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If you have always earned a high income and enjoyed the lifestyle that comes with it, chances are you want to continue living in the style to which you have become accustomed once you retire.
The widely-reported ASFA Retirement standard suggests couples can enjoy a ‘comfortable lifestyle’ on around $62,000 a year while singles can do the same on around $44,000. If that sounds less than comfortable to you, perhaps an income of $100,000 a year is closer to the mark.
The next step is to work out how much super you need to retire on $100,000.
Crunching the numbers
The tables below show how much super a couple or a single person would need to provide annual income of $100,000. Using MoneySmart’s Retirement Planner we have calculated various scenarios for each, depending on how long you want your money to last and the average annual return on your super investments, net of all fees.
As you can see, we also look at outcomes based on whether or not you will become eligible for the Age Pension at some point as your savings 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, but rising to 66 years and 6 months from 1 July 2021). All figures are in today’s dollars (adjusted for inflation), assuming an average annual 2.5% rise in the cost of living and an additional 1.5% 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.
Where to go for more
We hope that the figures in the tables below will get you thinking.
Couple – Super retirement balance needed to provide an annual retirement income of $100,000
| Years super lasts | Eligible for Age Pension? | 2% | 3% | 4% | 5% | 6% | 7% |
|---|---|---|---|---|---|---|---|
| 25 years | Yes | $2,960,000 | $2,650,000 | $2,370,000 | $2,120,000 | $1,900,000 | $1,700,000 |
| 25 years | No | $3,424,000 | $2,980,000 | $2,640,000 | $2,340,000 | $2,080,000 | $1,880,000 |
| 30 years | Yes | $4,060,000 | $3,260,000 | $2,860,000 | $2,520,000 | $2,220,000 | $1,960,000 |
| 30 years | No | $4,840,000 | $4,040,000 | $3,150,000 | $2,760,000 | $2,400,000 | $2,100,000 |
| 35 years | Yes | $5,780,000 | $4,860,000 | $3,600,000 | $2,900,000 | $2,520,000 | $2,180,000 |
| 35 years | No | $6,660,000 | $5,800,000 | $4,640,000 | $3,180,000 | $2,720,000 | $2,320,000 |
Single – Super retirement balance needed to provide an annual retirement income of $100,000
| Years super lasts | Eligible for Age Pension? | 2% | 3% | 4% | 5% | 6% | 7% |
|---|---|---|---|---|---|---|---|
| 25 years | Yes | $3,860,000 | $3,530,000 | $3,140,000 | $1,740,000 | $2,290,000 | $1,900,000 |
| 25 years | No | $4,080,000 | $3,740,000 | $3,350,000 | $2,930,000 | $2,450,000 | $2,000,000 |
| 30 years | Yes | More than $5m | $4,960,000 | $4,520,000 | $3,980,000 | $3,330,000 | $2,590,000 |
| 30 years | No | More than $5m | More than $5m | $4,760,000 | $4,230,000 | $3,570,000 | $2,790,000 |
| 35 years | Yes | More than $5m | More than $5m | More than $5m | More than $5m | $4,920,000 | $3,950,000 |
| 35 years | No | More than $5m | More than $5m | More than $5m | More than $5m | More than $5m | $4,260,000 |
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