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How much super do I need to retire? Is $500,000 enough or too much?

The Association of Superannuation Funds of Australia Limited (ASFA) releases quarterly projections of the amount retirees need to fund their post-retirement years, depending on their expected lifestyles.

Current projections assume that a person will retire by age 65 and would live up to the average age of 86 years old for males and 89 years old for females.

What is a comfortable retirement?

The ASFA projections assume that retirees are in good health, have healthy lifestyles, and own their homes. ASFA also assumes that a “comfortable lifestyle” means retirees will have access to private health insurance, own a good range of electronic equipment, a reasonable car and enough money to fund expenses for household goods, clothes, and holiday travels each year.

What does a comfortable retirement look like?

The previous magic number for a comfortable lifestyle was $1.6 million, but the June 2017 ASFA Retirement Standard state that the minimum amount for a comfortable lifestyle is at $640,000 for couples and $545,000 for singles.

These values translate to an income and annual expenditure of $60,063 for couples and $43,695 for singles. However, these values only apply to retirees who are clear of debt and own their homes upon retirement. Non-homeowners will need an additional $500,000 in their Super to pay off rent or mortgage.

TelstraSuper’s Financial Planning Guide suggests that age 56 retirees would require $670,000 in their super to last them until age 85—a similar value to what the 2012 Challenger Retirement Income Research calculated.

What is a modest retirement?

The amount is halved for retirees who prefer a more modest lifestyle in retirement.

A modest living affords retirees decent private health insurance. However, expenses for holidays, eating out, car maintenance and house repairs are significantly decreased. ASFA speculates that retirees who opt for a modest retirement lifestyle would not have much extra cash to run their air conditioners.

How much do I need for a modest retirement?

Singles who aim for a modest retirement need between $405,000 and $500,000, depending on the interest rate of the plan their savings are invested in. Total annual expenses can run up to about $24,270. This means that, for a single person who is free of debt by age 65, $500,000 will definitely be enough to afford a private health insurance while enjoying a modest living.

Couples who aim for a modest retirement may need to save between $580,000 and $640,000 to pay for estimated annual expenditures of $34,911. They would still have enough left over for smaller luxuries.

Are these figures definite?

The figures stated above are only projections on retiree lifestyles and savings—these are, by no means, definite measures.

Those who started building up their Super saving late in the game can still consider other options that would enable them to live comfortably even with smaller savings.

According to self-professed barefoot investor Scott Pape, couples would only require about $250,000 and singles $170,000 in super savings when they retire, but in both cases, they must already own their home and be debt free.

However, this advice would only work if the retiree claims the full age pension and does not leave employment even after retirement. Retirees should continue working part-time for at least one day a week to earn just enough money so that their annual income may still be be considered non-taxable.

This way, retirees can either take home extra income or top off their supers.

This information has been sourced from the Department of Human Services, ASFA and the Barefoot Investor.

How much super do I need to retire? Is $500,000 enough or too much?
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