Predicting exactly how much you’ll need in retirement can be difficult. To paint a clearer picture the Association of Superannuation Funds of Australia (ASFA) has put together a ‘Retirement Standard’ guide.
Factoring in lifestyle and spending habits from health to household goods, the guide aims to show whether you are on track to meet the retirement lifestyle you really want – whether that’s gardening, extraordinary travel adventures or just spending more time with the grand kids.
So how much is enough?
ASFA predicts a couple – around 65 years of age – will need $33,799 a year to live modestly, jumping to $58,444 annually for a comfortable lifestyle. For singles, $23,438 is needed for a modest lifestyle, or $42,569 living comfortably1.
While living modestly or comfortably is subjective, ASFA considers living comfortably to include private health, reasonable clothes and car, dinner out once or twice a week, as well as domestic (and some international) travel. However, for both a modest or comfortable lifestyle ASFA assume you have reasonable health and own your own home.
How does the age pension stack up?
Singles on a full age pension receive around $22,360 a year, enough for a modest lifestyle in retirement. However, for couples the age pension is around $33,7002, leaving a gap of nearly $25,000 a year to live comfortably.
Where do you stand today?
The retirement gap – that is the gap between your savings and what is required for a comfortable lifestyle in retirement – is real.
The Government’s recent Intergenerational Report (IGR) noted that the median super account balance for a person aged 60 or over in 2011/12 was around $95,000 – well below what is required to be self-suﬃcient in retirement. For many in this group there is the expectation of receiving the age pension to support their retirement.
The IGR and ASFA ﬁndings both reinforce the value of making extra contributions to your super. In the following table, ASFA shows that for someone earning $50,000, 12 per cent contributions (up from 9.5 per cent) will add more than $50,000 to their super over 30 years3.
Lump sum retirement beneﬁts after 30 years in a taxed fund
Contribution Level Wage of $30,000 Wage of $50,000 Wage of $100,000
9.5% $116,000 $193,500 $387,000
12% $146,000 $244,000 $487,000
15% $183,000 $305,000 $610,000
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1 ASFA Retirement standard (March 2015)
2 Australian Government website, human services
3 ASFA November 2014: The future of Australia’s super – a new framework for a better system