While most Australian’s do not retire until they are 65, it is incredible how often I am asked, how much super do I need to retire at 60 in Australia? or how much should I have in my super? The truth is there’s no magic number that fits everyone. It all boils down to your individual circumstances and what you want from life when you retire.
As a financial advisor with over 20 years of experience, I am always actively working with our clients to grow their super balance, because it is so tax effective. It is also very flexible once you are retired, and it is purpose built to fund retirement income needs. So, in combination, it is generally the best retirement structure available in Australia. In this blog we explore some key factors to consider for retirement and will help you understand how much super you will need.
Lifestyle Choices and Spending Patterns
Your lifestyle choices will play a big role in how much you’ll need to save up. Consider factors such as travel expenses, dining out, entertainment, healthcare cost and recreational activities when budgeting for retirement. Creating a detailed budget based on your lifestyle preferences will help you determine your retirement savings goal. I always recommend breaking up your expenses into those that you need and those that you want. As by their definition you cannot go without what you need, however you can prioritise what you want, and this will be a significant determining factor in how much super you need to retire at 60.
Super Contributions
Superannuation is typically the largest asset retirees in Australia have, and so you are right to be asking yourself how much super do I need to retire at 60 and thinking about ways that you can influence growing your balance. Unsurprisingly, one of the best ways to grow your super is by contributing what you can. As a start your employer’s mandatory 11% contribution is helpful, but it’s usually not enough on its own.
There are several ways to contribute more to your super, including through salary sacrifice or personal contributions to your super. The maximum yearly threshold is $27,500 for concessional contributions and $110,000 for non-concessional contributions. It is also possible to bring forward up to three years of non-concessional contributions, meaning you can put in up to $330,000. These thresholds are due to increase in July 2024, to $120,000 p.a. for non-concessional and $30,000 for concessional.
Other contribution options that should be considered include Spouse contribution; Co-contribution; Superannuation splitting; Catch up contributions; and Downsizer contribution. Each of these contribution types not only boost your nest egg but also brings along tax benefits. Before you decide to make any additional contributions to your super, it’s always wise to seek guidance from a retirement specialist.
Downsize Your Home
We have given this contribution option its own section because it is pretty common for pre-retirees to be rethinking where they choose to live in retirement. Often this is because the family home is far bigger than what you will need in retirement. As of January 2023, the eligibility age for the Downsizer Contribution in Australia was reduced from 60 to 55. This means if you’re eyeing retirement at 60, it’s time to consider this savvy strategy.
If you’ve owned your home for at least 10 years and are over 55, you may be able to contribute up to $300,000 from the proceeds of downsizing into your super. It could mean more cash in your super, setting you up for a more comfortable retirement. What’s even better is both partners in a couple can do this, and no work or age limits apply to this. it’s easy to see how powerful this could be, however, prior to making a downsizer contribution to super, it is important to consider eligibility requirements and to weigh the pros and cons to ensure it aligns with your long-term financial goals.
Review Your Investment Strategy
As you approach retirement age, it’s vital to ensure that your investments are aligned with your goals and risk tolerance. Assessing your asset allocation, income generation, inflation protection, and liquidity can help optimise your retirement savings and provide financial security in your retirement years. This will also influence the return assumptions used, that are part of calculating how much super you will need to retire at 60, so its important to really think this through.
Seeking professional advice from a retirement financial advisor can offer valuable insights tailored to your individual needs. With their guidance, you can make informed decisions to adjust your investment strategy as necessary, enhancing the likelihood of achieving your retirement objectives and enjoying a comfortable retirement lifestyle.
Age Pension
For many retirees, the Age Pension serves as a safety net, providing a guaranteed income stream to cover essential living expenses such as housing, food, and healthcare. It’s important to note that your eligibility for the Age Pension depends on various factors, including your age, residency status, and income and assets tests.
When planning for retirement, taking the Age Pension into account can help you better estimate how much should I have in my super to supplement your pension income and maintain your desired standard of living. Additionally, understanding the rules and eligibility criteria for the Age Pension can help you make informed decisions about your retirement savings strategies, such as when to access your super and whether to make additional contributions.
How Much Super Should I Have?
The Association of Superannuation Funds of Australia (ASFA) provides valuable insights into the average Australian super at retirement needed for a comfortable and modest lifestyle. These figures provide a valuable benchmark for assessing your journey toward financial security.
· A comfortable retirement requires approximately $690,000 for a couple and $595,000 for a single individual at age 67. These figures assume that you’ll receive partial amount of age pension.
· In contrast, for a modest retirement lifestyle, both couples and singles at age 67 would require around $100,000.
To discover more about how much you need to retire, the Yield team have prepared a comprehensive guide, that includes calculations for how much you need to retire on $80,000; $100,000; $200,000 and more, so depending what retirement lifestyle you are looking for, this is a rich source of information that is worth considering.
How Yield Advisors Can Help You?
Yield retirement advisors aren’t just about numbers and charts; we’re about understanding your dreams and crafting a plan to bring them to life. Our experienced team of retirement advisors can help you determine how much you need to retire comfortably or how much super to retire at 60 by offering tailored solutions, from boosting super contributions to exploring downsizing options. If you’re ready to take the next step towards a fulfilling retirement, reach out to Yield Advisors today.
