One of the biggest questions asked about super is the balance to aim for. It is difficult to commit to saving without a clear target, so thinking about your income goal and the balance you will need to fund it is a great place to start your retirement planning.
If you’re dreaming of travelling, eating out, driving an up-to-date car and enjoying some shopping during your post-work life, perhaps $100,000 a year aligns with your retirement budget. Research suggests couples need combined income of around 40% more than a single person to achieve the same lifestyle, so $140,000 per year should suit a couple looking to enjoy similar pursuits.
Crunching the numbers
The super balance required to provide a set level of income varies depending on many factors including when you plan to retire, how long you need your money to last, how your super is invested, and whether you have other investments outside super that will provide some of your retirement income.
The tables below show the super balance required to provide annual income of $100,000 for a single or $140,000 for a couple retiring at age 60 or 67.
It is assumed that you apply for and receive the Age Pension as soon as you are eligible, that is, when the value of your assessable income and assets has reduced below the maximum levels permitted under the Age Pension means tests.
We have used TelstraSuper’s Lifetime Income Calculator to model outcomes based on investing the entire balance in an account-based pension, in the investment options shown.
We chose this calculator because it is one of the most comprehensive available, and provides output based on the likelihood of reaching the goal. We have selected the default ‘highly likely’ option and target age of 92, meaning there is an 80% chance the set income will last until this age. In many cases income would last beyond the target but there is a 20% chance, based on the expected variability of investment returns, that the goal would not be reached, with either the balance being reduced to zero before age 92 or providing a smaller income. Once the balance is exhausted, future income is generated from Age Pension alone.
Transfer balance cap
Keep in mind that there is currently a $1.9 million transfer balance cap on the amount of money you can shift into a super pension account. Excess amounts will need to remain in a super accumulation account or outside super, where earnings will be taxed. The interaction of the transfer balance cap with other income and investments can be complex, so we advise you to seek professional advice if you feel this may apply to you.
The transfer balance cap applies to individuals, which means a couple could have up to $3.8 million between them in individual accounts. However, if a couple has one account between them in a single name, the lower individual limit applies.
We have indicated in bold where the required super balance to meet income goals is above the cap.
Where to go for more
We hope that the figures in the tables below will get you thinking about the ballpark you need to aim for, but remember that this data represents a small selection of possible outcomes and cannot substitute for a personalised calculation.
To build a picture of your own circumstances, use a good quality retirement projection tool such as the TelstraSuper Retirement Lifestyle Planner or Mercer Retirement Income Simulator. Make sure you include as much information as possible about your circumstances, including investments outside super, and review and adjust the assumptions including fees to ensure your projection is as meaningful as it can be.
If you are interested in using a lifetime pension to provide some of your retirement income, the TelstraSuper Lifetime Income Calculator is also worth a look.
While we used 80% certainty in our modelling using TelstraSuper’s tool, this is simply the default option. When running your own calculation, you may instead choose 70% certainty, or 90% certainty based on the risk you are willing to accept.
To help you navigate these and other free retirement planning tools, SuperGuide has developed a range of video demonstrations. You can find these how to guides in the calculators section.
Balance required for retirement at age 67 by investment type – 80% certainty
| Status and income target | Conservative (31% growth, 69% defensive) | Moderate (53% growth, 47% defensive) | Balanced (69% growth, 31% defensive) | Growth (83% growth, 17% defensive) |
|---|---|---|---|---|
| Single – $100,000 | $2,010,000 | $1,860,000 | $1,820,000 | $1,790,000 |
| Couple (combined) – $140,000 | $2,780,000 | $2,580,000 | $2,510,000 | $2,460,000 |
Balance required for retirement at age 60 by investment type – 80% certainty
| Status and income target | Conservative (31% growth, 69% defensive) | Moderate (53% growth, 47% defensive) | Balanced (69% growth, 31% defensive) | Growth (83% growth, 17% defensive) |
|---|---|---|---|---|
| Single – $100,000 | $2,500,000 | $2,250,000 | $2,160,000 | $2,120,000 |
| Couple (combined) – $140,000 | $3,350,000 | $3,040,000 | $2,950,000 | $2,900,000 |
Figures that are highlighted in bold type are above the transfer balance cap of $1,900,000 per person. The excess balance must be retained in a superannuation accumulation account or outside super.
Assumptions
- You own your own home and have personal assets of $25,000 or less. These calculations do not allow any investment assets outside super. Note that the amount of investment assets you have can greatly affect the amount of Age Pension you are eligible for.
- You are eligible for the Age Pension (or become eligible as your super balance reduces over time).
- Calculations for couples assume both are the same age and have equal super balances.
- Administration fees of $52 plus 0.16%, capped at $1,652 per year for each person’s account are included in the calculation.
- Results are in today’s dollars. Inflation is modelled as an average of 2.25%, with a standard deviation of 2.25%.
- We recommend you also review the assumptions and other important information about the calculator on TelstraSuper’s website.
- Calculations were made in April 2024.
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