Contents

*Note:** A $1.6 million cap now applies on the amount of superannuation savings you can transfer into retirement phase. Since 1 July 2017, you cannot transfer more than $1.6 million (general transfer balance cap), per individual, into retirement phase. As a couple, it is possible to have 2 separate pension accounts of up to $1.6 million each (a combined total of $3.2 million in super pension accounts). This article illustrates what a starting retirement sum of $1.6 million can deliver in retirement, in today’s dollars. In relation to couples, for this article, we assume a couple has $1.6 million in super, rather than $3.2 million in super. Latest article update is February 2018.*

*How the tables work:** This article is periodically updated with new figures to allow readers to compare what a $1.6 million retirement can deliver if retirement savings are invested with returns of 7% a year, or if invested on retirement with returns of 5% each year, and also takes into account Age Pension entitlements. 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 on retirement. For retirement income levels you can expect when you have more modest retirement savings, see article links within this article, and also the list of articles at end of this article.*

We are 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 however, we are tackling the issue from a very different perspective. We’re answering the following question: what does a $1.6 million retirement look like?

The majority of Australians won’t need $1.6 million in today’s dollars to have a comfortable retirement, but a significant minority of Australians have planned for, or are planning for (or at least hoping for) such a retirement lifestyle. This article illustrates what a $1.6 million retirement looks like in retirement income terms. (For those who will have more than $1.6 million in super, and to learn what the government wants you to do with your super savings above $1.6 million, see *SuperGuide* article Retirement phase: A super guide to the $1.6 million transfer balance cap.

**Note:** In related *SuperGuide* articles, we also do the numbers for those readers who aspire to a $1 million retirement in Crunching the numbers: $1 million retirement and in Low yields: A $1 million retirement on 3% or 2% returns. You can also discover what a $1 million retirement looks like by using *SuperGuide’s* easy-to-use $1 million Retirement Reckoner . If you’re interested in how much super you need to deliver a $100,000 a year retirement income, see *SuperGuide* article and Retirement income: Want to live on $100,000 a year? You can also try out *SuperGuide*’s How Much Super Is Enough Reckoner, which lists the lump sums you will need on retirement for specified annual incomes for 25 years, or for 35 years.

*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.*

**Quick access to updated tables: **If you’re a regular reader of this article, then you can access the updated tables by clicking on the links immediately below. If you are reading this article for the first time, then we strongly encourage you to continue reading the text below rather than clicking immediately to the tables (we provide links to the tables throughout the article). This article highlights the importance of investment returns, retirement age and Age Pension entitlements when determining the level of annual retirement income you can expect, and how long that income will last. We 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 $1.6 million
- Table 2: If you’re SINGLE and retire with $1.6 million

## …but you don’t need $1.6 million for a ‘comfortable’ retirement

If $1 million in super, or $1.6 million in super sounds like monopoly money, the comforting news is that you don’t need that much money to have a reasonable life in retirement.

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. You can find out why by reading this section, or for more information on what a comfortable retirement looks like, see *SuperGuide* articles How much super do you need to retire comfortably? and Retirement income: Living on more than $60,000 a year.

According to ASFA, you can live a modest life in retirement on around **$35,189** a year as a couple, and a comfortable life on just over **$60,000** a year, and the lump sums you need for $60,000 a year (indexed) is well under $1 million, when you take into account the Age Pension.

For example, assuming Age Pension age is 66 years (Age Pension age is now 65.5 years, and increasing to at least 66 years from July 2019 for those born after December 1953), a couple can secure a modest lifestyle with hardly any private savings ($3,000), because the FULL Age Pension for a couple is now **$34,507** (applicable since 20 September 2017, and excluding Energy Supplement). Without the Age Pension, a couple would need a lump sum of **$590,000** to deliver the equivalent annual retirement income of $34,507 (assuming retirement assets are generating a 7% return), or **$930,000** (if retirement assets are generating a 3% return) until after the age of 91.

**In comparison:** With a healthy PART Age Pension, a lump sum of around **$450,000** can deliver a couple roughly **$60,500** (indexed) a year in retirement until after the age of 91, and roughly **$56,150** (indexed) a year until after the age of 101, according to the ASIC MoneySmart Retirement Planner, and assuming the money is invested in assets that return 7% a year.

*Note:** Investment returns can make a huge difference to the amount of money you need to save for your retirement. If your money is returning only 5% a year (rather than 7%) in retirement, then you will need at least an extra $170,000 as a couple to finance $60,000 a year (indexed) for 25 years, that is, until after the age of 91 (including Age Pension entitlements). If your money is returning only 3% a year (rather than 7%), then you will need virtually double the amount of savings – at least an extra $440,000 as a couple to finance $60,000 a year (indexed) for 25 years, that is, until after the age of 91 (including Age Pension entitlements).*

For more information on how to achieve a comfortable retirement without $1.6 million, or even without $1 million, read the *SuperGuide* article How much super do you need to retire comfortably?

**Tip:** After reading this article, if you’re aspiring to a $1.6 million retirement, or 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.

## What can $1.6 million generate in terms of an annual tax-free income in retirement?

Continue reading to find out what $1.6 million in today’s dollars can deliver you if you want your lifestyle to last until after age 91, or if you want your lifestyle to last until after age 101, or somewhere in between. The average life expectancy for a 66-year-old woman is 87 (87.18) years, while average life expectancy for a 66-year-old man is 84.5 (84.41) years. We provide retirement income figures for a couple, or a single person, and where relevant, we include any Age Pension entitlements.

Even so, not everyone plans, or is able, to retire at age 66 (or whatever your Age Pension age is: to find out your Age Pension age see *SuperGuide* articles Age Pension age increasing to 67 years and Retirement Age Reckoner: Discover your preservation age and Age Pension age).

Everyone has different retirement plans, and if you are intending to accumulate $1.6 million in assets for your retirement, then there is a much higher likelihood that you will retire earlier than someone without that type of cash – because you can afford to!

The tables and text below outline the annual incomes you can expect if you retire with $1.6 million, and you retire at age 58, 61, 66, 67 or age 70. You can also see the different incomes you can expect depending on whether you invest your retirement money generating a return of 7% or 5%, and whether you want your money to last until after age 91, or until after age 101.

**Note:** If you plan to retire at age 58, the figures in Table 1 (for a couple) and in Table 2 (for a single person), assume your preservation age is 58 years or younger. If you plan to retire at age 66, the figures assume your Age Pension age is 66 years or younger. Links to the tables appear below.

**Quick access to updated tables: **If you’re a regular reader of this article, then you can access the updated tables by clicking on the links immediately below. If you are reading this article for the first time, then we strongly encourage you to continue reading the text below rather than clicking immediately to the tables.

- Table 1: If you’re part of a COUPLE and retire with $1.6 million
- Table 2: If you’re SINGLE and retire with $1.6 million

**Summary point, for a COUPLE:** A couple retiring today with **$1.6 million** can expect an indexed annual retirement income of between **$73,135** (from age 66 until after age 101, and 5% return) and **$104,711** (from aged 66 until at least age 91, and 7% return). A couple retiring at age 58 with **$1.6 million** can expect an indexed annual retirement income of between **$65,484** (from age 58 until after age 101, and 5% return) and **$90,427** (from age 58 until after age 91, and 7% return). See following text and Table 1 (later in the article) for further explanation. We assume Age Pension age is at least age 66 when retiring at age 66, and preservation age is at least age 58, when retiring at age 58.**Summary point, for SINGLE PERSON:** A single person retiring today with **$1.6 million** can expect an indexed annual retirement income of between **$64,849** (from age 66 until after age 101, and based on 5% return) and **$98,577** (from aged 66 until after age 91, and based on 7% return). A single person retiring at age 58 with **$1.6 million** can expect an indexed annual retirement income of between **$57,203** (from age 58 until after age 101, and 5% return) and **$85,239** (from age 58 until after age 91, and 7% return). See text later in the article and Table 2 for further explanation. We assume Age Pension age is at least 66 when retiring at age 66, and preservation age is at least age 58, when retiring at age 58.

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

We 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. If you have $1.6 million when you retire, you will not receive any Age Pension entitlements but couples may be entitled to a small PART Age Pension in the later years of retirement. Although a couple can potentially have $3.2 million in super pension accounts under the $1.6 million transfer balance cap rules, Table 1 only deals with a $1.6 million retirement balance for a couple.

- Table 1: If you’re part of a COUPLE and retire with $1.6 million
- Table 2: If you’re SINGLE and retire with $1.6 million

**Note:** The $1.6 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 income: Today’s dollars, and why $1 million can’t last forever.

## If you’re part of a COUPLE, and retire with $1.6 million

Due to the Age Pension assets test and Age Pension income test, a couple with $1.6 million in super on retirement will not be eligible for a PART Age Pension, although retirees may receive a PART Age Pension in the later years of retirement.

**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 **$1.6 million** in super on retirement, are more likely to receive a PART Age Pension, when eventually they become eligible for a PART Age Pension in the later years of retirement. Within Table 1, we indicate when a PART Age Pension starts, using ‘part AP’.

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

- Couple – retiring at age 58 (current minimum age for accessing super)
- Couple – retiring at age 61
- Couple – retiring at age 66
- Couple – retiring at age 67
- Couple – retiring at age 70

#### Table 1: A $1.6 MILLION retirement (in today’s dollars) for a COUPLE

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

Money lasts until at least: | Age 91 | Age 101 | Age 91 | Age 101 |

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

Age 58* | $90,427 | $80,365 | $75,625 | $65,484 |

Part AP | from age 76 | from age 82 | from age 73 | from age 77 |

Age 61 | $94,723 | $82,854 | $79,945 | $68,034 |

Part AP | from age 78 | from age 83 | from age 75 | from age 79 |

Age 66 | $104,232 | $87,956 | $89,424 | $73,135 |

Part AP | from age 80 | from age 85 | from age 78 | from age 82 |

Age 67 | $106,573 | $89,136 | $91,766 | $74,374 |

Part AP | from age 80 | from age 86 | from age 79 | from age 82 |

Age 70 | $114,980 | $93,195 | $100,221 | $78,435 |

Part AP | from age 82 | from age 87 | from age 80 | from age 84 |

**Tax may be payable on income when retiring before the age of 60, and the figures for age 58, assume your preservation age for accessing super is 58 years or younger. *

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

**Note:** Continue reading this section for a plain-English explanation of the contents of Table 1. If you are seeking the annual retirement income figures for a single person, then refer to Table 2: If you’re SINGLE and retire with $1.6 million

### Couple – retiring at age 58

If you want to retire before the age of 60, for example age 58, 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 must have reached your preservation age to access your super benefits. The minimum preservation age increased to 58 years, and anyone born on or after 1 July 1962 has a preservation age of at least 58 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* articles Accessing super: What is my preservation age? and Retirement Age Reckoner: Discover your preservation age and Age Pension age.

*Ignoring tax and assuming your retirement savings are invested at 7%,* if you retire today at age 58 with **$1.6 million** in super, as a couple, your savings can deliver you:

- A retirement income of
**$90,427**(indexed) a year until after the age of 91 (which includes a PART Age Pension from age 76), and potentially this income could be taxed until you reach the age of 60. **$80,365**(indexed) a year until after the age of 101 (with a PART Age Pension from age 82), and income potentially taxed until the age of 60.

*Ignoring tax and assuming your retirement savings are invested at 5%,* if you retire today at age 58 with **$1.6 million** in super, as a couple, your savings can deliver you:

- A retirement income of
**$75,625**(indexed) a year until after the age of 91 (including a PART Age Pension from the age of 73) and potentially this income could be taxed until you reach the age of 60. **$65,484**(indexed) a year until after the age of 101 (including a PART Age Pension from the age of 77) and income potentially taxed until the age of 60.

### Couple – retiring at age 61

If you retire before reaching Age Pension age but after the age of 60, for example age 61, you can still expect tax-free pension income, and the issue of retiring before Age Pension age is irrelevant in the early years of your retirement, as a couple, because your assets and income preclude you from claiming the Age Pension.

*Assuming your retirement savings are invested at 7%,* if you retire today at age 61 with **$1.6 million** in super, as a couple, your savings can deliver you:

- A retirement income of
**$94,723**(indexed) a year until after the age of 91 (which includes a PART Age Pension from the age of 78). **$82,854**(indexed) a year until after the age of 101 (with a PART Age Pension from the age of 83).

*Assuming your retirement savings are invested at 5%,* if you retire today at age 61 with **$1.6 million** in super, as a couple, your savings can deliver you:

- A retirement income of
**$79,945**(indexed) a year until after the age of 91 (including a PART Age Pension from the age of 75). **$68,034**(indexed) a year until after the age of 101 (including a PART Age Pension entitlement from the age of 79).

### Couple – retiring at age 66

*Assuming your retirement savings are invested at 7%,* if you retire today, at the age of 66 (assuming you have reached your Age Pension age) with **$1.6 million** in super, as a couple, your savings can deliver you:

- a retirement income of
**$104,232**(indexed) a year until after the age of 91 (which includes a PART Age Pension from the age of 80). **$87,956**(indexed) a year until after the age of 101 (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 66 (assuming this is your Age Pension age) with **$1.6 million** in super, as a couple, your savings can deliver you:

- a retirement income of
**$89,424**(indexed) a year until after the age of 91 (which includes a PART Age Pension from the age of 78). **$73,135**(indexed) a year until after the age of 101 (which includes a PART Age Pension from age 82).

### Couple – retiring at age 67

*Assuming your retirement savings are invested at 7%,* if you retire today, at the age of 67 with **$1.6 million** in super, as a couple, your savings can deliver you:

- a retirement income of
**$106,573**(indexed) a year until after the age of 91 (which includes a PART Age Pension from the age of 80). **$89,136**(indexed) a year until after the age of 101 (which includes a PART Age Pension from the age of 86).

*Assuming your retirement savings are invested at 5%,* if you retire today, at the age of 67 with **$1.6 million** in super, as a couple, your savings can deliver you:

- a retirement income of
**$91,766**(indexed) a year until after the age of 91 (which includes a PART Age Pension from the age of 79). **$74,374**(indexed) a year until after the age of 101 (which includes a PART Age Pension from the age of 82).

### Couple – retiring at age 70

*Assuming your retirement savings are invested at 7%,* if you retire today, at the age of 70 with **$1.6 million** in super, as a couple, your savings can deliver you:

- a retirement income of
**$114,980**(indexed) a year until after the age of 91 (which includes a PART Age Pension from the age of 82). - around
**$93,195**(indexed) a year until after the age of 101 (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 **$1.6 million** in super, as a couple, your savings can deliver you:

- a retirement income of
**$100,221**(indexed) a year until after the age of 91 (which includes a PART Age Pension from the age of 80). - around
**$78,435**(indexed) a year until after the age of 101 (which includes a PART Age Pension from the age of 84).

**Important:** The $1.6 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 income: Today’s dollars, and why $1 million can’t last forever.** **

**Note one:** In related articles, we also crunch the numbers for those readers who are working towards, or dreaming of, a $1 million retirement (see *SuperGuide* articles Crunching the numbers: a $1 million retirement (7% and 5% returns) and Low yields: A $1 million retirement on 3% or 2% returns. You can also use *SuperGuide’s* $1 million Retirement Reckoner to compare the annual retirement income (indexed) amounts listed in Table 1 (for a couple). The Reckoner allows you to click on different retirement ages (age 58 or 61 or 66 or 67 or 70), different rates of investment returns (2%, 3%, 5% or 7%) and until after age 91 or, until after age 101), to compare the level of retirement income you can expect.

**Note two:** If you don’t plan to have $1 million in super and you want a comfortable retirement, see *SuperGuide* article How much super do you need to retire comfortably? You can also try *SuperGuide’s* easy-to-use How Much Super Is Enough Reckoner. You can find out the super savings you will need for a $50,000 a year retirement, a $60,000 a year retirement, a $150,000 a year retirement, and annual retirement incomes in between these amounts.

## If you’re SINGLE and retire with $1.6 million

If you’re a single person retiring with $1.6 million you will not be eligible for a PART Age Pension on retirement. If you do become eligible for a PART Age Pension it will be a small amount in the later stage of your retirement.

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

- Single person – retiring at age 58 (current minimum age for accessing super)
- Single person – retiring at age 61
- Single person – retiring at age 66
- Single person – retiring at age 67
- Single person – retiring at age 70

#### Table 2: A $1.6 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 at least: | Age 91 | Age 101 | Age 91 | Age 101 |

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

Age 58* | $85,239 | $75,860 | $67,656 | $57,203 |

Part AP | from age 84 | from age 92 | from age 81 | from age 87 |

Age 61 | $89,391 | $71,555 | $72,055 | $59,762 |

Part AP | from age 84 | from age 91 | from age 82 | from age 88 |

Age 66 | $98,577 | $82,897 | $81,684 | $64,849 |

Part AP | from age 85 | from age 93 | from age 84 | from age 90 |

Age 67 | $100,901 | $84,045 | $84,080 | $66,085 |

Part AP | from age 85 | from age 93 | from age 84 | from age 90 |

Age 70 | $109,153 | $87,918 | $92,558 | $70,350 |

Part AP | from age 86 | from age 94 | from age 85 | from age 91 |

**Tax may be payable on income when retiring before the age of 60, and the figures for age 58, assume your preservation age for accessing super is 58 years or younger.*

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

### Single person – retiring at age 58

If you want to retire before the age of 60, for example age 58, then you can expect to pay some tax on your pension income.

*Assuming your retirement savings are invested at 7%,* if you retire today at age 58 with **$1.6 million** in super, as a single person, your savings can deliver you:

- A retirement income of
**$85,239**(indexed) a year until after the age of 91 (which includes a PART Age Pension from age 84). Potentially this income could be taxed until you reach the age of 60. **$75,860**(indexed) a year until after the age of 101, with a PART Age Pension from age 92. Potentially, this income could be taxed until you reach the age of 60.

*Assuming your retirement savings are invested at 5%,* if you retire today at age 58 with **$1.6 million** in super, as a single person, your savings can deliver you:

- A retirement income of
**$67,656**(indexed) a year until after the age of 91 (with a PART Age Pension from age 81). Potentially, this income could be taxed until you reach the age of 60. **$57,203**(indexed) a year until after the age of 101 (including a PART Age Pension from the age of 87). Potentially, income taxed until the age of 60.

### Single person – retiring at age 61

If you retire before your Age Pension age but after the age of 60, for example age 61, you can still expect tax-free pension income, and the issue of retiring before **Age Pension age** is irrelevant because your assets preclude you from claiming the Age Pension (in most cases, and if eligible, only in the later years of retirement).

*Assuming your retirement savings are invested at 7%,* if you retire today at age 61 with **$1.6 million** in super, as a single person, your savings can deliver you:

- A retirement income of
**$89,391**(indexed) a year until after the age of 91 (including a PART Age Pension from age 84). **$71,555**(indexed) a year until after the age of 100 (including a PART Age Pension from age 91).

*Assuming your retirement savings are invested at 5%,* if you retire today at age 61 with **$1.6 million** in super, as a single person, your savings can deliver you:

- A retirement income of
**$72,055**(indexed) a year until after the age of 91 (including a PART Age Pension from age 82) **$59,762**(indexed) a year until after the age of 101 (including a PART Age Pension from the age of 88).

### Single person – retiring at age 66

*Assuming your retirement savings are invested at 7%,* if you retire today at the age of 66 (assuming you have reached your Age Pension age) with **$1.6 million** in super, as a single person, your savings can deliver you:

- a retirement income of
**$98,577**(indexed) a year until after the age of 91 (including a PART Age Pension from age 85). **$82,897**(indexed) a year until after the age of 101 (including a PART Age Pension from age 93).

*Assuming your retirement savings are invested at 5%,* if you retire today at the age of 66 (assuming you have reached your Age Pension age) with **$1.6 million** in super, as a single person, your savings can deliver you:

- a retirement income of
**$81,684**(indexed) a year until after the age of 91 (including a PART Age Pension from age 84). **$64,849**(indexed) a year until after the age of 101 (including a PART Age Pension from the age of 90).

### Single person – retiring at age 67

*Assuming your retirement savings are invested at 7%,* if you retire today at the age of 67 with **$1.6 million** in super, as a single person, your savings can deliver you:

- a retirement income of
**$100,901**(indexed) a year until after the age of 91 (including a PART Age Pension from age 85). **$84,045**(indexed) a year until after the age of 101 (including a PART Age Pension from age 93).

*Assuming your retirement savings are invested at 5%,* if you retire today at the age of 67 with **$1.6 million** in super, as a single person, your savings can deliver you:

- a retirement income of
**$84,080**(indexed) a year until after the age of 91 (including a PART Age Pension from age 84). **$66,085**(indexed) a year until after the age of 101 (with a PART Age Pension from the age of 90).

### Single person – retiring at age 70

*Assuming your retirement savings are invested at 7%,* if you retire today at the age of 70 with **$1.6 million** in super, as a single person, your savings can deliver you:

- a retirement income of
**$109,153**(indexed) a year until after the age of 91 (including a PART Age Pension from age 86). **$87,918**(indexed) a year until after the age of 101 (including a PART Age Pension from age 94).

*Assuming your retirement savings are invested at 5%,* if you retire today at the age of 70 with **$1.6 million** in super, as a single person, your savings can deliver you:

- a retirement income of
**$92,588**(indexed) a year until after the age of 91 (including a PART Age Pension from age 85). **$70,350**(indexed) a year until after the age of 101 (with a small PART Age Pension from the age of 91).

**Note one:** In related articles, we also crunch the numbers for those readers who are working towards, or dreaming of, a $1 million retirement (see *SuperGuide* articles Crunching the numbers: a $1 million retirement (7% and 5% returns) and Low yields: A $1 million retirement on 3% or 2% returns. You can also use *SuperGuide’s* $1 million Retirement Reckoner to compare the annual retirement income (indexed) amounts listed in Table 1 (for a couple). The Reckoner allows you to click on different retirement ages (age 58 or 61 or 66 or 67 or 70), different rates of investment returns (2%, 3%, 5% or 7%) and until after age 91 or, until after age 101), to compare the level of retirement income you can expect.

**Note two:** If you don’t plan to have $1.6 million in super, or $1 million in super, and you want a comfortable retirement, see *SuperGuide* article How much super do you need to retire comfortably?. You can also try *SuperGuide’s* easy-to-use How Much Super Is Enough Reckoner. You can find out the super savings you will need for a $50,000 a year retirement, a $60,000 a year retirement, a $150,000 a year retirement, and annual retirement incomes in between these amounts.

#### $1.6 million retirement: Assumptions for text and Tables 1 and 2 (click to open and close)

## For more articles on how much super is enough…

If you are seeking more information about how much super is enough to live comfortably, then check out the following *SuperGuide* articles:

- How much super do you need to retire comfortably?
- Retirement income: Living on more than $60,000 a year
- How Much Super Is Enough Reckoner
- Retirement income: Want to live on $100,000 a year?
- Crunching the numbers: a $1 million retirement (7% and 5% returns)
- Low yields: A $1 million retirement on 3% or 2% returns
- $1 million Retirement Reckoner
- Life expectancy: Will you outlive your retirement savings?
- Retirement income: Come on, how much super do I really need?
- Retirement income: Today’s dollars, and why $1 million can’t last forever
- The super challenge: At what age should I retire?
- Retirement Age Reckoner: Discover your preservation age and Age Pension age

Interesting to note the trinity study research explains at a roughly 4% (or 3% for certain) withdrawal rate ie 80k on 2mm, your money will never run out based on all retirement starting points in the last 100years of returns. Hence can retire much earlier if keep to this spending level. Why not run scenarios at 40yrs age etc.

I just don’t get it. If I have $2mil @ 7% I generate $140,000 pa so how can my super run out at 87 or 100 if I only withdraw $100,000 pa?

Will my super not keep growing ? or is it to do with the minimum WDL increases?

Bill the reason is the author makes the assumption that you can only make either 4% o 2% real return (7% return minus 3% inflation). Frankly this is misleading and defies history. The average real return on the Australian stock market over the last 80 years is 8.2% and then add franking credits of 1.3% (30% of 4.2% dividend payout) giving a real return of 9.5%. To be conservative 7.5% should be used and with $2m the annual payout on average will be $150K and it will never run out. The issue is this is the reality long term but over shorter periods ie the late 70s to 80’s a period of 13 years showed high inflation and stagnant share prices your investments can go down but eevn during this period the decline was about 1.5% pa with franking credits it was basically zero return.

So if you have a horizon of 20 years or more equities are your best bet and wil return 7.5 to 9% real return, so you have to hope that when you start isn’t the beginning of an unusual period.

trueblue this is not correct, the real reason is because it is indexed so the amount withdrawn every year increases in line with inflation so that income is constant in real terms. if you invest $2 million at 7% and withdraw an income of $140,000 in the first year then assuming CPI is 2.5% then the following year you need an income of $143,500 for the same income in real terms, so now your capital has reduced by $3,500 and the following year not only do you need another increase in income but you have less capital to generate it. As this process continues you can see why the money runs out. the time it takes to run out depends on the starting income you choose, hence in the examples used if you choose a smaller income it will last to age 100 instead of 87.

Yes the way it has been calculated (money runs out, indexed) is very mathematical, and correct, however I suspect most people would try to preserve the starting capital, and restrict income to that end, even add to the capital to try to offset the ‘time devaluation’ of money in later years. Health problems later in life are obvious unknowns, but would I be right in saying that you need less money generally as you get on in years and you slow down? again helping preserve that hard earned starting capital. I’m not much of a risk taker (unfortunately I think) and I see real property as a safe vehicle for super investment/income stream. 5% is achievable (costs bite into this obviously, but I’m getting up to 8%, they are out there if you look), and you get some benefit from rent increases with CPI, and obviously longer term capital gains. For those who want to ‘spend the kids’ inheritance’, the presented calculations are for you!….I’m still on the fence on this one…