Good news! You don’t need to be a millionaire to retire comfortably

For a number of years now, a fearsome myth in the press has existed, which suggested that retirees would need at least $1 million in super to retire in comfort. And it still gets re-hashed from time to time, thanks to the big numbers involved and fact that, based on stats from the Australian Association of Superannuation Funds of Australia (ASFA), Australian’s retire with an average super balance of only around $359,870 for men and $289,180 for women¹.

In fact, a survey of 10,000 people in 2021 by News Ltd revealed that almost a half believed they’ll need more than $750,000 individually in super, and almost a third predicted they’ll need a million². This is still a popular misconception, but the good news is, for most people the figure of one million is excessive.

It’s also easy to get a personalised estimate of the super balance you’re likely to need, thanks to Prime Super’s easy-to-use retirement needs calculator.

Powered by up-to-date data, and capable of responding to your own unique circumstances and retirement ambitions, the calculator can provide an assessment of how much super you should aim to have when you make the move from building it up, to drawing it down.

So how much super do you need for a comfortable retirement?

The ASFA regularly releases its “ASFA Comfortable Standard” estimate, and for the March quarter of 2022³, it recommends that, to ensure a comfortable lifestyle in health, vitality and social connection, a single retiree aged between 65 and 85 would need a pension income of at least $46,494 per year, while a couple can live well on $65,445. At current levels this would equate to retiring with a super balance of around $573,000 for an individual and a combined $806,000 for a couple.

Of course, ‘comfort’ means different things to different people, but the ASFA’s estimate does include essentials such as fresh food and weekly groceries, transport and vehicle-ownership costs, utilities and insurance, health insurance, medical bills, keeping fit, heading to the movies, and going on daytrips, as well as a few luxuries such as flying interstate and overseas every now and then.

However, one very big assumption that the figures rely on, is that you’ll own your own home (and be relatively debt-free) by the time you retire.

Other considerations

As mentioned, every retiree is different. One person’s ‘ideal retirement’ is sitting on their little fishing boat dangling a line over the edge, while for others, ‘ideal’ is nothing less than an overseas holiday every year.

There are also differences in financial circumstances now and in retirement. Many eligible retirees combine their superannuation income with the age pension, reducing the drain on their own super. Others choose to transition to retirement, allowing them to combine the benefits of a regular salary and a super pension income for a short while.

Finally, while you are working, there are some additional strategies you can put in place now to help boost your super account balance at retirement, including salary sacrificing, and making voluntary lump-sum contributions. And while it might seem inconvenient now, having an end goal and a realistic target sum to aim for, can put everything into perspective.

So, check out Prime Super’s retirement needs calculator, and forget the $1 million myth once and for all.

This article is current at the date of publication and is subject to change. The dollars expressed in this article is in today’s dollar or current at the time it was sourced. It contains general information and does not take account of your specific objectives, financial situation or needs or personal circumstances. You should seek professional financial advice, consider your own circumstances and read our Product Disclosure Statement (PDS) before making a decision about Prime Super. For a PDS and Target Market Determination call 1800 675 839 or visit the primesuper.com.au/pds. Prime Super Pty Ltd ABN 81 067 241 016 AFSL 219723 RSE L0000277 (Trustee), Prime Super ABN 60 562 335 823 RN 1000276.

[1] Better Retirement Outcomes – a snapshot of account balances in Australia

[2] https://www.news.com.au/finance/money/costs/almost-one-third-of-aussies-believe-theyll-need-more-than-1-million-to-retire/news-story/9a708c3c5e5f41c54770318742551aee

[3] https://www.superannuation.asn.au/resources/retirement-standard