They say I need $1 million in super to retire, but is this true?
How much super should you save for retirement? The $1 million that’s often bandied around by the media is both out of reach and unnecessary for most people to achieve a comfortable retirement. So, how much super do you really need to retire?
What does a comfortable retirement look like?
Your retirement will be unique so it makes sense the amount of money you’ll need will also differ from your friends and neighbours. A good question to ask yourself is what does a comfortable retirement look like for you? Is it regular world travel, caring for grandkids, or is it turning a hobby into a business?
Once your retirement goals are set you can start thinking about what your ideal lifestyle might cost.
What are your retirement expenses?
Until you get there, it can be hard to know what your expenses will be, so many people use the ASFA Retirement Standard as a guideline. It presents a savings goal and expense breakdown for two types of retirement lifestyles—comfortable and modest. Both lifestyles assume people own their home outright, are relatively healthy, will draw down all their capital and receive a part Age Pension.
How much super will you need?
ASFA says a comfortable retirement allows retirees to maintain a good standard of living. Their savings goal accounts for a reasonable car and home repairs, top level private health insurance, and regular entertainment through exercise, leisure activities and meals out. It also accounts for top level internet and mobile phone plans, an annual domestic trip, and an international trip once every seven years.
For a comfortable retirement the ASFA Retirement Standard recommends that at age 67 couples have saved $690,000 and singles $595,000.
A modest retirement is less grand with spending being slightly above the Age Pension. It allows retirees to have an older model car, basic health insurance, a modest internet and phone plan, occasional trips to the cinema or inexpensive restaurants, and an annual domestic trip or short break.
For a modest retirement the ASFA Retirement Standard recommends that at age 67 both couples and singles have saved $100,000.
What about the Age Pension?
Yes, for those that are eligible the government Age Pension acts as a safety net for retirement. However, the Age Pension doesn’t provide for more than the very basics, so it’s important to have a savings goal in mind for your ideal retirement.
Start planning with the Retirement Income Calculator
Using the Retirement Income Calculator is a terrific way to kick-off your planning. It can provide you with an estimate of your future retirement income, and help you understand the actions you could take to achieve the lifestyle you want.
Should you talk to a professional?
While most of us won’t need to save $1 million to have a great retirement, it’s recommended you talk to a professional to help you retire without undue financial stress.
As part of your CareSuper membership you can give us a call for simple super help,* or for more comprehensive advice you can book in to see one of our experienced financial planners for a competitive fee.^
Speaking to an expert about your retirement goals and how you might achieve them can really provide peace of mind and help set you up for the best holiday of your life.
Ready to start planning your retirement? Visit the Retirement Guide for 4 steps to getting started.
*Financial advice obtained over the phone, or through MemberOnline, is provided by Mercer Financial Advice (Australia) Pty Ltd (MFAAPL) ABN 76 153 168 293, Australian Financial Services Licence #411766.
^Advice is provided by one of our financial planners who are Authorised Representatives of Industry Funds Services Limited (IFS). IFS is responsible for any advice given to you by its Authorised Representatives. Industry Fund Services Limited ABN 54 007 016 195 AFSL 232514.