‘Dumb way’ Australians measure their superannuation balances as expert shares how to hit $1 million by the time you retire
A financial expert has revealed the “dumb” way some Aussies analyse the strength of their super balances - and shared the foolproof way to retire with over $1m.
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For many Australians, a million in super has been a dream scenario. But it was more than was really necessary. Most Aussies who are retired never even got close and are absolutely fine.
But for you? The person who isn’t going to retire for ages? It is possible. It’s actually even likely, if you are young enough. About half of all people aged 30 will end up with a million in super. But which half?
A million dollars in super might be pretty nice to have in the future. Because the cost of living keeps going up. If inflation is high enough, a million dollars might be enough to buy Weet-Bix and keep the lights on!
In this story we’re going to look at who has what, and who is likely to end up with a million dollars in super. And we are going to look at some amazing graphs.
No more averages please
When I talk about super, I give the full story. Not just the averages. Averages are, in this context, dumb. Because almost nobody is the average. Super is not like height, where we are all fairly similar and an average is meaningful. When it comes to super, some people are like lego people and some are bigger than giraffes.
The following charts break super up by age group. They also break your age group into 20 groups, from the zeroes on the left (no super) to the superheroes on the right (loads of super), and everyone else in the middle, in chunks of 5 per cent. This is useful because it shows you not just the average for your age, but where you stand compared to your peers.
You can find yourself in the following charts (there’s one for men and one for women)
1. First find your age group,
2. Then find the tallest column that is less than your super balance. That’s your column.
3. See where your column stands. If it is the tallest you’re in the top 5 per cent, second tallest top 10 per cent, etc. If your bar is near the right side, you’re near the top. If your bar is near the left, you’re closer to the bottom.
Each bar is 5 per cent of that age group. The height of the bar is the minimum dollar amount to be in that group.
My super balance is just below the second bar for my age group. Which means I’m in the third group – the top 15 per cent for my age. Not too bad, not amazing. My holidays in retirement might be a week at the coast not a month of cruising the Mediterranean, but at least I should get some holidays!
Where will I end up?
So … who is likely to end up with a million in super? If we make some simplifying assumptions – say everyone puts in $9000 a year and gets 7 per cent returns, we see the following.
The charts are the same as the ones above, but I’ve coloured red the people who are able to hit a million by age 60.
For women, we see about 20 per cent of those aged 35 to 39 will hit a million by age 60.
Those whose balances are over $120,000 now are on their way to seven figures.
For women under 30, all of them can hit a million. If they put $9000 a year away for 30 more years and get 7 per cent returns the magic of compounding will get them over the line.
The following charts are for men. More men aged 35 to 39 will hit a million in super by age 60 – about 30 per cent of them. Again, all men under 30 can hit a million in super by age 60.
In reality not everyone under 30 now will get there by 60. People who have no super at age 30 are not likely to start saving $9000 a year.
Putting $9000 a year away is a lot for a person making below average income in 2025, so that assumption is a bit dubious, on the other hand some of these people will still be working in 30 years and at that point $9000 a year won’t be much. The above charts are best thought of as a simplified model of what’s possible.
Should you worry about your super?
Obviously this is just a projection – a guess, estimate, forecast. If you get promoted to manager or act super frugal you can end up with more than the projection. If someone drops a steel beam on your head or your business goes broke, you end up with less. And if you fall in a fiery volcano the day before your 60th birthday it won’t matter at all.
Super works only if civilisation still exists at retirement. And the longer the time frame you’re looking at the harder it is to predict the future. Eighteen year olds aren’t thinking about retirement and honestly good on them. Go have fun.
Also, every so often history dishes up a big financial event that crashes markets and destroys wealth. If that arrives in your last five years before retirement, a lot of your good work in saving hard can be undone.
The assumption I’ve made – of 7 per cent returns steadily each year – could come to look ridiculously optimistic.
For anyone about to retire and stressing about the cost of living in retirement there is comfort in the knowledge that the pension is going to be there. Politicians have raised the pension age to 67 but no further rises are planned. If you can stretch your working life and savings to age 67 then the pension ($1051 per fortnight for a single) will carry you afterwards, and you needn’t worry about super at all!
Jason Murphy is an economist | @jasemurphy.bsky.social. He is the author of the book Incentivology
Originally published as ‘Dumb way’ Australians measure their superannuation balances as expert shares how to hit $1 million by the time you retire
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