Are You Building Enough Super For A Comfortable Retirement?

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While it can be tempting to put off preparing for retirement, it can leave you in a situation where you are scrambling to put together the funds required. The alternative to this? Take a long-term planning approach that is more relaxed and reliable. With either tactic, is it important to know the answer to this question: how much super do you need to retire?

 

The Theory

There have been different theories on how much you need in your superannuation savings to make for a comfortable, secure retirement. There are some that argue that you need savings as high as $1M or more, but the Association of Super Funds of Australia offers a more realistic goal.

They recommend saving enough to cover two-thirds of your working income in order to maintain your current living standards, in retirement. This is based off the idea that while you will still have similar costs for many areas of your life, there are expenses associated with raising a family and staying in employment that you will no longer need to pay.

 

The Figures

While “two-thirds” of an income can greatly fluctuate between individuals, the ASFA has released minimal recommendations. For a “modest” retirement lifestyle that is above the Age Pension but restricted to basic activities, they suggest aiming to live off $28 000 per year for individuals, and $40 000 per year for couples.

A “comfortable” retirement lifestyle is defined as one where an older, healthy retiree can enjoy a broad range of leisure and recreational activities. The suggested numbers take in to account the purchase of the following: household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, and domestic and occasionally international holiday travel. The budgets for these lifestyles are estimated at $43 000 for individuals and $61 000 for couples.

In both cases, these figures assume the retiree owns their own house.

 

The Risk

One of the reasons that some experts tout a recommended super of at least a million are the fears of inflation and rising costs of living to come in the decades ahead. The ASFA have indicated that even with these potential factors, this is still more than considered necessary.

One concrete factor that will affect the total amount you need for super is that age at when you plan to retire. If you’re seeking to retire at 60, your savings would need to stretch and last you potentially another decade, compared to if you were to retire at 70. Decisions like this have the power to impact your bottom line savings goal by tens of thousands of dollars – or could tip you from having a comfortable living down to just a modest living.

 

The Choice

Despite the fact that the ASFA’s recent reports have comforted some fears about reaching super goals, the fact remains that paying the mandatory minimum on your super savings could put your retirement goals at risk.

To safeguard your future plans so you can retire as soon and as comfortably as you would like, consider seeking out financial planning assistance. By doing this, you can:

  • Have your financial numbers assessed, based on your current earnings and expenses
  • Consult whether your retirement plans and lifestyle are viable, based on your current situation
  • Get advice on how you could potentially restructure your super plans to ensure you’re investing in your future in alignment with your goals.

 

While you may not need to save as much super as you initially thought, that doesn’t negate the need to actively plan financially for retirement. The sooner you know with confidence what you’re working towards, the more flexibility you have to make up time for savings and give yourself the best chance at a comfortable and rewarding retirement.

If you’re ready to begin the conversation around retirement and wish to get professional advice, you can speak to our experienced team today on 1300 784 084 or book in a free, 20 minute consultation here.

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Dane Jansen
Dane is a Managing Partner/Responsible Manager at Positive Dynamics. He embraces his leadership skills to provide guidance to his clients giving them the confidence and conviction to achieve financial success.
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