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How Much Superannuation Do I Need To Retire Comfortably?

June 16, 2021

How Much Superannuation Do I Need To Retire Comfortably?

How much Super do I need? Before you can even begin to answer this question, you’ll need to?figure out what a ‘comfortable’ retirement looks like for you. Problem is, you’ve probably never been retired, so you don’t really know what to expect.?

The Government has put together some information, which you can take a look at here:

https://moneysmart.gov.au/glossary/asfa-retirement-standard

To plan for your retirement, you’ll need to ask yourself a few questions. Here are my top tips, to help you plan:

How Will I Know How Much Super I Will Need To Retire?

To work out how much money you will need, ask yourself what you would like to do in retirement.?Most people haven’t sat down and had a proper think about it.

Start by considering your normal weekly expenses. These may include fuel, groceries and insurances etc. Check your bank and credit card to figure this out.?

Then take a moment to think about the lifestyle you’d like to enjoy:

  • Will you be going out for dinner multiple times a week, or cooking at home?
  • What’s your holiday style? Do you dream of caravanning around Australia? Or visiting the world’s grandest hotels?
  • Is there a hobby you’d like to take up?
  • Would you like to help your children and/or grandchildren financially??
  • What sort of social or extra-curricular activities are you planning to do??

Also have a think about the practicalities of your financial situation:

  • How will your Superannuation be invested during retirement??
  • Will you be eligible for an Age Pension??

How you answer these questions will go a long way to answer that age old question of ‘how much super do I need?’ 

How Will I Know How Much Super I Will Need To Retire?

When Should I Start Planning My Retirement?

This one’s an easy one: now! It’s never too soon to start planning for your retirement. You’re probably aware of how much Super you currently have, but have you worked out how much that will be when you retire? And if that will be enough?

Once you’ve estimated your required retirement income, you can create a plan and work toward your goal.

Just remember, retirement can last a long time, so take this into account. Most people live well into their 80s, which means you need to have enough income to live comfortably for at least 20 years after retirement.

How Much Does Retirement Cost? 

‘Do I need a million dollars to retire?’ I’m asked this question all the time. And while yes, it can be true for some, the problem with giving this ballpark figure is that it doesn’t?take into account?your personal?goals,?needs and lifestyle requirements. 

The Australian Government?estimates that you’ll need $60 000 per year, to live a comfortable lifestyle during retirement. This assumes that?you’ll invest about $1 000 000 and draw an income from that.

What it doesn’t?consider?is that you’ll have access to the Age Pension, nor the fact that not everyone wants or needs $60 000 per year. Some are comfortable on less with regular, modest holidays while others will need more than this. The key is to articulate your financial and retirement lifestyle goals.? 

Don’t forget to take into account other investments, including assets, other income streams, your home and the option to downsize. 

Another thing to think about is the fact that there are some big expenses which still need to be covered, throughout retirement. These include mortage paymentss, rent, home renovations, debts, travel, medical costs and general living expenses. 

ASFA estimates that a modest lifestyle covering the basics, will be met by the Age Pension. A modest lifestyle is estimated to cost $70 000 per couple. For a more comfortable lifestyle, ASFA has estimated a requirement of $640 000 per couple or $545 000 per single person. Another way to look at it is this way; if you own your own home, you’ll need about two thirds of your current income, to maintain your current lifestyle.

If you’ve answered the above questions and have realised that your Super is on track to fall short of your needs, don’t be discouraged, there are plenty of things you can do, to help grow your Superannuation.  

How Much Does Retirement Cost?

Here are my top tips: 

Consolidate Your Super 

Consider consolidating your Super into one account. This will cut out extra account fees and will enable you to have a better idea of exactly what’s happening with your Super. 

Search for Lost Super 

Make a habit of searching for lost Super every few years. Money which is rightfully yours may be sitting in a forgotten account.

Make Extra Contributions

By making extra contributions to your Super, you’ll see big changes in the long run. This can be done in multiple ways: 

  • Salary Sacrifice: contributing extra money to your Super fund from your before-tax salary can make a huge difference in the long run. Your contributions will be taxed at 15% (income less than $250 000) per year or 30% (income over $250 000) per year, rather than marginal tax rate.  
  • After Tax Contributions: these are limited to $100 000 per financial year. 
  • Co-Contribution: the Government offers co-contribution for those in the low to middle income earner bracket. 
  • Mortgage/Debt Paid Off? Consider making partial payments to your Super account instead.

Be sure not to allow your contributions (including your employer’s contributions) to exceed $25 000 per year for tax purposes.

Be Proactive

Be sure to check your Super balance annually and review your employer’s contribution, investment options, account fees and insurance. Double check that your fund has the correct personal details and tax file number. Make sure your Super is being invested in the best way possible. Never be afraid to call your Superannuation company to ask any questions you may have.

It’s important to be able to answer the question ‘how much Super do I need?’ and there are a lot of things you can to, to make sure you’re set up for a successful retirement. If you’re unsure or have any questions, I’d love to have a chat with you.  

Feel free to call me on ?03 8782 3793?or?book a chat?today!

There’s some good tools out there (like the one linked below) that will give you a guide on how much superannuation you may have at retirement and the type of lifestyle you may be able to live.

https://www.canstar.com.au/calculators/superannuation-retirement-calculator

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