Every Australian has a different idea of how they envision their retirement to look. It is important to ask yourself how much super will be enough for you to live the life you are aspiring to live.
When you retire, you might want to dine out for dinner every week at a fancy restaurant, travel overseas every year, have enough money to help your children and grandchildren, or the opportunity to relax and enjoy life without worrying about money.
There might also be one-off costs such as purchasing a new car or placing a deposit on a retirement village. You might need money to support you with any health issues that occur during retirement.
How Much Super Will Be Enough?
It is super important for you to start thinking about saving for your retirement as early as possible. First, figure out how much money you think you’ll need in retirement and use this to determine how much superannuation will be enough for a happy retirement.
There are many ways to figure out how much super will be enough for retirement, including online calculators.
It is estimated that by the age of 65, a single person who wants a ‘comfortable’ lifestyle with annual living costs of $43,901 would need a lump sum of $545,000 in today’s monetary standards. For couples with annual living costs of $62,083, a lump sum of $640,000 is estimated to be needed.
The lump sums needed for a modest lifestyle are relatively low at $70,000 for singles and couples, as the base rate of the Age Pension and various supplements can cover much of the required expenditure.
How Much Money Will Be Required With Inflation?
In 20 or 30 years, these numbers will differ due to the cost of living. However, the ‘Standard’ is updated quarterly to account for the rising price of items and changes in lifestyle expectations and spending habits.
As the cost of living increases annually, retirement calculations are adjusted to reflect these changes.
Is It Possible to Rely on the Aged Pension?
If you’re considering the aged pension, review the current rates. The maximum rate for the Age Pension is $860.60 for a single person and $648.70 each for a couple, per fortnight. This amount may not be sufficient for the retirement lifestyle you desire, making it important to contribute extra to your super.
Add Extra Money Into Your Super Account Now
Consider setting up a salary sacrifice arrangement for your super with your employer. Salary sacrificing even a small amount can make a significant difference to your super balance in the long term.
Look at Your Debts
Entering retirement debt-free can significantly impact your lifestyle and available funds. The Australian Securities and Investments Commission (ASIC) found that 18.5% of people struggle with credit card debt. Repaying debts before retirement and considering debt consolidation strategies can strengthen your financial position.
Review Your Investments Approach
Reviewing how your super is invested can greatly impact your retirement savings goals. If you have many years left in the workforce, consider your risk appetite and possibly a higher risk, higher return investment strategy.
