Superannuation is one of those topics many of us avoid thinking too much about but it is important to know, how much is enough to retire? And, more importantly, when should we start thinking about our superannuation?
For the most part, our superannuation is largely ignored until we near retirement age, however, superannuation should be a focus throughout your working life. In most instances, superannuation makes up or will make up the majority of your investible assets upon which you will be relying to fund your retirement.
Understanding from an early age how much capital you need to retire is the best way to ensure that not only will you have enough to retire but your retirement will be comfortable.
In this article on superannuation, we will cover:
- How much money is enough to retire?
- Ways to ensure a secure financial future in retirement.
- The importance of performing health checks on your super.
How Much is Enough to Retire?
Talking about superannuation, how much is enough to retire? There are a number of industry guidelines that practitioners use to determine this important number.
Knowing how much super or investible capital you need is as simple as assessing and itemising your current expenses and how many of those will continue past retirement age (i.e. any residual mortgage, ongoing rent or loan repayments, utilities, healthcare and food).
Factoring in the kind of lifestyle you want to lead in retirement, you need to decide if you will retire to a quiet, less expensive life in the country, or plan to travel the world in style?
So how do you manage your superannuation and capital base to ensure that you are able to maintain a life of choice and not compromise.
Many practitioners argue that to maintain a pre-retirement lifestyle, post retirement, you need approximately two thirds of your pre-retirement income. That assumes no debt, reduced travel costs associated with work and other specific work related expenses and that your children are predominantly (financially) off your hands.
So, if you were earning $150,000 income pre – retirement, then post retirement $100,000 would maintain the type of lifestyle that you previously enjoyed. Many of our clients say they require between $75,000 and $120,000 post retirement.
The Association of Superannuation Funds of Australia (ASFA) recommends the following as an estimate of how much you need to retire:
For a modest retirement lifestyle, which covers the basics plus a little extra, the estimate of the lump sum needed for a couple is $640,000 on top of part Age Pension. For a single person, this figure is slightly less at $545,000. Furthermore, these figures also assume that you own your own home.
The figure of $640,000 earning 5% p.a. equates to $32,000 per annum plus part pension. The full Govt pension for a couple on the other hand, is approximately $38,000 per annum.
We do not believe that any combination of these payments is enough for people to support their retirement lifestyles.
Other common guidelines, which we at Collins Mann ascribe to are as follows:
- If you want post retirement income of $100,000 and don’t want to reduce capital, then assuming a 5% return on investments, you would need $2,000,000 in investible assets.
- If you want post retirement income of $100,000 and are happy to reduce capital, then assuming a 5% return on investments you would need $1,600,000 in investible assets which would reduce to zero by the time you reach 87.
Again, the above assumes that you own your home and have no debt.
You can see from these estimates that how much super is enough to retire with varies greatly depending on your circumstances.
Do I have enough saved for retirement?
Are you feeling overwhelmed or concerned that your superannuation balance is too low? Are you worrying ‘Will I have enough to retire?’ The expert financial advisors at Collins Mann can advise you about superannuation strategies, savings and the life you hope to have in retirement.
With over 40 years of experience, our fully licenced and accredited team are committed to helping you create the retirement you want. Our advisors can:
- Assess your current superannuation balance and capital investment base.
- Review your fund’s fees and investment strategies and decide if they are right for you.
- Help you quantify the amount you need for retirement through careful assessment of your situation and where you want to end up, so you will know exactly how much super is enough for you to retire.
- Help you find ways to increase your super balance and retirement capital base, so you have enough to retire in the style you want.
Retirement planning and wealth management strategies are our specialities. No matter where you are at in your working life or what your super balance currently looks like, we can help. Taking the stress and worry out of your financial future is what we do best.
Your Superannuation Health Check
Your super shouldn’t be a far away, inaccessible thing. Most funds now make it easy to log in online and regularly check your super.
At least once a year, in conjunction with financial planning advice, you should review your superannuation. You should check that all your details are correct including your Tax File Number (TFN) and that the correct employer contributions are being lodged against your account. Check that the insurance attached to your account is adequate for your current situation. Finally, make sure that the investment options on your account are still suitable and that the account fees are agreeable.
If you haven’t done so previously, perform a lost super search. Even that job you had at a grocery store at 16 should’ve paid super and it may be floating around unaccounted for. Collating lost super is one of the fastest ways to boost your balance.
Live the Retirement You Dream Of
At Collins Mann, we have the tools to help you create the retirement you dream of. Don’t wait until retirement is looming to review your superannuation or work out how much is enough to retire.
Contact Collins Mann today on 07 3251 3200. With our help your retirement can be about choice, not compromise.
‘The lump sum needed at retirement to support a comfortable lifestyle is $640,000 for a couple and $545,000 for a single person. This assumes a partial Age Pension.