How Much Superannuation Do I Need For Retirement?
Written by: Jayden Scott | Advisory Team
When planning for retirement, one of the most important questions you’ll face is…
“How much superannuation do I need?”
Superannuation plays a crucial role in helping you achieve financial independence in retirement, providing a dedicated, tax-effective savings vehicle that grows throughout your working life from a combination of contributions and investment returns.
What Is Superannuation?
Upon retirement, you can use your superannuation balance that you have accumulated over your working life to draw down regular, tax-effective pension payments to help fund your retirement.
Unfortunately, there is no one-size-fits-all, and how much you need in superannuation to retire is dependent on various factors, such as your desired lifestyle throughout retirement, your retirement age, your health status and life expectancy, your tolerance towards investment risk, what type of Aged Care you desire later in retirement, plus what assets you own outside of superannuation. In this blog, we will delve into this a little deeper to help you navigate and understand how much you may need in superannuation to fund your retirement.
The Association of Superannuation Funds of Australia Guidelines
The Association of Superannuation Funds of Australia (ASFA) provides guidance on how much superannuation you may need to retire based on whether you are a couple or a single, and whether you want to live a “comfortable” or “modest” lifestyle in retirement.
Referring to ASFA’s website can be a good starting point to try and understand how much superannuation you may need in retirement. ASFA releases updated reports each quarter, reflecting changes to CPI and updating the figures in the report accordingly. These reports also provide a detailed breakdown of the budget used to calculate the figures provided and outline all expenditure items individually.
As of February 2025, ASFA’s guidelines indicate that a couple retiring at age 67 and aiming for a “comfortable” lifestyle would need a combined super balance of $690,000, while a single retiree would need $595,000. For a “modest” lifestyle, both couples and singles would need $100,000. However, these figures should be seen as general guidelines only, as your individual circumstances and retirement goals will influence the amount you need.
Assessing Your Personal Circumstances When Considering Retirement
Your desired lifestyle in retirement is one of the most significant factors, so it is important to firstly work out how much you will be realistically spending per week/month/year during retirement.
Will you want to take regular holidays, eat out at restaurants often, or purchase new cars, caravans, and boats through retirement? Or are you happy living a minimalist lifestyle where you only require income to fund a basic cost of living? Or do you sit somewhere in the middle?
What age you retire also plays an important role, as this will affect how long your super balance needs to last.
If you would like to retire at age 60, for example, then you will need your superannuation to last longer during retirement than if you retired at age 70. Therefore, you would require a higher starting balance to fund those additional years in retirement. Furthermore, it is also important to factor in that the minimum age you can apply for the government Age Pension is age 67. Therefore, if you want to retire at age 60, you will be required to be entirely self-funded for at least the first seven years of your retirement, requiring you to draw more income from your own financial resources, which can then reduce the longevity of your superannuation if you don’t have sufficient financial resources to fund this.
Risk Tolerance + Life Expectancy When Considering Retirement
On the other hand, how long you are expected to live also plays a role.
While it’s often hard to predict how long you will live, it’s important to give it some thought and consider your personal health, your family’s health history, and your statistical life expectancy based on your current age. This can give you an idea of how long you may require your superannuation to last.
Your risk tolerance when it comes to investing your superannuation also plays an important role. This is because the level of investment risk you’re willing to take during retirement often correlates with the investment returns you will receive, which then affects how long your superannuation balance will last. If you’re a conservative investor and don’t want to take much investment risk throughout retirement, then it’s likely that you will require a higher starting balance in retirement as you will be earning lower investment returns over the long term, resulting in your superannuation depleting at a faster rate while you draw down on your balance. In comparison, someone who takes on more investment risk may earn higher returns over the long term, allowing them to draw a larger portion of their retirement income from those funds, and less from their existing balance, helping their superannuation last longer.
It’s also important to consider other assets and/or income you may be receiving during retirement. For some people, you may have other sources of income that will help you fund your retirement and reduce your reliance on your superannuation. For example:
- You may own an investment property that is providing rental income.
- You may have a direct share portfolio outside of super providing dividends.
- You may have an annuity or defined benefit lifetime pension that will provide you with income throughout retirement.
- You may only partially retire and continue to work one or two days a week during retirement.
- Or you may become eligible to receive some Age Pension from age 67 or sometime thereafter.
All this income reduces the amount of income you are required to draw from superannuation to fund your retirement, hence reducing the superannuation balance you require.
Other factors are also relevant and can make a big difference to how much superannuation you need to retire. For example, while you shouldn’t rely heavily on the expectation of receiving a future inheritance, it may be a relevant factor. Furthermore, you should consider what medical care or Aged Care you may require in the later years of your retirement and try to understand how much this may cost.
Maximising Superannuation In The Lead Up To Retirement
If you feel like your superannuation balance isn’t as high as what you want it to be leading into retirement, there are some things that you can be actively doing now to help with this.
First and foremost, the obvious thing that you can do is make additional contributions to superannuation on top of what your employer is contributing. There are multiple ways you can make additional contributions to super. This can include:
- Setting up a salary sacrifice arrangement with your employer.
- Making additional non-concessional or personal contributions to super from your post-tax income.
- You may also be able to utilise other contribution types, such as the downsizer contribution, the lifetime CGT cap contribution after the sale of a small business, or a spouse contribution, to name a few.
- It’s important to be mindful of other rules that can go in your favour and allow you to contribute more to superannuation, such as carrying forward unused concessional contributions from previous financial years and utilising the bring-forward rule with non-concessional contributions.
All the contribution types mentioned above have their own unique rules and eligibility criteria, so it is extremely important to do your research before making any of these types of contributions. It is also very important to be mindful of contribution caps, as exceeding these contribution caps can have significant consequences.
Other things you can be doing are reviewing your investments inside your fund, and looking at any insurance that you may have. By doing this, you can see if there are some tweaks you can make to your superannuation that will help you maximise your superannuation balance. For example, you may be able to save on fees by moving super funds.
Canny Advisory + Your Retirement Plan
With Australia’s complex and forever-changing superannuation and social security environment, retirement planning can sometimes feel like an overwhelming task to face.
Particularly when the cost of getting something wrong, or the cost of inaction, can have such a significant impact on your retirement, it pays to receive professional advice. At Canny Advisory, we are experts in retirement planning and help a wide range of people transition into retirement every day. We can help you come up with a clear and actionable plan to ensure that you’re doing the most you can to be able to retire when you want, and how you want!
Get in touch with our team to start your retirement planning on the right foot!
