How Much Should I Have in My Super by Age?

Superannuation is Australia’s dedicated system for retirement savings. Employers contribute a portion of an employee’s earnings into a superannuation fund throughout their working life. Building a substantial superannuation balance is an important step towards achieving independence and maintaining a desired lifestyle in later life.

Understanding Superannuation Benchmarks

The Association of Superannuation Funds of Australia (ASFA) provides widely recognized benchmarks for retirement savings, categorizing them into “modest” and “comfortable” lifestyles. A modest retirement covers basic expenses, while a comfortable retirement allows for a broader range of activities and discretionary spending. These benchmarks assume individuals own their homes outright and may receive a part Age Pension.

For a comfortable retirement at age 67, ASFA suggests a single person needs an annual income of approximately $52,383, while a couple would require $73,875 per year. To achieve these income levels, the recommended lump sum superannuation balances at retirement are $595,000 for a single person and $690,000 for a couple. A modest retirement, by comparison, requires an annual income of $33,386 for singles and $48,184 for couples, necessitating a superannuation balance of around $100,000 for both singles and couples.

Average superannuation balances across different age groups in Australia can also serve as a general reference point. For individuals aged 25-34, average balances were approximately $42,100 for men and $34,500 for women. Moving into the 35-44 age bracket, these averages increase to about $107,700 for men and $76,900 for women. The gap between genders often reflects factors such as career breaks for caring responsibilities.

For those nearing retirement, average balances for the 55-59 age group were around $301,922 for men and $228,259 for women. In the 60-64 age group, averages stood at approximately $380,737 for men and $300,717 for women. It is important to remember that these average figures reflect what people currently have, not necessarily what is needed for a comfortable retirement.

Personalizing Your Superannuation Goal

While general benchmarks offer a useful starting point, tailoring your superannuation goal to your unique circumstances is essential for effective retirement planning. Your desired retirement lifestyle significantly influences the amount of superannuation you will need. A comfortable lifestyle, as defined by ASFA, includes private health insurance, a reliable car, regular leisure activities, and annual domestic trips, with occasional overseas travel. A modest lifestyle, in contrast, covers basic health insurance, an older car, and infrequent entertainment.

The age at which you plan to retire plays a role in determining your superannuation goal. Retiring earlier than Australia’s current pension age of 67 means your superannuation funds will need to support you for a longer period. Conversely, delaying retirement allows more time for your superannuation to grow through contributions and investment earnings.

Other potential income sources modify your personal superannuation target. The Australian Age Pension provides government support for eligible retirees, and can reduce reliance on superannuation. Additionally, any personal investments held outside your superannuation fund, such as property or shares, can contribute to your retirement income. Factoring these into your financial picture refines the superannuation balance you need.

Considering your health and projected life expectancy is important for personalizing your retirement plan. Anticipated healthcare costs can be a significant expense in later life. Longer life expectancies mean your savings must stretch further. These considerations help ensure your funds are sufficient for your entire retirement.

Inflation and assumed investment returns influence the real value of your superannuation. Inflation erodes purchasing power. Investment returns help your savings grow and counteract the effects of inflation. ASFA’s retirement estimates, for instance, are presented in today’s dollars and assume an average annual investment earning rate of 6 percent.

To estimate your personalized superannuation goal, project your desired annual retirement expenses. Subtract any expected income from sources like the Age Pension or other investments to determine the income your superannuation needs to cover. Then, work backward from this annual income requirement, considering your planned retirement age, life expectancy, and a realistic investment return rate, to calculate the lump sum balance needed at retirement. Many financial tools and calculators are available to assist with this estimation.

Strategies for Growing Your Superannuation

Various strategies can help individuals increase their retirement savings. Compulsory employer contributions, known as the Super Guarantee (SG), are a foundation of superannuation. Employers are required to pay a percentage of an employee’s ordinary time earnings into their super fund. This rate is 12%, typically paid at least quarterly.

Individuals can also make voluntary personal contributions to their superannuation. Concessional contributions are those made before tax, including employer SG payments, salary sacrifice arrangements, or personal tax-deductible contributions. They are taxed at a concessional rate of 15% within the super fund. The annual concessional contributions cap is $30,000. Individuals may also be able to carry forward unused concessional cap amounts from previous financial years.

Non-concessional contributions are made from after-tax income and include personal non-tax-deductible contributions, as well as spouse contributions. They are not taxed by the super fund as tax has already been paid. The annual non-concessional contributions cap is $120,000. Individuals may also be able to utilize a “bring-forward” arrangement, allowing them to make up to three years’ worth of non-concessional contributions in a single year.

Spouse contributions allow an individual to contribute to their spouse’s superannuation account to boost a couple’s combined retirement savings. Another incentive is the government co-contribution, available to low and middle-income earners making personal after-tax contributions. If eligible, the government may contribute 50 cents for every dollar contributed, up to a maximum of $500. Eligibility typically depends on income thresholds.

Reviewing the investment options within your superannuation fund is important. Super funds typically offer a range of investment strategies, from conservative to high-growth, allowing members to choose options aligning with their risk tolerance and time horizon. Ensuring your super is invested appropriately can significantly impact long-term growth. Consolidating multiple superannuation accounts into one can offer substantial benefits. Many accumulate several accounts from changing jobs, leading to duplicate fees and administrative complexity.

Consolidating into a single account can reduce fees, simplify management, provide a clearer view of your overall investment strategy, and help avoid lost superannuation. Before consolidating, it is advisable to check if you have any insurance coverage attached to your existing accounts that you might lose. The Australian Taxation Office (ATO) provides an online service via myGov to help individuals find and consolidate their superannuation.