How much super do you need to retire comfortably on?
IF you want to have any hope of having a comfortable retirement, you’ll need super savings. Find out if you are on track with our online calculator. (And be warned: you could be in for a shock.)
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THE Association of Superannuation Funds of Australia has revealed the magic figure we’ll need to ensure a comfortable retirement when we finish working.
A single person will require $545,000 at the time of their retirement and a couple will require $640,000 between them.
If a single person saves $545,000 come retirement at 67 this will provide them with an annual income of $42,764.
This is on the premise the person owns their home outright and has good health.
A comfortable retirement allows retirees to be involved in a range of leisure and recreational activities and have a good standard of living.
They should also be able to purchase things without concern including private health, household goods, a reasonable car and can travel domestically and internationally.
The Association has established what working Australians will need in their super accounts at each age in order to put them on track to reach that tally.
Use our calculator below to see if you are on track.
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SUPER SECTOR UNDER SCRUTINY
The nation’s $2.6 trillion superannuation sector is expected to cop a battering as it becomes the next target of the financial services Royal Commission in August.
Revelations of chronic underperformance of funds, high fees and complex products are all serious problems that have plagued the industry and been singled out in the Productivity Commission’s recent report.
And there’s no denying many Australians have found super incredibly difficult to understand.
This has been exacerbated by the constant tinkering of rules and has led to member disengagement with many people accumulating multiple accounts.
With members’ superannuation statements beginning to roll in from now through to September it pays to open them up and read through them closely to check if your savings are on track.
RETIREMENT RETURNS SHORT OF GOALS
Superannuation fund members have had a volatile first half of the year and have just experienced a weak quarter.
The latest SuperRatings figures show the median balanced fund grew by an estimated 1.3 per cent in June, bringing the June quarter to 3.3 per cent growth.
The 2017/18 financial year delivered single-digit growth for the median balanced option at about 9.2 per cent.
The five-year returns are 8.9 per cent and 10-year returns are 6.5 per cent.
But new figures from AMP have revealed for Australians to live a retirement lifestyle they aspire to from 65 their accumulated savings will only last them five years.
It found with the average life expectancy being 82.5 years, Australians will have a shortage of money for 12.5 years.
And for women it is even worse. The findings showed they would have a shortage of 14 years, versus men with 11 years.
AustralianSuper’s group executive Paul Schroder said regardless of your retirement plans you should be checking where you are at now.
“Consider how long you might need your retirement savings to last,’’ he said.
“With current life expectancies and depending on when you retire your retirement could need to last 20 years or longer.”
As to working out a magical number you need to have Mr Schroder said it depends on how much debt, if any, you are saddled with at retirement.
“How much you actually need will also depend on any outstanding debts you might have,’’ he said.
Sometimes retirees will also look at downsizing to free up some more extra cash if there’s a shortfall.
For those over 65, if they are thinking of downsizing there are some helpful provisions if the sale is made after July 1 this year.
Anyone can make a non-concessional contribution into their funds from the proceeds of their home up to $300,000.
SUPERANNUATION GUARANTEE
The superannuation guarantee for compulsory contributions is 9.5 per cent and this figure won’t move again until 2021.
This is when it will start to steadily increase to 12 per cent by 2025.
AMP financial planner Dianne Charman said many people incorrectly believe the “superannuation guarantee will be enough.”
“It depends on your income; have you been proactive with your retirement saving from an early age?’’ she said.
“The more early planning you can do the better.
“If you put more money into your super, say $50 a month in your 20s rather than trying to catch up in your 40s, that compounding interest will be the key and you’ll end up better off.”
INVESTMENT OPTIONS
This is critical for all members — it determines the level of risk a person is willing to take.
Typical investment options including conservative, balanced and growth — but as to what exactly the money is invested in, this varies between funds.
A conservative investment option usually invests around 30 per cent in shares and property, balanced options invest around 70 per cent and growth options invest around 85 per cent.
Intrust Super’s chief executive officer Brendan O’Farrell urges members to be “more engaged” and understand exactly what their money is being invested in.
“Know what your fund is investing in within those options and if you’re not sure get some advice,’’ he said.
“Don’t just switch to a cash investment option because you’ve finished work, you may have 20 more years to live after you stop work.”
Most Australians are in a balanced option.
EXTRA CONTRIBUTIONS
Mr Schroder said for those nearing retirement it’s important to work out if you will receive money from the Age Pension alongside any super savings.
“Find out if you’re eligible for the Age Pension but don’t rely on it as your sole income as government policies can change,’’ he said.
“Instead consider using your super to top up any Age Pension you may be eligible for.”
It pays to ask your fund member or your employer if you are putting enough into super and check what your balance is.
If you need to catch up or fatten your balance, salary sacrificing allows you to tip in a portion of your pre-tax salary and it can be tax effective.
But these extra contributions are capped at $25,000 per financial year and taxed at 15 per cent.
This cap also includes compulsory contributions made by your super fund.
CONSOLIDATION AND LOST SUPER
Many Australians have multiple super accounts, collected along the way from different jobs, but AustralianSuper’s group executive Paul Schroder said combining these into one will save you money.
“There’s nearly 30 million super accounts in Australia and there should only be 15 or 18 million and this affects people of all ages,’’ he said.
“Added to this is the worse prospect that you might have super in an account that you didn’t know about.”
Latest Australian Taxation Office statistics show there is already nearly $12 billion in lost super which Mr Schroder said is an “unacceptable situation.”
Super is deemed lost when the fund is unable to contact the individual and has not received a contribution to the account for five years for account with a balance below $6000.
For Australians to claw back their lost super it takes a few quick steps:
* Check your super accounts by registering for the ATO’s online services via MyGov or contact your current super fund for assistance.
* Once you log into your MyGov account you can see all your super accounts and any balances held by the ATO.
* You can consolidate your account(s) into your preferred super account.
* You can also ring the ATO on 13 10 20 to check on your accounts and find any unclaimed super in your name.
How much should you have in super now?
| AGE | BALANCE AT THE END OF THE YEAR |
| 21 | $4664 |
| 30 | $59,783 |
| 40 | $146,381 |
| 50 | $260,676 |
| 60 | $411,529 |
| 67 | $545,000 |
Note: This is the balance you should have to achieve a comfortable retirement and have an income of $42,764 per annum in retirement.
The nation’s largest super fund AustralianSuper’s average balances
| AGES | MALE | FEMALE |
| 15-24 year olds | $4433 | $3964 |
| 25-34 | $20,974 | $17,652 |
| 35-44 | $49,219 | $36,375 |
| 45-54 | $80,873 | $53,091 |
| 55-64 | $125,534 | $87,486 |
| 65-74 | $155,004 | $134,072 |
| 75 years and older | $136,262 | $125,162 |
Note: 1 in 10 working Australians are a member of AustralianSuper.
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