How much super is enough?
When it comes to super, one-size-fits-all does not apply. But if you’re looking at getting your super sorted, knowing how your savings stack up can help with the next steps.
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Is your super on target?
Taking action on super is harder when you’re in the dark about your goals. Self-employed Financial Adviser, Michelle tells us why it’s important to have a clear target to aim for.
What’s my super goal?
The magic number to save for your retirement isn’t a simple sum. That’s because we’re all so different. Super won’t necessarily be the only money you’ll be spending in retirement. And the way you live and your living costs won’t be the same as everybody else either.
What does a healthy super balance look like at retirement?
Having said that, there are lots of resources available to help you get a rough idea of what your super savings goal should be. One estimate says a couple will need a super balance of $640,000 at retirement to give them $63,352 every year to live on . You can take a look at more figures like these to help you run the numbers for your future in retirement.
Run the numbers for your retirement
Is my super on track now?
How can I catch up?
- Your Super Guarantee payments from your employer are a percentage of your salary. When your salary goes up, your Super Guarantee payments will automatically go up and will help you save more super.
- You don’t have to rely on your employer to save more. You can pay yourself super by making personal contributions. Learn how to Grow your balance
Saving a little extra in your super now can make a big difference to your balance in 30, 20 or even 10 years’ time.
A head start can help
Saving more in super now makes a lot more sense when you can see the difference it makes.
Assumptions: Income is $50,000, salary inflation is 3.1%, starting balance at age 25 is $30,000, salary sacrifice contribution is $100 per month, investment growth is 2.10% pa, income growth is 3.77% pa, based on an estimate value of today's dollars and legislation as at 19 October 2021.
Cass starts saving an extra $100 each month from age 25. Her friend Sunita starts her extra savings into super from 45. If the two friends earn the same throughout their career and keep saving at the same rate, Cass will have a super balance that’s $39,290 higher when they both retire at age 65.
Choosing to save a little more into super now will see your money grow much more over time. And thanks to the magical multiplying effect of compounding, every extra dollar added to your super savings is another dollar that can earn even more towards your final balance.
The interest or investment returns your super is earning are also going to be reinvested and earn more for your super. As this example shows, a 20 year head start on saving extra into super has earned Cass an additional $15,290 in investment earnings form her super savings up to age 65. Around 60% of her extra balance at retirement comes from her savings, and around 40% comes from the earnings on those savings.
Check out Grow your balance to find out all the ways you can help boost your savings in super
Run the numbers: How much super is enough and how does your current balance stack up
When it comes to money, we’re all wired differently. Setting your sights on a super goal for the income you’ll need to live comfortably when you retire, could be the perfect way to motivate you to get your super sorted.
Expert tip
"If you had $50k in a bank account you could access, you would know how much was in there, probably to the dollar! As well as the fees you were paying and interest you were earning. Your money in super is no different. It's your money, take control over it."
To give you food for thought for your final super savings target, the Association of Superannuation Funds of Australia (ASFA) put together a set of numbers every quarter called the Retirement Standard. This includes an estimate for the amount a single person or a couple would need saved in their super by the time they retire so they can afford to pay their way.
They make these estimates based on a modest lifestyle and a comfortable lifestyle. These figures also assume that you live in house that you own which means you’re no longer having to pay rent or home loan repayments as part of your day-to-day living costs.
| Super balance at retirement for.. | Modest lifestyle* | Comfortable lifestyle~ |
|---|---|---|
| Couple | $70,000 | $640,000 |
| Single person | $70,000 | $545,000 |
Source: Association of Superannuation Funds of Australia (ASFA) Retirement Standard, June 2021
* Assumes couples and individuals will draw down all their super savings and rely on the Age Pension for much of their living expenses.
~ Assumes couples and individuals will draw down all their super savings and receive a part Age Pension to meet some of their living expenses.
So what does a comfortable or a modest lifestyle look like? The Retirement Standard also includes a weekly and monthly budget for a couple and single person in retirement and detailed breakdown of what their money buys them.
Here’s the annual budget the Retirement Standard says you’d need to live modestly or comfortably if you retired today, and are no longer paying rent or home loan repayments as part of your day-to-day living costs.
| Annual spending for ... | Modest lifestyle | Comfortable lifestyle |
|---|---|---|
| Couple | $41,170 | $63,352 |
| Single person | $28,514 | $44,818 |
This table shows what sort of lifestyle you can expect with these different levels of income. The final column describes what life might be like if you only have the Age Pension as income. This is a regular Centrelink payment you may be eligible for when you’re retired.
Source: Association of Superannuation Funds of Australia (ASFA) Ltd Retirement Standard, June 2021
Finally, it’s worth keeping in mind that how you’re used to spending money before retirement will have a lot to do with how much you’ll spend in retirement.
This is why there’s a rule of thumb that you should expect your spending in retirement to be between two-thirds and three-quarters of what you spend just before you retire.
The important thing to remember is that everyone will have a different lifestyle, now and when they retire. So there is no ‘right’ goal for where you should be with your super now or when you start using your super as income. Instead, take these numbers as a starting point to get you thinking about how important this money could be to you.
Check out How do I get my super sorted? to start looking after your retirement savings
