NOTE: we do our best to share general resources so you can do your own research, but keep in mind this information doesn’t consider your personal circumstances, objectives or needs. When it comes to investing in your super, you should consider if it’s appropriate, read PDS and TMDs and reach out to a financial advisor and tax accountant. When investing, there may be tax implications and you should get advice from a licensed tax adviser and financial advisor..
Since the introduction of the Superannuation Guarantee in 1992, Australians have been asking: “How much super should I have to retire?”
It’s a question the government and industry have been tackling for a long time and continue to wrestle with today.
The purpose of superannuation is to help Australians prepare for retirement by building up savings over their working lives. Putting that money away in a super fund with tight restrictions on withdrawals creates a safety net. This nest egg is there to give us some sense of financial security during retirement. It’s especially helpful when our other savings and assets don’t cut it for our post-work lifestyle.
Now that we’ve covered the “why” behind super, let’s get to the real reason you’re here: to answer the question “How much super should I have?”
There are two key factors to estimating how much super you’ll need to retire comfortably:
1. Your desired lifestyle
2. Expected costs to sustain that lifestyle
Let’s look at both a little closer.
Lifestyle and expectations
What do you imagine retirement will look like for you?
Maybe you plan to travel around the world, take up gardening, volunteer with charities, or write a novel. All these activities sound like great ways to spend retirement, but also vary considerably in their associated costs.
Some have tried to calculate the average income needed to answer the question those of us with a long term outlook are asking. Even so, no two people are the same. We see these universal suggestions, and we’re still left asking, “But how much super should I have?”
Well, are you hoping for a comfortable or modest lifestyle in retirement? For some of us, it doesn’t take much to feel content. For others, we like to have nice things and don’t want that to stop when we retire.
These lifestyle expectations should be considered when figuring out how much super you need to retire.
Costs in retirement
Your expenses in retirement will be influenced by both your desired lifestyle and the other big costs you may incur. So, while you may take up a low-cost activity like writing a novel in retirement, you may plan to also pay off your mortgage. That’s too large a cost to overlook!
Other big costs include:
- Renovating your home
- Paying rent
- Travel
- Medical bills
To help you estimate how much you’ll spend when you retire, give the MoneySmart budget planner a go. This also covers day-to-day costs like groceries, transport, clothes and social activities. According to MoneySmart, if you own your own home, you’ll need about two-thirds of your pre-retirement income to maintain the same living standard.
So, how much super should I have?
If your goal is to retire comfortably, it’s helpful to go further than relying on industry standards. Consider your unique lifestyle preferences, current income, expected costs, assets and personal situation. Pearler's Financial Independence Calculator can help you do that.
Once you know how much super you should have, you can then figure out how to get there. If building wealth through long term investing is your strategy, that’s what Pearler's investing platform is for!
