How much super do I need to retire at 55?
Retirement is something that everyone looks forward to. With the right planning, you can be confident that you’ll have enough money saved up for retirement when your golden years roll around. But how much super should you aim to save if you want to retire at 55 in Australia? On top of navigating any changes in the laws and regulations surrounding superannuation accounts, understanding the differences between pre-tax and post-tax contributions and estimating how long your funds will last in retirement – there’s so much more to consider!
In this blog post we explore these topics in detail and provide a comprehensive guide on what’s required to achieve a comfortable retirement lifestyle by age 55 in Australia.
How much super do you need?
The amount of superannuation you will require upon retirement depends on:
- your big costs in retirement, and
- the lifestyle you want
With the increase in life expectancy, a lot of people can anticipate living up to their eighties. As a result, if you retire at the age of 65, you must have enough retirement earnings to sustain at least 20 years of living expenses.
Moneysmart’s website suggests that homeowners will require around 67% of their pre-retirement income to maintain their current standard of living during retirement.
The Association of Superannuation Funds of Australia’s Retirement Standard recommends that in order to have a ‘comfortable’ retirement (at age 67), single individuals should have $595,000 in retirement savings and couples should have $690,000. Use this guide to determine the estimated amount of money required for a ‘comfortable’ or ‘modest’ retirement. Additional information is provided in the box below. The Standard is revised quarterly to account for the increase in prices of necessities like food and utilities, as well as changes in lifestyle expectations and spending patterns. It covers expenses such as healthcare, communication, clothing, transportation, and household items.
Both Super Consumers Australia and Association of Superannuation Funds OF Australia (ASFA) offer information about retirement spending.
The Retirement Savings Targets tool by Super Consumers Australia can assist individuals aged between 55-59 and 65-69 to determine the amount of superannuation they require for their retirement. The tool considers low, medium, and high spending patterns to estimate the required savings. It is assumed that one either owns a home or does not have to pay rent or mortgage.
Savings targets for pre-retirees (aged 55-59)
| If you own your own home when you retire and you live | How much you would like to spend in retirement | How much you need to have saved by 65* |
|---|---|---|
| By yourself | Low $1,308 per fortnight $34,000 per year | $88,000 |
| By yourself | Medium $1,692 per fortnight $44,000 per year | $301,000 |
| By yourself | High $2,115 per fortnight $55,000 per year | $745,000 |
| In a couple | Low $1,846 per fortnight $48,000 per year | $111,000 |
| In a couple | Medium $2,462 per fortnight $64,000 per year | $402,000 |
| In a couple | High $3,115 per fortnight $81,000 per year | $1,003,000 |
*On top of income from the Age Pension
Savings targets for retirees (aged 65-69)
| If you own your own home when you retire and you live | How much you would like to spend in retirement | How much you need to have saved by 65* |
|---|---|---|
| By yourself | Low $1,115 per fortnight $29,000 per year | $73,000 |
| By yourself | Medium $1,462 per fortnight $38,000 per year | $258,000 |
| By yourself | High $1,962 per fortnight $51,000 per year | $743,000 |
| In a couple | Low $1,615 per fortnight $42,000 per year | $95,000 |
| In a couple | Medium $2,154 per fortnight $56,000 per year | $352,000 |
| In a couple | High $2,885 per fortnight $75,000 per year | $1,021,000 |
*On top of income from the Age Pension
Another way for you to learn how much super you need, you can use the Retirement Standard from the Association of Superannuation Funds of Australia (ASFA), which estimates how much the average Australian would need to retire. This standard assumes that you retire at age 65, own your home (no mortgage), and are relatively healthy.
ASFA Retirement Standard
| Age | Modest spending ($ per year) | Comfortable spending ($ per year) |
|---|---|---|
| 65-84 years old | Single $31,785 Couple $45,808 | Single $50,004 Couple $70,482 |
| 85 years old | Single $29,378 Couple $42,127 | Single $46,618 Couple $64,536 |
Source: ASFA Retirement Standard, based on the March 2022 quarter, if you own your home (no mortgage) and are relatively healthy
Expenses in retirement
As we move through our working lives, it’s important to keep an eye on our superannuation balances to ensure we have enough to enjoy a comfortable retirement. But how do we calculate our current balance and gauge what our expenses might be in the future?
Think about any big costs that might be part of your retirement plans. For example:
- paying off your mortgage
- rent
- renovating your home
- travel
- medical costs
Also, you can figure out how much super you need based on range of factors, including:
- How long you expect to live
- Your financial situation
- Where you live
- Aged care
- Your and your family’s health.
In Australia, there are a number of resources available to help you do just that. By using online calculators like Moneysmart’s retirement planner calculator, it can give you a round estimate of how much super you would need to retire at the age you want. Most importantly, seeking advice from financial professionals can help plans for your retirement. It’s never too early to start thinking about your financial future, so take some time to explore your options and make sure you’re on track for a secure retirement.
What it’s like to retire in Australia
| Age Pension The Retirement Standard says if you're on the Age Pension with no super, this means a budget lifestyle. | Modest Retirement A modest lifestyle in Australia is considered better than the Age Pension and allows for basic activities. | Comfortable Retirement A comfortable lifestyle in Australia allows you to be involved in a wide range of activities. |
|---|---|---|
| No budget to repair home or car May need government help with electricity bill Specials at the RSL club or cheap takeaway meals | Repairs for a basic car and home, no renovations Basic private health insurance One holiday in Australia per year | Decent car, and can renovate kitchen and bathroom Can afford to run the air-con Restaurant dining |
Source: Australian Retirement Trust
How much super is enough
So how much super do you need to retire? Are you content with a modest retirement, would you prefer a comfortable retirement, or are you planning on living it up?
The first step is to check your superannuation preservation age, so that you know what age you can access your super. Then, decide on what age you would like to retire, how much you need between now and being able to access your super and what your super balance needs to be once you can access it.
Understand the impacts of ageing on your retirement savings
As you’re planning for your retirement, it’s important to understand the potential impacts of ageing on your savings.
In Australia, life expectancy has continued to rise, which means many Australians are now living longer than ever before. While this is undoubtedly good news, it also means that you will need to ensure that your retirement savings can last you through an extended retirement period. Additionally, as you age, you may experience health concerns or changes that could also impact your financial situation.
To ensure your retirement is as comfortable as possible, it’s important to start considering these factors now and plan accordingly.
Consider the pros and cons of working longer versus retiring early
As we approach retirement age, many of us are faced with the decision of whether to retire early or work longer. There are certainly pros and cons to both options, and it’s important to carefully consider your individual circumstances before making your choice.
| Retiring Early | |
|---|---|
| Pro | Con |
| Retiring early can give you the freedom to pursue your passions and enjoy your golden years | Working longer can provide financial security and stability, as well as allow you to continue contributing to society |
There are a variety of factors to consider, such as changes to the age pension, superannuation rules, and the impact on your lifestyle. Ultimately, the decision to retire or work longer is a personal one, and requires careful consideration of your own goals and priorities.
Explore different investment strategies to help you reach your retirement goals
Reaching your retirement goals in Australia can be as simple as crafting a well thought out investment strategy.
- Figuring out the right balance between caution and risk appetite;
- Understanding the different types of investments available;
- Taking into account changes in legislation surrounding retirement; and
- Knowing when to diversify are all key considerations to ensure that your hard-earned savings are working for you.
With research and advice from specialist professionals such as financial advisers and analysts, and a personalised plan tailored to suit your individual needs and circumstances, you can implement an investing strategy that will help you grow your wealth and meet your retirement objectives.
When can I retire in Australia?
You may be curious about when you can retire and start enjoying the rewards of your work, especially if you have been working for some time. It’s worth noting that while the average retirement age in Australia is 55, this isn’t necessarily the age at which you can access your superannuation or the Age Pension.
The most recent census from the Australian Bureau of Statistics revealed that the average retirement age is 55.4 years. It also found that women tend to retire earlier than men. However, people aged 45 and above expect to retire much later, at an average age of 65.5 years.
According to the Australian Institute of Health and Welfare, the average life expectancy for Australian women born in 2019-2021 is 85.4, and for men, it’s 81.3. Therefore, your retirement savings may need to last up to 30 years depending on when you decide to retire.
When planning for retirement in Australia, there are two ages you must keep in mind. These are the preservation age, which is when you can access your super, and the Age Pension age, which is when you become eligible to receive the Age Pension.
Age Pension Age
| If you were born between | You can receive the age pension when you are: |
|---|---|
| 1 January 1954 to 30 June 1955 | 66 years |
| 1 July 1955 to 31 December 1956 | 66 years and 6 months |
| On or after 1 January 1957 | 67 years |
Source: Challenger
To be eligible to receive the Age Pension you must also meet the income and assets tests.
Preservation Age
You can access your super when you reach age 65. If you are under age 65, you can also access your super if you reach preservation age and have retired from the workforce.
If you are under 65, you can generally access your superannuation savings.
Your preservation age depends on the year you were born, see the table below.
| If you were born between | Your preservation age is |
|---|---|
| Before 1 July 1960 | 55 |
| 1 July 1960 to 30 June 1961 | 56 |
| 1 July 1961 to 30 June 1962 | 57 |
| 1 July 1962 to 30 June 1963 | 58 |
| 1 July 1963 to 30 June 1964 | 59 |
| After 30 June 1964 | 60 |
Source: Challenger
When deciding on the age you want to retire, think about various factors, including:
- Your health status
- Work conditions
- Job requirements
- Your family’s needs or your partner’s (if you have one).
- Status of your savings, including superannuation
- Other forms of investments, property, assets, mortgages,
- Debts, such as credit card debts.
- Significant costs that you anticipate during your retirement years, like medical expenses, overseas travel, or home renovations.
Ultimately, the best time to retire is whenever you’re financially ready and confident you can enjoy your retirement years without worrying about money.
How to retire at 55-60 years?
If you’re an Australian, you can access your superannuation between the ages of 55 to 60 (depending on your birth year). However, accessing your super doesn’t mean you need to retire completely. You can opt for a transition-to-retirement strategy, reducing your work hours while accessing some of your superannuation.
TTR allows you to reduce your working hours without decreasing your income by accessing a portion of your superannuation early to supplement your salary. Additionally, there could be potential tax advantages.
While enjoying the benefits of both worlds, you should determine the amount required to live comfortably because you cannot access the Government Age Pension until you reach the age of 66.
What type of retirement assets do I need at 55-60?
Planning for retirement can be overwhelming, especially when it comes to determining what type of retirement assets you need from 55-60 years old in Australia. It’s important to understand that retirement planning is not a one-size-fits-all approach, and will depend on factors such as your current financial situation, lifestyle expectations, and investment goals.
Some popular retirement assets to consider during this timeframe may include superannuation funds, savings accounts, investment properties, and shares. It’s recommended to meet with a professional financial advisor to assess your retirement needs and create a tailored plan that aligns with your individual goals and objectives.
With careful planning and strategic investment decisions, you can ensure a comfortable and secure retirement for years to come.
Source of income for Australians aged 55-60
As you approach your mid-50s, the thought of retirement becomes more prevalent. However, this doesn’t mean you need to stop earning income altogether. In fact, many people continue to work in some capacity between 55 and 60 years old in Australia. One option could be to continue working in your current job, either full-time or part-time. Alternatively, you could consider exploring other opportunities such as consulting, freelance work or starting your own business. Another option could be to consider a partial retirement, where you work fewer hours or take extended breaks during the year.
Whatever route you choose, it’s important to take the time to consider your financial goals and determine the best course of action to ensure a comfortable retirement.
How to retire early?
Retiring early in Australia can seem like a daunting goal, but with some careful planning and perseverance, it can be achievable.
- Start saving as early as possible. Consistency is key, even if it means cutting back on some of your expenses.
- Make a budget and stick to it.
- Consider investing your money in high-yield accounts, stock market or real estate.
- Consider superannuation and make the most of tax benefits and contribute additional funds to it.
- Keep yourself updated with changes in tax laws, investment opportunities and other financial aspects that may affect your retirement plan.
With dedication and smart decisions, early retirement can be a reality.
Retiring in Australia is an exciting thought for many, but one that also carries a lot of uncertainty. The biggest challenge for anyone planning their retirement is understanding how much capital they will need to support the lifestyle they want to lead and whether this goal is achievable.
Knowing when you can access your money and making sure you have enough saved up to cover your anticipated expenses during retirement can be daunting tasks. That’s why it’s important to partner with a reliable financial adviser who can help you calculate how much super you need, get advice about how to retire early and/or prepare for retirement at 55-60 years old.
Retirement isn’t just about having enough money; it’s also about enjoying every moment of it without worrying too much over finances. Reach out today if you need help getting ready for retirement, there are plenty of resources available so don’t feel like you’re alone in preparing for a comfortable retirement!
