Note: This article is updated every 6 months or so with new figures, covering retirement incomes when retiring at age 58, age 61, age 66, 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 20 September 2017, and the 2017 changes to the Age Pension assets test since 1 January 2017. Latest article update is February 2018.
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 three-part series ($1 million retirement when investments return 7% or 5%, a $1 million retirement when investments return 3% or 2%, and a $1.6 million retirement), for those readers who want a truly comfortable life in retirement. See links for the other 2 articles at the end of this article, and also within this article.
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 just over $60,000 a year for a couple, and just over $44,000 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. (For information on a comfortable lifestyle in retirement, see SuperGuide article How much super do you need to retire comfortably?.)
In this article, we 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 58 (new minimum age for accessing super), age 67 (aligning with the increasing Age Pension age), or age 70 (for those who wish to work longer, or need to work longer), as well as age 61 and age 66.
Note: You can also discover what a $1 million retirement looks like by trying SuperGuide's easy-to-use $1 million Retirement Reckoner. For those readers expecting much lower investment returns in retirement (that is 3% or 2% a year), see SuperGuide article Low yields: A $1 million retirement on 3% or 2% returns. In a related article, we 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, reflecting the new cap on the amount you can transfer to retirement phase).