How much do we need to put aside for retirement?

 

How much do you need to retire? When it comes to superannuation and retirement savings, it seems that size really does matter. There are other considerations of course, but for the most part the focus will be on finances when people aim to “improve” their post-work life prospects.

The question of how much retirement savings any particular person needs to squirrel away to be able to live to their expectations in their golden years is made all the more complicated by several unknown factors. No-one knows, for example, how long they will live or what medical necessities could surface to strain the coffers.

Some guidance is available however from Super Guru, a website run by the non-profit Association of Superannuation Funds of Australia (ASFA). Super Guru releases a “retirement standard” every quarter. This is a benchmark for the annual budget needed by Australian individuals and couples to fund either a “comfortable” or “modest” standard of living in their post-work years.

The updated quarterly figures reflect inflation and provide an objective outline of the budgets that singles and couples would need to spend to support their chosen lifestyle.

Super Guru’s recent release of figures, for the March 2018 quarter, shows that the super accumulation balances needed for a “comfortable” retirement are $545,000 for singles and $640,000 for couples. In annual pension payout terms, this equals $42,764 and $60,264 respectively. Details of what these amounts mean for spending capacity are in the table below.

By way of comparison, note that the government Age Pension base rate (before payment of supplements) is $21,222 for singles and $31,995 for a couple. “The Age Pension is designed to provide a ‘safety net’ for those who do not have enough superannuation or other financial resources to provide an adequate retirement income. So the Age Pension works in conjunction with superannuation,” Super Guru says. “Most people – women in particular – will continue to be eligible for a full or part Age Pension, supplemented by whatever superannuation benefits they receive.”

ASFA notes that as people age, their spending requirements also change. It estimates the net impact of the various factors at play mean that by age 85 annual budgets would reduce by around $1,000 a year for “modest” lifestyles, and $5,000 a year for “comfortable” lifestyles.

As far as measuring what these different lifestyles entails, Super Guru has produced the following comparison table (and includes a retiree taking the Age Pension only).