It’s the million dollar question, and unfortunately one that has around a million answers. The short answer is that it all comes down to what you want to spend in retirement, but as that’s not all that helpful, let’s take a look at the longer answer.
It’s all about retirement income
The most important thing to remember is that you aren’t focussing on the lump sum you’ll have when you retire, but rather what retirement income your super will generate. The next step then is to work out what income you want, which is the harder bit, and will vary hugely from person to person.
It can feel a little like one of those ‘how much is a piece of string?’ questions, but fortunately there are a couple of measures you can use. One is a general rule of thumb, which is you should aim for two-thirds of your pre-retirement income. Another, more scientific, tool is the ASFA Retirement Standard.
What is the ASFA Retirement Standard?
The ASFA Retirement Standard benchmarks the annual budget for a couple or single living either a modest or comfortable retirement. It’s calculated by taking a very detailed breakdown of living expenses and assigning an annual dollar spend to each. The latest figures calculate that a couple aged 65 who owns their own home should budget $60,063 a year for a comfortable lifestyle. A modest lifestyle is $34, 911 (although you should bear in mind this isn’t much above the poverty line).1
What’s really important to consider though is what’s deemed to be a ‘comfortable’ lifestyle. You’ll find a full breakdown of expenditure on the ASFA website; but for example it assumes around $80 a week for dining out, and $13 a week for day trips and outings to the cinema or sporting events. So if you think you’ll want to spend more, you’ll need to budget more.
Save more, spend more
It’s a pretty simple equation really: if you want more money to spend in retirement, you need to contribute more now. We understand that finding that bit extra to put in can be difficult, especially if retirement is still a distant dream, but it really can make a huge difference to your future. What you put in now could make the difference between holidaying on an exotic beach or the local holiday caravan park!
The best thing is that there’s always time to make a difference. Here at Club Super we’re here to help you reach better retirement outcomes, and have a wealth of resources on our website outlining strategies you can take to boost your balance. And if you want any more information, just give us a call on 1300 369 330.
1 ASFA is the peak policy, research and advocacy body for Australia’s superannuation industry. All figures quoted sourced from the ASFA Retirement Standard, June quarter 2017 report available at https://www.superannuation.asn.au/resources/retirement-standard