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What's the price of a happy retirement?

Published 1 June 2016

To retire without financial stress, you need to get real with your sums.

Leading industry research firm, Rice Warner, says $1m-plus is the “magic” figure for a comfortable retirement, despite official recommendations of $545,000.

But in trying to work out exactly how much superannuation savings you need to retire comfortably, we need to start with a simple understanding of why we save it at all.

"Super is intended to provide for a more comfortable retirement. It's not, as many think, all about retiring early and living the life of the rich and famous – of course that's great, but for most it's unrealistic," says The Association of Superannuation Funds of Australia (ASFA) CEO, Pauline Vamos.

ASFA produces a series of benchmark figures to help the super funds industry and their clients - that's you - work out their retirement income needs.

It calculates that as of March 2016 a couple will need an income of $58,922 every year to support a comfortable retirement lifestyle that includes some travel, eating out and running a car. For single people, the figure equates to an annual income of $42,893.

ASFA notes that in order to achieve a comfortable standard of living in retirement, an individual requires a minimum balance of around $545,000 and a couple around $645,000 in their super (assuming that the money lasts for about 20 years). 

Currently, less than 20 per cent of single people and 30 per cent of couples (aged over 65) are able to reach this standard of living.

Funds needed for retirement lifestyles*

Funds needed for retirement lifestyles: single
Single Lifestyle Superannuation savings Yearly budget











Funds needed for retirement lifestyles: couple
Couple Lifestyle Superannuation savings Yearly budget











*The figures in each case assume that the retiree(s) own their own home and relate to expenditure by the household. This can be greater than household income after income tax, where there is a drawdown on capital over the period of retirement. Single calculations are based on female figures. All calculations are weekly, unless otherwise stated. Source: Definitions and figures of ‘modest’ and ‘comfortable’ from ASFA Retirement Standard 2015.

The $1 million figure recommended by Rice Warner assumes a higher standard of living in retirement without recourse to the age pension.



These figures assume retirement at 65, account for inflation and access to the age pension based on the means test for the age pension, effective 1 January 2017. Many of us will live longer than our average life expectancy so you shouldn't plan for your super to run out at a specific time. You need the comfort of having money in reserve. 

According to 2013 figures from the Australian Bureau of Statistics, most people's super runs out long before their mid-eighties, with 66 per cent of retirees totally reliant on the age pension.

ABS research also shows the average retirement age is actually well short of 65, coming in at 58.5 years old for men and exactly 50 for women.

Then there's the question of what you personally want in retirement. You may expect more than the ASFA's assessment of a “comfortable” retirement lifestyle, or you may think you could manage on less. 

The association does provide income figures for a lower scale “modest” retirement lifestyle: a yearly income of $34,064 for a couple and just $23,651 for singles.

The modest lifestyle is frugal compared to earning a full-time salary, with super basically topping up the current age pension a little. At this amount, there won’t be much for eating out or travelling – something most Australians want to do in retirement.

Nathan Bonarius, a senior consultant at superannuation research firm, Rice Warner, thinks younger people will have to aim higher with their super.

“If you're 30 years off retirement there's considerable policy change risk around the age pension and life expectancy will likely increase to over 90 years old," he warns.

Add those concerns to the assumptions in the ASFA benchmark retirement sums that you won’t be paying rent or a mortgage at 65, which Bonarius says "may no longer be the case with today's higher property prices” – and tacking on a few more hundred thousand dollars to the ideal super figure makes more sense.

He adds, “The ASFA standard will be sufficient for the majority of retirees, however for those expecting a higher standard of living in retirement without recourse to the age pension, something over that magic $1 million figure would be needed to fund that lifestyle in the decades ahead."

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