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Budgeting for retirement: Is $1 million enough?

One million dollars in superannuation sounds like a lot of money, but is it enough to retire comfortably? it turns out there are a lot of variables, including how you define ‘comfortable’. Dive into the infographics below for tips on budgeting for retirement and to see how your retirement plans compare!

How much income do you need to budget for retirement?

Stopping work is a big financial decision, not to mention more than one-quarter of retirees are forced out of the workforce due to illness, injury, redundancy or business closure.

According to the Association of Superannuation Funds of Australia (ASFA), a retired individual needs around $44,000 a year (equivalent $3,666 monthly) and a couple needs $62,500 a year ($5,208 monthly). This will mean their retirement standard includes certain lifestyle expenses; entertainment and leisure activities, good clothes, a reasonable car, private health insurance and occasional holidays. ASFA’s calculations assume that the retirees own their own home outright and are relatively healthy.

modest or comfortable retirement

How much income do you need as a single person or couple

The Federal Government age pension is worth only half of that at just over $24,700 a year for individuals and $37,000 for couples. According to Canstar, considering that the average Australian household spends $7,280 a year on food and groceries and that the national median rent is $23,200 per annum for units, the aged pension leaves little margin for unexpected bills, let alone luxuries.

Single and couple retirement income

The age pension continues to be the primary source of income for Australian retirees. According to 2018-19 Australian Bureau of Statistics data, around 30% of retired men rely mainly on super and just 17% of women. Retirees with no personal income whatsoever remains at around 30% for women and 7% for men. All this points to around 2 million retired Australians with tight retirement budgets who currently rely heavily on the government age pension safety net.

Retirement Income snapshot

Looking ahead for Generation X (people born 1961-1979) and Generation Y (1980-1995), it’s predicted that $1 million in superannuation savings may not be sufficient to fund even a modest retirement. According to 2014 calculations by consulting firm Deloitte, taking future inflation into account, the average 30 year old today would need a super balance by 65 of:

  • $1.1 million for a modest retirement lifestyle
  • $1.6 million for a comfortable retirement lifestyle for men and $1.8 million for women
Generation x and generation y retirement

Research shows that to be planning for a comfortable retirement, 30-year old men and women would need to have a super account balance of around $54,000 today. On average, however, they are currently between $26,000 and $31,000 behind. The biggest super gap is experienced by women in their sixties who are lagging their male counterparts by a whopping $249,000.

See the effects of boosting your super with the Small Change Big Savings Calculator.

Source: Canstar, How much super for retirement

Despite needing more super savings than men because they live four years longer on average, women are generally disadvantaged by lower lifetime earnings than men. According to the Association of Superannuation Funds of Australia (ASFA), in 2019 one in three women did not have a super account and around one-quarter of women retired with no super at all.

Of those that did have super, women aged between 60-64 retired with a median balance of $122,848, compared to $154,453 for men. Both men and women retiring in 2019 fell well short of $545,000 ASFA recommends for a comfortable retirement.

Read more about Ways Women Can Boost Their Super

Tips to grow your super

  • Rollover multiple super accounts into one fund to reduce costs
  • Choose a fund with good long-term performance and low fees
  • Choose an investment strategy to suit your financial priorities
  • Consider topping up your super to grow the balance faster

Want to retire comfortably?

Live the life you want with a customised budget plan to boost your nest egg. Call MyBudget today on 1300 300 922.

This content has been updated from the original post published in May, 2015.

This article has been prepared for information purposes only, and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information in this article you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.

All customised budgets and consultations with money experts are subject to MyBudget’s qualification criteria. We recommend that you read and consider our Product Disclosure Statement.

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