The super balance you should have right now to enjoy a comfortable retirement
Experts have revealed the exact amount of retirement pension you need to have in your savings at what age in order to live a comfortable retirement.
They say a couple needs $640,000 in super savings in retirement, while singles need $545,000, assuming they exhaust their entire retirement fund and receive a part-age pension.
Figures are based on a couple or single person with no mortgage or rent to pay.
A comfortable life is defined as one that allows a healthy retiree to enjoy leisure activities, purchase household goods, private health insurance, a reasonable car, good clothing, electronics, and travel.
So how do you know if you’re on the right track?
Well, according to Australia’s leading pensions industry body, an average 25-year-old worker only needs $17,000 in their super today to reach $545,000 at age 67.
A 35 year old man needs $93,000, a 45 year old man should have $195,000, a 55 year old man should have $330,000 and a 65 year old man – two years away from retirement age – would need $503,000.
The Association of Superannuation Funds of Australia (ASFA) calculation assumes future pre-tax wage income of just under $65,000 per year.
ASFA deputy chief executive Glen McCrea said the aim was to get as many people up to what ASFA calls a comfortable standard, but at the moment only a fifth of Australians of childbearing age work reached this level.
“A comfortable standard means you can go to the pub and have a meal, you can have that cup of coffee, when you’re at retirement age, you can buy your grandkids a present, you can get a fix your car,” McCrea said. .
“To get there, you’re looking at a balance of about $640,000 for a couple or $545,000 for a single.
“The current reality is that about 20% of people make it.”
The shortfall could stem from a failure of some to contribute high amounts to the super during their working lives, he said.
But with the increase in pension guarantee payments that employers must pay to workers by law, the gap would narrow, Mr McCrea said.
From July 2021, the regular compulsory contributions made by employers to the account of their employees have been reduced from 9.5% to 10% of their salary, affecting around eight million workers, mainly in the private sector.
This rate would increase to 10.5% on July 1 and would reach 12% in 2025-2026, in accordance with the legislation in force.
“We estimate that by going to 12% in a few years, by 2050 you’ll get 50% of the population there (at the comfortable standard),” Mr McCrea said.
“There is hope and the super is a long-term prospect, so there is definitely hope for people who get higher super balances to get more dignity in retirement as they go. grow old.”
Mr McCrea said during the pandemic many people withdrew from their super to face financial challenges but failed to replenish the funds when they could.
And with the rising cost of living, people may not think it’s a good time to make extra payments to secure their nest egg.
“Things are tough right now, but when you can get that extra paycheck or that little bonus or have worked a few extra shifts, see if you can get it back into the super because definitely every dollar counts as you you’re heading for retirement,” he said.
“The good thing about superannuation is that it’s compulsory and often you don’t notice it’s being paid into it, and then over many years it slowly builds up and gives you a good balance.
“Obviously when things are tough, like now, people may not have the ability to contribute as the cost of living skyrockets.
“However, in five or ten years, assuming the economy is better, inflation is under control, that could be a good time, where if you’re a bit behind, try to catch up.
“So keep engaging with your super, watch your balance, talk to your fund, and look for those opportunities to contribute when you can.
“Get familiar with it and try to understand: ‘Am I on the right track’?
“If people are contributing 12% for most of their lives, they should be at a comfortable level.”