costs.
How much do you need to withdraw from your pension?
You need to withdraw a minimum of 4% from an account-based pension each year if you are under age 65. This minimum withdrawal increases as you age.
