It’s fair to assume that the average Australian might hope to live comfortably, if not lavishly, in retirement.
The widely reported ASFA Retirement standard suggests a single person can enjoy a ‘comfortable lifestyle’ on around $44,000 a year, so it stands to reason they should be able to live more than comfortably on $50,000. For couples, $50,000 a year affords a lifestyle that allows for more spending than ASFA’s ‘modest’ budget of around $40,000 a year but not quite up to the ‘comfortable’ standard of around $62,000.
If $50,000 a year sounds like your kind of retirement, the next step is to work out how much super you will need to fund it.
Crunching the numbers
The tables below show the super balance required to provide a couple or a single person with annual income of $50,000. Using MoneySmart’s Retirement Planner we’ve calculated various scenarios, depending on how long you want your money to last and the average annual return on your super investments, net of all fees.
We also look at outcomes based on whether or not you will become eligible for the Age Pension at some point as your savings are run down.
For simplicity, we have not counted savings and investments held outside super. If you have significant outside savings, you will need less super. We also assume you own your home.
The results are based on someone retiring at 67 but apply to anyone who is over Age Pension age (currently 66 years). All figures are in today’s dollars (adjusted for inflation), assuming an average annual 2% rise in the cost of living and an additional 1.2% rise in living standards per year.
Transfer balance cap
Also keep in mind that there is a $1.6 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.
The $1.6 million cap applies to individuals, which means a couple could have up to $3.2 million in individual accounts. However, if a couple has one account between them in a single name, the $1.6 million limit applies.
For more detail, go to SuperGuide’s Definitive guide to the $1.6 million transfer balance cap.
Where to go for more
For more information on the factors to consider when planning your retirement income needs, refer to the SuperGuide article How much super do I need to retire?
We hope that the figures in the tables below will get you thinking. The data in these tables is a small selection of possible outcomes. To plug in your own numbers, check out SuperGuide’s Income from super Reckoner which has nearly 9,000 options.
Disclaimer
This article is only intended to give approximate figures about the range of superannuation required to fund a retirement income of approximately $50,000 per year. These figures do not take into account any of your personal circumstances and are also based on projections about future investment returns which may not be achieved. We recommend that you undertake additional research for your own retirement planning, and wherever possible seek independent financial advice.
Couple – Super retirement balance needed to provide annual retirement income of $50,000
| How long super to last? | Eligible for Age Pension? | Net returns (per year) | |||||
|---|---|---|---|---|---|---|---|
| 2% | 3% | 4% | 5% | 6% | 7% | ||
| 25 Years | Yes | $420,000 | $370,000 | $330,000 | $290,000 | $260,000 | $240,000 |
| No | $1,530,000 | $1,360,000 | $1,200,000 | $1,070,000 | $960,000 | $860,000 | |
| 30 Years | Yes | $570,000 | $460,000 | $390,000 | $330,000 | $290,000 | $260,000 |
| No | $2,030,000 | $1,640,000 | $1,420,000 | $1,230,000 | $1,080,000 | $950,000 | |
| 35 Years | Yes | $920,000 | $620,000 | $460,000 | $380,000 | $330,000 | $280,000 |
| No | $2,720,000 | $2,280,000 | $1,690,000 | $1,410,000 | $1,200,000 | $1,030,000 | |
Single – Super retirement balance needed to provide annual retirement income of $50,000
| How long super to last? | Eligible for Age Pension? | Net returns (per year) | |||||
|---|---|---|---|---|---|---|---|
| 2% | 3% | 4% | 5% | 6% | 7% | ||
| 25 Years | Yes | $1,200,000 | $1,060,000 | $940,000 | $830,000 | $740,000 | $650,000 |
| No | $1,530,000 | $1,360,000 | $1,200,000 | $1,070,000 | $960,000 | $860,000 | |
| 30 Years | Yes | $1,490,000 | $1,320,000 | $1,160,000 | $1,020,000 | $900,000 | $790,000 |
| No | $2,030,000 | $1,640,000 | $1,420,000 | $1,230,000 | $1,080,000 | $950,000 | |
| 35 Years | Yes | $1,980,000 | $1,550,000 | $1,370,000 | $1,190,000 | $1,030,000 | $900,000 |
| No | $2,720,000 | $2,290,000 | $1,690,000 | $1,410,000 | $1,200,000 | $1,030,000 | |
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.
- Inflation costs are a 2% rise per year in cost of living plus an 1.2% additional rise per year in living standards
- You retire after you reach Age Pension age
- All returns are net of fees
- Results are in today’s dollars
- We recommend you also review the assumptions that MoneySmart list below their calculator