How much do you need to retire?

Is it too early to think about your retirement fund when you’ve still got a mortgage or school-aged kids or lots of other financial balls in the air? And how much money do you need to retire? We do a deep dive into your plan for retirement…

It’s never too early to start thinking about your retirement fund, says money expert Tammy Barton. Maintaining your life while building a plan for retirement might only take loose change and consistency – but only if you start today.

We know what it’s like. You’ve got rent to pay or a mortgage. You’re raising a family and trying to keep up with bills. The very idea of starting to ask questions like,‘Do I have enough super to retire’ in 10, 20 or 30 years?’ or ‘How much money do you need to retire and live comfortably?’ is enough to send you into a tailspin.

But retirement might sneak up faster than you expect. According to the Australian Bureau of Statistics, the average Australian retirement age is surprisingly young at 55.3 years.

However, when we look at just the last five years of data, we see the average retirement age rise sharply to 62.9 years. In other words, it’s a very recent trend that Australians are working longer and retiring later.

What is the retirement age in Australia?

There’s no hard and fast rule that says when you can retire, but there is legislation that defines when and how you can access your retirement fund or superannuation (also known as “super.”)

When can you access your retirement fund?

The technical term for when you can access your super balance is your ‘preservation age’ and it’s based on the year in which you were born. Those born before 1 July 1960 can access their super when they are 55 years old, while the preservation age goes up to 60 for those born after 1 July 1964.

Want to know your preservation age? Use MoneySmart’s super age calculator.

How much money do you need to retire?

Wondering ‘Do I have enough super to retire?’ It’s a big question. The amount of super you need for retirement comes down to what sort of retirement lifestyle you want to live. Are you content to potter in the garden and catch public transport? Or do you see yourself driving your own car? Going out for dinner occasionally? Taking holidays?

For those who want to retire comfortably (and who doesn’t?!) the Association of Superannuation Funds of Australia (ASFA) recommends an annual retirement budget of $44,000 for singles and $62,500 for couples.

Adjusted for inflation, by 2050 those figures would be around $68,442 a year for singles and $96,500 a year for couples (based on 1.5% annual inflation.) Your plan for retirement should aim here as a starting point.

What if you don’t have enough in your retirement fund when the time comes?

For those who need it, the age pension provides a means-tested safety net that pays up to $24,268 a year for singles or $36,582 a year for couples (current at time of research). For those who qualify, the age pension is accessible from 65 to 67 years.

Australia reached a milestone in 2019 when more than half of 66-year-olds were totally self-funded in retirement. This means their assets and income were too high to qualify for the age pension. Only 25 per cent were drawing a full age pension.

Do keep in mind when you’re making a plan for retirement that the age pension qualifying age is expected to keep rising in line with longer life expectancies, up to the proposed age of 70 by 2035.

How is your retirement fund tracking?

The first step to planning for retirement is a really simple one—see how your super is tracking. On the Super Guru website, ASFA provides an online calculator that estimates your annual retirement income based on your current age and super balance. Check it out now.
What was your result? Are you tracking for a modest or comfortable retirement?

Are there potential benefits to topping up your retirement fund by even small amounts?

You’re very likely have multiple financial priorities right now. You might be trying to pay extra towards your mortgage or save for a holiday or school fees or a house deposit or renovations—or all of the above!

But it may nonetheless pay to consider topping up your super, if you can. Aside from potential tax benefits,
* you may be able to make a big impact on the quality of your retirement lifestyle with what equates to loose change today.

That’s because the long timeframes involved in retirement saving give your contributions time to add up and for interest to compound over the years.

For example, when considering how much money do you need to retire, a 40-year-old could boost their super balance by more than $15,000 at retirement age by topping up their super by just $10 a week (based on a balanced fund at 4.8% growth over a 27 year period).

So, if you’re someone who is worrying ‘Do I have enough super to retire?’, this is the perfect opportunity to give you a boost.

Use the Small Change Big Savings Calculator to see the effect of topping up your super.
*The information in this article is general in nature. See an accountant or financial advisor for specific advice regarding superannuation planning.

The hardest thing about retiring could also be the best

For a lot of people, the hardest part of adjusting to retirement is budgeting. They’ve been used to earning an income and suddenly have to come to terms with drawing down the balance of their savings and making it last for decades.

“The people who adjust to retirement the easiest,” says MyBudget founder and director Tammy Barton, ”are either those who have a lot of savings or they’re already in the habit of budgeting.”

Tammy continues, “Budgeting can be life-changing because it creates positive habits that become part of your life every day, every week. Very quickly they snowball and have a huge impact on the quality of your life now and into the future.”

Turn loose change into your retirement fund

Tammy’s point is that it’s never too late—or early—to embrace the habit of budgeting. Even if you’re just a few years from retirement, you can start now and build up a sizable nest egg. More importantly, you can develop the financial habits that set people up for successful retirement.

And for those who are a decade or more from retiring, that’s when topping up your super by even a small amount every payday could be the key to retiring sooner or maintaining the life you love beyond your working years.

How much money do YOU need to retire?

At MyBudget, we’re specialists in personalised money management. We can help you calculate how much you need for retirement so you can set yourself up for financial success.