Contents

*Note:** This article is periodically updated with new figures (in particular the effects of the latest Age Pension rate changes), covering retirement incomes when retiring at age 56, age 61, age 65, age 67 and age 70. The article allows readers to compare what a $1 million retirement can deliver if retirement savings are invested with returns of 7% each year, or if invested on retirement with returns of 5% a year. If you opt for a 5% investment return, rather than, say, 7% return, during retirement, then you will need to accept a lower annual income for the same lump sum in retirement. If you retire at an older age, then your $1 million will deliver a higher income for a set number of years, or your required income will last longer. The annual income figures (where relevant) include Age Pension rates effective from March 2016 (and applicable until September 2016). Latest article update is May 2016.*

I am often asked the question ‘how much super is enough for a worry-free retirement?’, and we regularly update our special *SuperGuide *articles on this topic for our readers. In this article I’m answering the question: what does a $1 million retirement look like? This article forms part of a two-part feature ($1 million and $1.6 million retirements) for those readers who want a truly comfortable life in retirement.

*Note:** The updated $1.6 million article (see link at end of article) was previously a $2 million retirement, but due to the Liberal party’s proposed $1.6 million cap on the amount that can be transferred into a super pension, we have updated the article with a new retirement target and new figures (for more information on the proposed changes to super pensions see SuperGuide articles Liberals to impose $1.6 million cap on pension start balances, if win election** and ALP to tax pension earnings above $75,000 a year, if wins election).*

Due to Age Pension entitlements and eligibility rules, the majority of Australians will not need $1 million in today’s dollars to have a ‘comfortable’ retirement (that is a retirement income of around $59,000 a year for a couple, and around $43,000 a year for single person), but an increasing number of Australians are planning for (or at least hoping for) a more-than-comfortable retirement lifestyle.

*Important:** Changes to the Age Pensions assets test, taking effect from January 2017, will hit many current retirees receiving a part Age Pension and will particularly affect single retirees seeking to secure a part Age Pension, while also enjoying a comfortable life in retirement (for more information on this change, see SuperGuide articles Age Pension assets test: 300,000 retired Australians to lose some or all entitlements** and Latest retirement deal! Lose Age Pension, receive Seniors Health Card**).*

In this article, I do the numbers for those who are aiming to accumulate the magic $1 million for retirement. Due to the many requests from readers, we have updated the calculations to include annual retirement incomes based on your savings being invested at 5% per annum, as well as returning 7% each year. We have also updated the article to include calculations for those retiring at age 67 (aligning with the increasing Age Pension age), or age 70 (for those who wish to work longer, or need to work longer).

**Note:** In a related article, I also crunch the numbers for those readers who aspire to a $1.6 million retirement (see *SuperGuide* article Crunching the numbers: a $1.6 million retirement).

Continue reading to find out what $1 million in today’s dollars can deliver you if you want your lifestyle to last until the age of 87 or if you want your money to last until the age of 100, or somewhere in between. The average life expectancy for a 65-year-old woman is 87 years, while average life expectancy for a 65-year-old man is 84.22 years. If you retire at an age older than 65, for simplicity, the calculations remain based on the money lasting until age 87, and age 100. I provide figures for a couple, or a single person, and where relevant, I include any Age Pension entitlements.

*Important: The calculations contained in this article are merely a conversation-starter for your retirement plans. The assumptions used for the calculations appear at the end of the article.*

## Remember, you may not need $1 million…

If $1 million or $1.6 million in retirement (for $1.6 million figures see link at end of article, or link in earlier paragraph) is beyond your wildest dreams then check out our other *SuperGuide* articles dealing with the topic of how much super do I need? Even when you have a small amount of super savings, you may be pleasantly surprised by what your retirement savings can deliver, especially if you’re entitled to a full or part Age Pension. According to ASFA, you can live a modest life in retirement on around **$34,230** a year as a couple, and a comfortable life on just over **$59,000** a year, and the lump sums you need for this type of income is nowhere near $1 million, when you take into account the Age Pension..

For example, assuming Age Pension age is 65 years, a couple can secure a modest lifestyle with no private savings at all, because the full Age Pension for a couple is now **$34,252** (applicable until September 2016). Without the Age Pension, a couple would need a lump sum of around **$530,000** to deliver the equivalent annual retirement income of $34,230. With a healthy part Age Pension, a lump sum of around **$400,000** can deliver a couple **$59,000** (indexed) a year in retirement until the age of 87, and roughly **$53,500** (indexed) a year until the age of 100, according to the ASIC MoneySmart Retirement Planner, and assuming the money is invested in assets that return 7% a year.

*Note:** If your money is returning only 5% a year however, then you will need at least an extra $120,000 as a couple to finance $59,000 a year (indexed) for 22 years, that is, until age 87 (including Age Pension entitlements).*

**Tip:** If you’re aspiring to a $1 million retirement then it may be worthwhile having a chat with a financial adviser or an accountant about the most tax-effective, and ‘risk appropriate’ way to get there.

## So, what can $1 million generate in terms of an annual tax-free income in retirement?

**Summary point, for a couple: **A couple retiring today at age 65 with **$1 million** can expect an indexed annual retirement income of between **$81,570** (from aged 65 until age 87, and 7% return) and **$53,010** (from age 56 until age 100, and 5% return). See text and Table 1 (later in the article) for further explanation.

**Summary point, for single person:** A single person retiring today at age 65 with **$1 million** can expect an indexed annual retirement income of between **$71,000** (from aged 65 until age 87, and based on 7% return) and **$40,980** (from age 55 until age 100, and based on 5% return) and. See text later in the article and Table 2 for further explanation.

**Important:** The assumptions we use for this article and for Tables 1 and 2 appear at the end of the article.

I have created a table for couples (Table 1) and a table for singles (Table 2) due to the different Age Pension treatment for singles and couples.

- Table 1: If you’re part of a COUPLE and retire with $1 million
- Table 2: If you’re SINGLE and retire with $1 million

**Note:** The $1 million scenarios referred to in this article allow for 3% inflation when working out annual incomes, so the figures in these features automatically allow for the annual adjustment in retirement incomes. For further explanation of why planning for retirement using today’s dollars is more helpful than using tomorrow’s dollars, see *SuperGuide* article Retirement: Today’s dollars, and why $1 million can’t last forever.

## If you’re part of a COUPLE and retire with $1 million

Due to a stricter Age Pension assets test taking effect from January 2017, a couple with **$1 million** in super on retirement will only be eligible for a part Age Pension later on in retirement, rather than when first retired.

**Note:** Also, due to the more generous treatment of assets for a couple when determining eligibility for the Age Pension (compared with a single person), a couple who retire with $1 million, when eventually they become eligible for a part Age Pension later in retirement, will receive a greater part Age Pension than a single person owning the same amount of assets.

The scenarios for a couple are divided into five timeframes (also see Table 1 and supporting text):

- Couple – retiring at age 56 (minimum age for accessing super)
- Couple – retiring at age 61
- Couple – retiring at age 65
- Couple – retiring at age 67
- Couple – retiring at age 70

**Note:** Couples can enjoy such good incomes for such long periods due to receiving a PART Age Pension later on in retirement. Within Table 1, we indicate when a PART Age Pension starts using ‘part AP’.

### Table 1: A $1 MILLION retirement (in today’s dollars) for a COUPLE

Investment return during retirement | 7% return on savings | 5% return on savings | ||
---|---|---|---|---|

Money lasts until: | Age 87 | Age 100 | Age 87 | Age 100 |

Annual income (indexed) when RETIRE at: | ||||

Age 56* | $68,390 | $60,740 | $60,090 | $53,010 |

Part AP | from age 67 | from age 67 | from age 67 | from age 67 |

Age 61 | $76,750 | $64,700 | $67,715 | $56,320 |

Part AP | from age 68 | from age 70 | from age 67 | from age 68 |

Age 65 | $81,570 | $66,385 | $73,328 | $58,540 |

Part AP | from age 70 | from age 72 | from age 69 | from age 71 |

Age 67 | $85,600 | $67,970 | $77,230 | $60,040 |

Part AP | from age 72 | from age 74 | from age 71 | from age 73 |

Age 70 | $93,335 | $70,690 | $84,760 | $62,730 |

Part AP | from age 74 | from age 77 | from age 74 | from age 75 |

**Tax may be payable on income when retiring before the age of 60.*

*Note: **See end of article for assumptions. ‘Part AP’ stands for part Age Pension. Figures calculated using ASIC MoneySmart retirement planner calculator (www.moneysmart.gov.au)*

### Couple – retiring at age 56

If you want to retire before the age of 60, then your super savings will have to finance a longer life in retirement, and you can expect to pay some tax on your pension income. You cannot claim the Age Pension until you reach your Age Pension age (for information on your Age Pension age, see *SuperGuide* article Age Pension age increasing to 67 years (not 70 years)).

You must have reached your preservation age to access your super benefits. The minimum preservation age increased to 56 years, and anyone born on or after 1 July 1961 has a preservation age of at least 57 years, and preservation age increases to age 60 for those born on or after 1 July 1964 (for more information about your preservation age, see *SuperGuide* article Accessing super: What is my preservation age?)

*Ignoring tax and assuming your retirement savings are invested at 7%*, if you retire today at age 56 with **$1 million** in super, as a couple, your savings can deliver you:

- A retirement income of
**$68,390**(indexed) a year until the age of 87 (which includes a part Age Pension from the age of 67). **$60,740**(indexed) a year until the age of 100 (which includes part Age Pension entitlements from the age of 67).

*Ignoring tax and assuming your retirement savings are invested at 5%,* if you retire today at age 56 with **$1 million** in super, as a couple, your savings can deliver you:

- A retirement income of
**$60,090**(indexed) a year until the age of 87 (which includes a part Age Pension from the age of 67). **$53,010**(indexed) a year until the age of 100 (which includes part Age Pension entitlements from the age of 67).

### Couple – retiring at age 61

If you retire before the age of 65 but after the age of 60, you can still expect tax-free pension payments although you will only be able to claim the Age Pension (if eligible) when you reach Age Pension Age (currently age 65 and increasing to age 67, depending on your date of birth).

*Assuming your retirement savings are invested at 7%*, if you retire today at age 61 with **$1 million** in super, as a couple, your savings can deliver you:

- A retirement income of around
**$76,150**(indexed) a year until the age of 87 (which includes a part Age Pension from the age of 68). **$64,700**(indexed) a year until the age of 100 (including a part Age Pension from the age of 70).

*Assuming your retirement savings are invested at 5%,* if you retire today at age 61 with **$1 million** in super, as a couple, your savings can deliver you:

- A retirement income of
**$66,715**(indexed) a year until the age of 87 (which includes a part Age Pension from the age of 67). **$56,320**(indexed) a year until the age of 100 (including a part Age Pension from the age of 68).

### Couple – retiring at age 65

*Assuming your retirement savings are invested at 7%,* if you retire today, at the age of 65 with **$1 million** in super, as a couple, your savings can deliver you:

- a retirement income of around
**$81,570**(indexed) a year until the age of 87 (which includes a part Age Pension from the age of 70) - around
**$67,970**(indexed) a year until the age of 100 (which includes a part Age Pension from the age of 74).

*Assuming your retirement savings are invested at 5%,* if you retire today, at the age of 65 with **$1 million** in super, as a couple, your savings can deliver you:

- a retirement income of
**$73,330**(indexed) a year until the age of 87 (which includes a part Age Pension from the age of 69) **$58,540**(indexed) a year until the age of 100 (which includes a part Age Pension from the age of 71).

### Couple – retiring at age 67

*Assuming your retirement savings are invested at 7%,* if you retire today, at the age of 67 with **$1 million** in super, as a couple, your savings can deliver you:

- a retirement income of around
**$85,600**(indexed) a year until the age of 87 (which includes a part Age Pension from the age of 72) **$67,970**(indexed) a year until the age of 100 (which includes a part Age Pension from the age of 74).

*Assuming your retirement savings are invested at 5%,* if you retire today, at the age of 67 with **$1 million** in super, as a couple, your savings can deliver you:

- a retirement income of
**$77,230**(indexed) a year until the age of 87 (which includes a part Age Pension from the age of 71) **$60,040**(indexed) a year until the age of 100 (which includes a part Age Pension from the age of 73).

### Couple – retiring at age 70

*Assuming your retirement savings are invested at 7%,* if you retire today, at the age of 70 with **$1 million** in super, as a couple, your savings can deliver you:

- a retirement income of
**$93,355**(indexed) a year until the age of 87 (which includes a part Age Pension from the age of 74) - around
**$70,690**(indexed) a year until the age of 100 (which includes a part Age Pension from the age of 77).

*Assuming your retirement savings are invested at 5%,* if you retire today, at the age of 70 with **$1 million** in super, as a couple, your savings can deliver you:

- a retirement income of
**$84,760**(indexed) a year until the age of 87 (which includes a part Age Pension from the age of 74) **$62,730**(indexed) a year until the age of 100 (which includes a part Age Pension from the age of 75).

**Important:** The $1 million scenarios referred to in this article allow for 3% inflation when working out annual incomes, so the figures in these features automatically allow for the annual adjustment in retirement incomes. For further explanation of why planning for retirement using today’s dollars is more helpful than retirement planning using tomorrow’s dollars, see *SuperGuide* article Retirement: Today’s dollars, and why $1 million can’t last forever.

**Note: ** In a related article, I also crunch the numbers for those readers who aspire to a $1.6 million retirement (see *SuperGuide* article Crunching the numbers: a $1.6 million retirement).

## If you’re SINGLE and retire with $1 million

The scenarios for a single person are divided into five timeframes (also see text and Table 2 below):

- Single person – retiring at age 56 (minimum preservation age)
- Single person – retiring at age 61
- Single person – retiring at age 65
- Single person – retiring at age 67
- Single person – retiring at age 70

### Table 2: A $1 MILLION retirement (in today’s dollars) for a SINGLE PERSON

Investment return during retirement | 7% return on savings | 5% return on savings | ||
---|---|---|---|---|

Money lasts until: | Age 87 | Age 100 | Age 87 | Age 100 |

Annual income (indexed) when RETIRE at: | ||||

Age 56* | $60,500 | $50,360 | $49,530 | $40,980 |

Part AP | from age 75 | from age 81 | from age 71 | From age 75 |

Age 61 | $64,680 | $53,005 | $55,235 | $43,700 |

Part AP | from age 76 | from age 84 | from age 74 | from age 78 |

Age 65 | $71,000 | $55,750 | $61,475 | $46,320 |

Part AP | from age 78 | from age 85 | from age 76 | from age 81 |

Age 67 | $75,050 | $57,336 | $65,541 | $47,904 |

Part AP | from age 79 | from age 86 | from age 77 | from age 82 |

Age 70 | $82,810 | $60,065 | $73,315 | $50,635 |

Part AP | from age 80 | from age 87 | from age 79 | from age 84 |

**Tax may be payable on income when retiring before the age of 60.*

*Note:** See end of article for assumptions. ‘Part AP’ stands for part Age Pension. Figures calculated using ASIC MoneySmart retirement planner calculator (**www.moneysmart.gov.au**)*

**Single person – retiring at age 56**

If you want to retire before the age of 60, then you can expect to pay some tax on your pension income. You cannot claim the Age Pension until you reach your Age Pension age (for information on your Age Pension age, see *SuperGuide* article Age Pension age increasing to 67 years (not 70 years)).

You must have reached your preservation age to access your super benefits. The minimum preservation age increased to 56 years, and anyone born on or after 1 July 1961 has a preservation age of at least 57 years, and preservation age increases to age 60 for those born on or after 1 July 1964 (for more information about your preservation age, see *SuperGuide* article Accessing super: What is my preservation age?).

*Assuming your retirement savings are invested at 7%,* if you retire at age 56 with **$1 million **in super, as a single person, your savings can deliver you:

- A retirement income of
**$60,500**(indexed) a year until the age of 87 (which includes a part Age Pension from the age of 75). - A retirement income of
**$50,360**(indexed) a year until the age of 100 (which includes a part Age Pension from the age of 81).

*Assuming your retirement savings are invested at 5%,* if you retire at age 56 with **$1 million **in super, as a single person, your savings can deliver you:

- A retirement income of
**$49,530**(indexed) a year until the age of 87 (which includes a part Age Pension from the age of 71). - A retirement income of
**$40,980**(indexed) a year until the age of 100 (which includes a part Age Pension from the age of 75).

### Single person – retiring at age 61

If you retire before the age of 65 but after the age of 60, you can still expect tax-free pension income although you will only be able to claim the Age Pension (if eligible) when you reach Age Pension Age (currently age 65 and increasing to age 67).

*Assuming your retirement savings are invested at 7%,* and you retire today at age 61 with **$1 million** in super, as a single person, your savings can deliver you:

- A retirement income of
**$64,680**(indexed) a year until the age of 87 (which includes a part Age Pension from the age of 76). **$53,005**(indexed) a year until the age of 100 (which includes a part Age Pension entitlement from the age of 84).

*Assuming your retirement savings are invested at 5%*, and you retire today at age 61 with **$1 million** in super, as a single person, your savings can deliver you:

- A retirement income of
**$55,235**(indexed) a year until the age of 87 (which includes a part Age Pension from the age of 74). **$43,700**(indexed) a year until the age of 100 (which includes a part Age Pension entitlement from the age of 78).

### Single person – retiring at age 65

*Assuming your retirement savings are invested at 7%,* if you retire today, at the age of 65 with **$1 million** in super, as a single person, your savings can deliver you:

- a retirement income of
**$71,000**(indexed) a year until the age of 87 (which includes a part Age Pension from the age of 78). **$55,750**(indexed) a year until the age of 100 which includes a part Age Pension from the age of 85).

*Assuming your retirement savings are invested at 5%*, if you retire today, at the age of 65 with **$1 million** in super, as a single person, your savings can deliver you:

- a retirement income of
**$61,475**(indexed) a year until the age of 87 (which includes a part Age Pension from the age of 76). **$46,320**(indexed) a year until the age of 100 which includes a part Age Pension from the age of 81).

### Single person – retiring at age 67

*Assuming your retirement savings are invested at 7%,* and you retire today at age 67 with **$1 million** in super, as a single person, your savings can deliver you:

- A retirement income of
**$75,050**(indexed) a year until the age of 87 (which includes a part Age Pension from the age of 79). **$57,336**(indexed) a year until the age of 100 (which includes a part Age Pension entitlement from the age of 86).

*Assuming your retirement savings are invested at 5%*, and you retire today at age 67 with **$1 million** in super, as a single person, your savings can deliver you:

- A retirement income of
**$65,541**(indexed) a year until the age of 87 (which includes a part Age Pension from the age of 77). **$47,904**(indexed) a year until the age of 100 (which includes a part Age Pension entitlement from the age of 82).

### Single person – retiring at age 70

*Assuming your retirement savings are invested at 7%,* if you retire today, at the age of 70 with **$1 million** in super, as a single person, your savings can deliver you:

- a retirement income of
**$82,810**(indexed) a year until the age of 87 (which includes a part Age Pension from the age of 80). **$60,065**(indexed) a year until the age of 100 which includes a part Age Pension from the age of 87).

*Assuming your retirement savings are invested at 5%*, if you retire today, at the age of 70 with **$1 million** in super, as a single person, your savings can deliver you:

- a retirement income of
**$73,315**(indexed) a year until the age of 87 (which includes a part Age Pension from the age of 79). **$50,635**(indexed) a year until the age of 100 which includes a part Age Pension from the age of 84).

**Important:** The $1 million scenarios referred to in this article allow for 3% inflation when working out annual incomes, so the figures in these features automatically allow for the annual adjustment in retirement incomes. For further explanation of why planning for retirement using today’s dollars is more helpful than retirement planning using tomorrow’s dollars, see *SuperGuide* article Retirement: Today’s dollars, and why $1 million can’t last forever**.**

**Note: ** In a related article, I also crunch the numbers for those readers who aspire to a $1.6 million retirement (see *SuperGuide* article Crunching the numbers: a $1.6 million retirement).

## $1 million retirement: Assumptions for text and Tables 1 and 2

Note:Both political parties (ALP and Liberals/Nationals) plan to impose a tax on a certain level of super pension earnings, but both parties have promised that the proposed tax will not affect pension balances below $1.6 million (Liberals), or $1.5 million (ALP, although the ALP policy is based on the level of pension earnings rather than account balance). For more information on the proposed tax on super pension earnings, see SuperGuide articles Liberals to impose $1.6 million cap on pension start balances, if win electionand ALP to tax pension earnings above $75,000 a year, if wins election.

Assumptions:The amounts listed in Tables 1 and 2 assume that the money is retained in the super system and that you pay yourself a super pension (from a pension provider or from your self-managed super fund). By retaining your money in the super system, the earnings on your savings are exempt from tax, and the income payments that you receive from your super pension are tax-free.

The amounts quoted in this article were calculated with the ASIC MoneySmart Retirement Planner using the following assumptions:

- investment returns are 7 per cent after fees and taxes (that is, re-invested), investment returns are 5 per cent after fees and taxes (that is, re-invested), on the account balance of a superannuation pension, which means the fees boxes are set at zero in the calculator.
- the investment return is manually set under ‘other’ at 7% or 5% respectively, when using the Retirement Planner.
- Inflation and cost of living adjustments are set at 3 per cent rather than 4.0 per cent (which is the standard assumption).
- Money lasts until age 87, or age 100, or whatever age I specify in the text. In the calculator, I set the age at 88 and 101 respectively, to ensure the money lasts for the full year of being 87 and 100.
- No money is spent in year one before commencing retirement income stream, and assume holds $25,000 in personal assets (including car), and that you have paid off home.
- Age Pension entitlements are included in annual retirement incomes.
- Individual retirement age is specified in the text, and covers age 56, 61, 65, 67 and age 70.

Hi Trish,

I have “plugged” your figures and assumptions in to the ASIC Retirement calculator and the results are substantially less than you have indicated. Have you re-tested these calculations with the current ASIC calculator?

Hi Robert

Thanks for your email.

We use slightly different assumptions (which we disclose at the end of the article) to the ASIC default assumptions, so the results will be different. We do this to ensure our calculations reflect returns after fees, and to ensure that we can track other websites that illegally copy our articles (unfortunately this happens). Great news that the article has prompted you to use the calculator.

You do mention that you used our assumptions – the ASIC calculator automatically deducts a lump sum on retirement (which I remove), which dramatically changes the calculation – you have to manually do this, once you go into results, and keep on clicking until the ‘spending in year 1’ pops up. You also have to manually put fees to zero and even when you go on the ‘How it works’ page, this sometimes defaults as well. You also need to check the investment return which has to be manually changed to 5% and 7%, and then double-checked because it can revert to the default.

I will check the figures again, although the fiddly aspects to the calculator (if you change the default assumptions) can make it confusing.

Regards

Trish

So if I retired at age 65 with $1million @7% and drew $79k pa (indexed) until age 87 I presume the balance would be decreased to zero. Is that correct?

Hi Mike

Thanks for your question. Yes, that is the assumption for the table that I have created. The individual would then rely only on the Age Pension from age 88, at that income level. You can use the ASIC calculator to change any of the assumptions, including having your money last longer (but at lower income levels).

Regards

Trish

Dear Trish what is nick bruining referring to when he says if you tick all the boxes before tomorrow 27 February and you retired before 2009 you have the opportunity for the $76000 ? Sincerely john kemp – this was broadcast on the Geoff Hutchinson abc morning programme ?

Hi John

He is referring to the Age Pension bonus – you can find more information by clicking on our article – http://www.superguide.com.au/how-super-works/goodbye-pension-bonus-hello-work-bonus

Regards

Trish

What will the proposed change to franking credits cost the government in terms of increased superannuation payouts as the result of lost franking income?

Thanks for the excellent articles and information. Told me exactly what I wanted to know and alerted me to the fallacy of believing that my capital would not diminish over time.

Will $950000 be enough to retire on?

My wife is 59 and wants to retire next year at 60 and I am about to retire this month.

We own our house and vehicles and have virtually no debt except utilities. Our electricity is covered by substantially by our solar panels, hence only a few outlays- rates,food, clothing, registration / car insurance.

Regards

Ken

Hi Trish,

I am turning 65 in August. My husband is 66 and receiving a part aged pension. If I wish not to apply for a pension at 64 1/2, do I have to advise centrelink of the amount held in my super account before August?