Contents

*Note:** This article lists expected annual retirement incomes for a $1 million starting retirement balance, when savings are invested during retirement delivering returns of 3% or 2% each year. If you opt for a 3% investment return, rather than, say, 5% or 7% return, during retirement, then you will need to accept a much lower annual income for the same lump sum in retirement. For the expected annual retirement incomes when receiving 5% or 7% investments returns on a $1 million starting retirement balance, see SuperGuide article **Crunching the numbers: a $1 million retirement (7% and 5% returns)**. The article below covers retirement incomes when retiring at age 56, age 61, age 65, age 67 and age 70. The annual income figures (where relevant) include Age Pension rates. Latest article update is January 2017.*

What does a $1 million lump sum deliver in retirement when your savings earn 3%, or even 2%, a year during retirement?

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 in a lower-return environment? This article forms part of a three-part feature (see links for these articles within this article, and at end of this page) for those Australians seeking a truly comfortable lifestyle in retirement:

- $1 million retirement at 3% or 2% returns (this article)
- $1 million retirement at 5% or 7% returns
- $1.6 million retirement at 5% or 7% returns.

**Note:** If you delay retirement until 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.

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 seeking income figures that take into account the current low-return environment, we include annual retirement incomes based on your savings being invested at 3%, as well as returning 2%. We include calculations for those retiring at age 65 (current Age Pension age), and age 67 (aligning with the increasing Age Pension age), and age 70 (for those who wish to work longer, or need to work longer), and age 56 or age 61 (for those intending to retire early, and who can access super benefits at this age).

**Note **For those readers expecting much higher investment returns in retirement (that is 5% or 7% a year), see *SuperGuide* article *Crunching the numbers: a $1 million retirement (7% and 5% returns)**. *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).

*Important:** Changes to the Age Pensions assets test, which took effect from 1 January 2017, make it more difficult, but not impossible, to claim a PART Age Pension when retiring with $1 million in assets. A PART Age Pension will be available in the later years of retirement. See Tables 1 and 2 below for when Age Pension entitlements become available.*

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, and your savings deliver 3% a year (or 2% a year) during retirement.

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 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 **$34,560** a year as a couple, and a comfortable life on nearly **$60,000** a year, and the lump sums you need for $60,000 a year (indexed) is nowhere near $1 million, assuming an annual investment return of 3% on retirement savings, and taking into account the Age Pension, and assuming you don’t want the money to last until your turn 100.

For example, assuming Age Pension age is 65 years, a couple can secure a modest lifestyle ($34,560 a year) with hardly any private savings, because the FULL Age Pension for a couple is now **$34,382** (applicable until 19 March 2017). Without the Age Pension, a couple would need a lump sum of **$800,000** to deliver the equivalent annual retirement income of $34,560 (assuming retirement assets are generating a 3% return).

**In comparison:** With a PART Age Pension, a lump sum of around **$720,000 **can deliver a couple **$60,000** (indexed) a year in retirement until the age of 87, and roughly **$49,000** (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 3% a year. (If your retirement savings generated a 7% return each year, you would only need a lump sum on retirement of **$400,000** to generate **$60,000** (indexed) a year until age 87).

*Note:** If your money is returning 5% a year (rather than 3%), then you will need $185,000 less as a couple to finance $60,000 a year (indexed) for 22 years, that is, until age 87 (including Age Pension entitlements). If your money is returning only 7% a year (rather than 3%), then you will need $320,000 less as a couple to finance $60,000 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 deliver in retirement (3% return, or 2% return)?

**Summary point, for a couple: **A couple retiring today at age 65 with **$1 million** can expect an indexed annual retirement income of between **$65,853** (from aged 65 until age 87, and 3% return) and **$44,187** (from age 56 until age 100, and 2% 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 **$53,134** (from aged 65 until age 87, and based on 3% return) and **$31,492** (from age 56 until age 100, and based on 2% 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, which took effect from January 2017, a couple with **$1 million** in super on retirement will be eligible for a PART Age Pension later 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 (current 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 comparatively higher incomes than single people (see Table 2) with the same amount of retirement savings due to receiving a larger PART Age Pension later on in retirement. Within Table 1, we indicate when a PART Age Pension starts using ‘part AP’.

**TIP:** You can also use our *SuperGuide* Retirement Reckoner to compare the annual retirement income (indexed) amounts listed in the table below. The Reckoner allows you to click on different retirement ages (age 56 or 61 or 65 or 67 or 70), different rates of investment returns (2%, 3%, 5% or 7%) and different life expectancies (until 87 or until 100), to compare the level of retirement income you can expect. Click here to find out more about the *SuperGuide* Retirement Reckoner Introducing SuperGuide’s Retirement Reckoner.

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

Investment return during retirement | 3% return on savings | 2% return on savings | ||
---|---|---|---|---|

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

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

Age 56* | $53,420 | $46,589 | $49,682 | $44,187 |

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

Age 61 | $59,860 | $49,536 | $56,802 | $47,403 |

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

Age 65 | $65,853 | $51,923 | $62,649 | $49,308 |

Part AP | from age 68 | from age 69 | from age 68 | from age 69 |

Age 67 | $69,567 | $53,294 | $66,245 | $50,617 |

Part AP | from age 70 | from age 71 | from age 70 | from age 71 |

Age 70 | $76,760 | $55,762 | $73,721 | $52,879 |

Part AP | from age 73 | from age 74 | from age 73 | from age 74 |

**Tax may be payable on income when retiring before the age of 60, and the figures for age 56, assume your preservation age for accessing super is 56 years or younger.*

*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, for example at age 56, 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 has 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 3%*, if you retire today at age 56 with **$1 million** in super, as a couple, your savings can deliver you:

- A retirement income of
**$53,420**(indexed) a year until the age of 87 (which includes a PART Age Pension from the age of 67). **$46,589**(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 2%,* if you retire today at age 56 with **$1 million** in super, as a couple, your savings can deliver you:

- A retirement income of
**$49,682**(indexed) a year until the age of 87 (which includes a PART Age Pension from the age of 67). **$44,187**(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, for example age 61, 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 3%*, if you retire today at age 61 with **$1 million** in super, as a couple, your savings can deliver you:

- A retirement income of
**$59,860**(indexed) a year until the age of 87 (which includes a PART Age Pension from the age of 67). **$49,536**(indexed) a year until the age of 100 (including a PART Age Pension from the age of 67).

*Assuming your retirement savings are invested at 2%,* if you retire today at age 61 with **$1 million** in super, as a couple, your savings can deliver you:

- A retirement income of
**$56,802**(indexed) a year until the age of 87 (which includes a PART Age Pension from the age of 67). **$47,043**(indexed) a year until the age of 100 (including a PART Age Pension from the age of 67).

### Couple – retiring at age 65

*Assuming your retirement savings are invested at 3%,* 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
**$65,853**(indexed) a year until the age of 87 (which includes a PART Age Pension from the age of 68) - an annual income of
**$51,923**(indexed) a year until the age of 100 (which includes a PART Age Pension from the age of 69)

*Assuming your retirement savings are invested at 2%,* 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
**$62,649**(indexed) a year until the age of 87 (which includes a PART Age Pension from the age of 68) **$49,308**(indexed) a year until the age of 100 (which includes a PART Age Pension from the age of 69).

### Couple – retiring at age 67

*Assuming your retirement savings are invested at 3%,* 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
**$69,567**(indexed) a year until the age of 87 (which includes a PART Age Pension from the age of 70) **$53,294**(indexed) a year until the age of 100 (which includes a PART Age Pension from the age of 72).

*Assuming your retirement savings are invested at 2%,* 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
**$66,245**(indexed) a year until the age of 87 (which includes a PART Age Pension from the age of 70) **$50,617**(indexed) a year until the age of 100 (which includes a PART Age Pension from the age of 71).

### Couple – retiring at age 70

*Assuming your retirement savings are invested at 3%,* 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
**$76,760**(indexed) a year until the age of 87 (which includes a PART Age Pension from the age of 73) - an annual income of
**$55,762**(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 2%,* 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
**$73,321**(indexed) a year until the age of 87 (which includes a PART Age Pension from the age of 73) **$52,879**(indexed) a year until the age of 100 (which includes a PART Age Pension from the age of 74).

**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 **For those readers expecting much higher investment returns in retirement (that is 5% or 7% a year), see *SuperGuide* article Crunching the numbers: a $1 million retirement (7% and 5% returns)*. *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 (current minimum age for accessing super)
- Single person – retiring at age 61
- Single person – retiring at age 65
- Single person – retiring at age 67
- Single person – retiring at age 70

**TIP:** You can also use our *SuperGuide* Retirement Reckoner to compare the annual retirement income (indexed) amounts listed in the table below. The Reckoner allows you to click on different retirement ages (age 56 or 61 or 65 or 67 or 70), different rates of investment returns (2%, 3%, 5% or 7%) and different life expectancies (until 87 or until 100), to compare the level of retirement income you can expect. Click here to find out more about the *SuperGuide* Retirement Reckoner Introducing SuperGuide’s Retirement Reckoner.

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

Investment return during retirement | 3% return on savings | 2% return on savings | ||
---|---|---|---|---|

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

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

Age 56* | $42,074 | $34,417 | $39,196 | $31,492 |

Part AP | from age 68 | from age 70 | from age 67 | From age 69 |

Age 61 | $47,274 | $36,815 | $44,127 | $34,476 |

Part AP | from age 71 | from age 77 | from age 71 | from age 73 |

Age 65 | $53,134 | $39,355 | $49,745 | $36,898 |

Part AP | from age 74 | from age 77 | from age 74 | from age 76 |

Age 67 | $56,935 | $40,700 | $53,477 | $38,091 |

Part AP | from age 76 | from age 79 | from age 75 | from age 78 |

Age 70 | $64,327 | $43,144 | $60,695 | $40,395 |

Part AP | from age 78 | from age 81 | from age 77 | from age 80 |

**Tax may be payable on income when retiring before the age of 60, and the figures for age 56, assume your preservation age for accessing super is 56 years or younger.*

*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, for example at age 56, 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 has increased 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 3%,* if you retire at age 56 with **$1 million **in super, as a single person, your savings can deliver you:

- A retirement income of
**$42,074**(indexed) a year until the age of 87 (which includes a PART Age Pension from the age of 68). - A retirement income of
**$34,417**(indexed) a year until the age of 100 (which includes a PART Age Pension from the age of 70).

*Assuming your retirement savings are invested at 2%,* if you retire at age 56 with **$1 million **in super, as a single person, your savings can deliver you:

- A retirement income of
**$39,196**(indexed) a year until the age of 87 (which includes a PART Age Pension from the age of 67). - A retirement income of
**$31,492**(indexed) a year until the age of 100 (which includes a PART Age Pension from the age of 69).

### Single person – retiring at age 61

If you retire before the age of 65 but after the age of 60, for example at age 61, 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 3%,* 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
**$47,274**(indexed) a year until the age of 87 (which includes a PART Age Pension from the age of 71). **$36,815**(indexed) a year until the age of 100 (which includes a PART Age Pension entitlement from the age of 74).

*Assuming your retirement savings are invested at 2%*, 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
**$44,127**(indexed) a year until the age of 87 (which includes a PART Age Pension from the age of 71). **$34,476**(indexed) a year until the age of 100 (which includes a PART Age Pension entitlement from the age of 73).

### Single person – retiring at age 65

*Assuming your retirement savings are invested at 3%,* 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
**$53,134**(indexed) a year until the age of 87 (which includes a PART Age Pension from the age of 74). **$39,355**(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 2%*, 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
**$49,745**(indexed) a year until the age of 87 (which includes a PART Age Pension from the age of 74). **$36,898**(indexed) a year until the age of 100 which includes a PART Age Pension from the age of 76).

### Single person – retiring at age 67

*Assuming your retirement savings are invested at 3%,* 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
**$56,935**(indexed) a year until the age of 87 (which includes a PART Age Pension from the age of 76). **$40,700**(indexed) a year until the age of 100 (which includes a PART Age Pension entitlement from the age of 79).

*Assuming your retirement savings are invested at 2%*, 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
**$53,447**(indexed) a year until the age of 87 (which includes a PART Age Pension from the age of 75). **$38,091**(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 70

*Assuming your retirement savings are invested at 3%,* 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
**$64,327**(indexed) a year until the age of 87 (which includes a PART Age Pension from the age of 78). **$43,144**(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 2%*, 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
**$60,695**(indexed) a year until the age of 87 (which includes a PART Age Pension from the age of 78). **$40,395**(indexed) a year until the age of 100 which includes a PART Age Pension from the age of 80).

**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 million retirement but plan to generate higher returns of 5% or 7% (see *SuperGuide* article Crunching the numbers: a $1 million retirement (7% and 5% returns)). For those aspiring 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

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 3 per cent after fees and taxes (that is, re-invested), investment returns are 3 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 3% or 3% 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, 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.

Glenda Sladen says

It is wonderful to see this calculation using more modest returns. Thank you, Trish!! The only thing I would like further would be to see how much of the yearly income was generated by the superfund and how much was from the part age pension – in other words, how much of this is part age pension (because some of us are not entitled to it at all).

Another important point to note is that under this scenario, the kids don’t inherit anything (apart from the family home).

Glenn says

what about the scenario of taking just the minimum 5% of fund balance each year (or adjusted per the ‘rules’ at various ages)

I find that the 5% is actually too much money at the moment, for my pension lifestyle and am able to save the excess…… or possibly put it back into a Super Fund if the Libs changes are made (no work test)