Here’s how much money you REALLY need to retire

Experts have revealed the exact amount of superannuation you must have in your savings at what age in order to live a comfortable retirement.

They say a couple needs $640,000 in super savings at retirement, while singles need $545,000, assuming they use up all their retirement fund and receive a part age pension.

The figures are based on a couple or single person having no mortgage or rent to pay for.

A comfortable life is defined as one that allows a healthy retiree to enjoy leisure activities, buy household goods, private health insurance, a reasonable car, good clothes, electronic equipment and travel.

So, how do you know if you’re on the right track?

Well, according to Australia’s peak superannuation industry body, a 25-year-old average worker needs only $17,000 in their super today to reach $545,000 by age 67.

A 35-year-old requires $93,000, a 45-year-old should be at $195,000, a 55-year-old should have $330,000 and a 65-year-old — two years from pension age — would require $503,000.

The Association of Superannuation Funds of Australia (ASFA) calculation assumes a future pre-tax wage income of just under $65,000 a year.

ASFA deputy CEO Glen McCrea said the goal was to get as many people to reach what ASFA terms a comfortable standard, but at the moment only a fifth of working age Aussies were reaching that level.

“A comfortable standard means you can go to the pub and have a meal, you can have that cup of coffee, when you’re at retirement age you can buy your grandkids a present, you can get your car fixed,” Mr McCrea said.

“To get there, you’re looking at, for a couple, of balance of around $640,000 or a single person $545,000.

“The reality at the moment is about 20 per cent of people get there.”

The shortfall could stem from a failure by some to contribute high amounts to super during their working life, he said.

But with increases to superannuation guarantee payments employers must make to workers under law, the gap would reduce, Mr McCrea said.

From July 2021, the regular compulsory contributions employers made to their employees’ account, rose from 9.5 per cent to 10 per cent of their wage, affecting about eight million mainly private sector workers.

This would increase to 10.5 per cent on July 1 and would reach 12 per cent in 2025-26, in line with current law.

“We estimate by going to 12 per cent in a couple of years time, by 2050 you get 50 per cent of the population there (to the comfortable standard),” Mr McCrea said.

“There is hope and super is a long term prospects, so there really is hope for people getting higher super balances to get more dignity in retirement as they get older.”

Mr McCrea said during the pandemic, many people withdrew from their super to deal with financial challenges but had not replenished the funds when they could.

And with the rising cost of living, people may feel now was not a good time to make extra payments to secure their nest egg.

“Things are tough at the moment, but when you may have that extra pay cheque or that little bonus or been working a few extra shifts, see if you can chip it back into super because every dollar certainly counts as you head towards retirement,” he said.

“The good thing about superannuation is it is compulsory and often you don’t notice it’s going in there and then over many years, it slowly compounds away and gives you a good balance.

“Obviously when things are tough, like now, there may not be the capacity for people to contribute, because the cost of living is going through the roof.

“However, in five or ten years time, let’s assume the economy’s looking better, inflation is under control, that could be a good time, where if you’re behind a little bit, to try and catch up.

“So keep engaging with your super, look at your balance, talk to your fund and look for those opportunities to contribute when you can.

“Get familiar with it and try to understand, ‘Am I on track’?

“If people are contributing 12 per cent for most of their life, they should get to a comfortable level.”