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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 private 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.
Note: The cap is currently set at $1.6 million but will be indexed for inflation in $100,000 increments. For all the details, see SuperGuide article 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.
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We also encourage you to try out MoneySmart’s Retirement Planner calculator with your projected super balance, retirement age, length of retirement and estimated investment returns. The calculator also allows you to enter outside savings and investments.
Disclaimer
This article is only intended to give approximate figures about the range of superannuation required to fund retirement income of approximately $100,000 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 your own additional research for your own retirement planning, and wherever possible seek independent financial advice.
Couple – Super retirement balance needed to provide an annual retirement income of $100,000
|
How long super to last? |
Eligible for Age Pension? |
Net returns (per year) |
|||||
|---|---|---|---|---|---|---|---|
|
2% |
3% |
4% |
5% |
6% |
7% |
||
|
25 Years |
Yes | $3,080,000 | $2,750,000 | $2,400,000 | $2,050,000 | $1,760,000 | $1,570,000 |
| No | $3,590,000 | $3,260,000 | $2,870,000 | $2,460,000 | $2,050,000 | $1,740,000 | |
|
30 Years |
Yes | $4,230,000 | $3,850,000 | $3,360,000 | $2,830,000 | $2,280,000 | $1,840,000 |
| No | $4,800,000 | $4,420,000 | $3,960,000 | $3,400,000 | $2,750,000 | $2,100,000 | |
|
35 Years |
Yes | Over $5m | Over $5m | $4,680,000 | $4,020,000 | $3,200,000 | $2,320,000 |
| No | Over $5m | Over $5m | Over $5m | $4,710,000 | $3,910,000 | $2,920,000 | |
Single – Super retirement balance needed to provide an annual retirement income of $100,000
|
How long super to last? |
Eligible for Age Pension? |
Net returns (per year) |
|||||
|---|---|---|---|---|---|---|---|
|
2% |
3% |
4% |
5% |
6% |
7% |
||
|
25 Years |
Yes | $3,410,000 | $3,090,000 | $2,720,000 | $2,320,000 | $1,950,000 | $1,680,000 |
| No | $3,590,000 | $3,260,000 | $2,890,000 | $2,470,000 | $2,050,000 | $1,740,000 | |
|
30 Years |
Yes | $4,600,000 | $4,230,000 | $3,770,000 | $3,240,000 | $2,610,000 | $2,020,000 |
| No | $4,800,000 | $4,420,000 | $3,960,000 | $3,410,000 | $2,760,000 | $2,100,000 | |
|
35 Years |
Yes | Over $5m | Over $5m | Over $5m | $4,460,000 | $3,690,000 | $2,700,000 |
| No | Over $5m | Over $5m | Over $5m | $4,710,000 | $3,910,000 | $2,920,000 | |
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
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