How much superannuation do I need for retirement?
This is a question being faced by anyone who is planning to fund their retirement through their superannuation, and with the trend of Government Age Pension entitlements reducing, more and more people will be dependant on their superannuation for a comfortable future.
This is a very personal question and one that will be answered differently by everyone.
Do you currently or do you plan to live frugally in retirement? Or do you like the finer things in life – good wine and dinners out at a nice restaurant regularly?
Will you have a home mortgage in retirement or will it be paid off?
Do you want to ‘spoil’ your children and grandchildren?
Do you want to travel in retirement? If so, will you travel domestically, or will you want to travel overseas?
These are just some of the questions that come up when determining how much will be enough for you.
Where to start – gathering information on what standard of living you want in retirement
The Association of Superannuation Funds Australia (AFSA) conducts annual research and benchmarking on what is needed to fund different levels of retirement – comfortable, modest or Age Pension only. They also provide a guide on what each type of retirement ‘looks like’. For example, a comfortable retirement allows you to own a reasonable car, a modest retirement means owning a cheaper more basic car, and Age Pension only means you do not own a car or if you do it will be a struggle to afford repairs.
Find the AFSA Retirement Standard here – it is a very interesting read comparing the three levels of standard of living in retirement and the money required to achieve each of these.
What to do next - start a conversation with your Financial Adviser
The figures in this report, that a couple would need $640,000 in super to fund a comfortable retirement, need to be looked at in combination with your overall situation. It should be looked at as a starting point for conversations with your Financial Adviser as it is rare to ‘fit the mould’ exactly. You could have other assets which would affect any Age Pension entitlements but that would not provide you with an income. Or you may have family members that you will need or want to support during your retirement.
Our team of specialists are here to help you with retirement planning
To ensure you are equipped with everything you need to make informed decisions about superannuation, retirement planning, or for any other strategic financial advice, get in touch with the Rethink Financial Planning team. We’re a team of highly-trusted financial advisers in Newcastle and can offer you personalised financial advice to help you take control of your financial future.