Australia

How much super do you really need to retire?

Your annual superannuation statement should by now have crossed your kitchen bench.

The shrunken balance probably made you gasp. However, the chances are that since June it has recovered to somewhere near where it was before the coronavirus pandemic struck.

Women are now retiring with an average super balance of $157,050 and men with $270,710.

Women are now retiring with an average super balance of $157,050 and men with $270,710.Credit: Sam Bennett

So, is your fund going to go the distance in your retirement?

I’ve crunched the numbers for how much is enough super to save at every age.

The Association of Superannuation Funds of Australia itemises the cost of a "comfortable" retirement, which includes a mix of leisure and recreational activities and the purchase of such things as household goods, a car, clothes, electronic equipment and domestic and overseas travel. It also assumes you are healthy and own your own home.

Now, for a single person, ASFA says a cushy retirement costs $43,687 a year. For a couple it’s $61,909.

However, the bigger question is the pension pot you need to produce this enviable level of income. And it’s lower than the $1 million sometimes thrown around, if you ultimately draw down all capital and therefore gain the government pension incrementally.

For a single person, the magic number is $545,000 and for a couple, $640,000.

Using the super calculator at moneysmart.gov.au and average super balances from the ABS (2015-16), we’ve generated the data for four different age groups.

Figures factor in the 15 per cent contributions tax and assume you want to retire at 65 with $545,000, make a 7.5 per cent annual investment return and pay 0.85 per cent in investment fees.

The point is that if your employer isn’t contributing as much as necessary on your behalf, it’s crucial that you top up to that amount with your own contributions.

At age 25: The average male’s super balance is $23,712 and to get over the lifestyle line, they need a gross monthly $629 going into their fund. The average female’s super balance is $19,107 and they need a gross monthly $642 into super.

At age 35: The average male’s super balance is $64,590 and they need a gross monthly $806 in super. The average female’s super balance is $48,874 and they need a gross monthly $861.

At age 45: The average male’s balance is $145,076 and they need a monthly $1023. The average female’s balance is $87,543 and they need a monthly $1297.

Notice how the super balances are consistently smaller for women than for men, and the extra amount they need to save climbs rapidly. At 25, women need to save $13 a month additionally to men. At 35, the figure is $55. And by 45, it’s $274.

Women are now retiring with an average super balance of $157,050 and men with $270,710 (aged 60-64; 2015-16 figures).

The difference comes down to a 14 per cent gender pay gap.

But both genders typically fall short of the target of $545,000 for a "comfortable" retirement.

ASFA’s conclusion? “Many people, especially those who will not receive the full benefit of the increase in the SG to 12 per cent over their entire time in the labour force, still need to contribute above compulsory contributions to their super to ensure they have adequate retirement savings.”

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