Nov 22, 2024  | Tags: Superannuation

Our insights

The answer differs for everyone depending on a range of questions such as:

• How old are you?
• When do you want to retire?
• What sort of lifestyle do you wish to sustain in retirement?
• How long do you expect to live?
• Do you want to leave a legacy to your heirs?

Clearly, arriving at how much super you need is an imprecise science.

But there are useful guidelines that indicate whether you are on target.

And if you come up short, there are ways to supercharge your super.

But it is imperative to seek professional advice from a qualified financial planner and act now before it’s too late.

ASFA’s projections

Between the ages of 65-84, the Association of Super Funds Australia (ASFA) recommends singles need $52,085 per year to live comfortably while couples require $73,337.

Beyond 85, that falls to $48,879 for singles and $67,647 for couples.

Living comfortably in retirement is what most people aspire to.

ASFA says these figures allow retirees a good standard of living with things like private health insurance, a reasonable car and nice clothes as well as domestic and occasional international holiday travel.

To reach this target, ASFA projects singles will need $595,000 in super by their retirement age of 67 while couples will need $690,000.

This figure assumes that retirees will draw down all their capital and receive a part Age Pension to supplement their income.

To qualify for the Age Pension, you must pass both an income and assets test.

Your income must be less than $65,020 for singles or $99,382 for couples.

And your assets, if you own your home, must be less than $695,500 for singles or $1,045,500 for couples.

For non-home owners, singles can have assets of up to $947,500 and couples $1,297,500.

Your super is considered among your assets whether you leave it in the fund, withdraw it all or draw an income from it while leaving the balance invested.

Super balance detective calculator

ASFA’s super balance detective calculator is a handy tool which will instantly tell you how much super you should have for your age.

Simply type in the year you were born and the calculator advises the amount of super you should have today.

The calculator returns the following balances for those seeking a ‘comfortable retirement’ based on their age today:

25 years - $26,000

30 years - $66,500

35 years - $111,500

40 years - $168,000

45 years - $226,000

50 years - $296,000

55 years - $377,000

60 years - $469,000

65 years - $571,000

The calculator doesn’t take into account other assets you may have which may reduce your reliance on your super.

For instance, if you have equity in your home, you may be able to draw a significant amount by downsizing later in life.

If you work beyond 67, even in a part-time capacity, you will actually continue to build your super rather than drain it.

You may also benefit from an inheritance later in life, although you should never build a retirement plan around a potential inheritance.

What does your ideal retirement lifestyle look like?

While these markers are a useful guide, they are not the be-all and end-all. Ultimately, how much super you need, as well as other sources of wealth, will largely depend on your retirement goals. 

The numbers above, for example, may suit if you are content with a conservative lifestyle. 

However, if you have plans for travel, dining out, supporting other family members and generally don’t want to penny pinch, your super goals will need to be significantly higher. 

This is where your financial advisor can work with you, to help you understand the ‘cost’ of your lifestyle goals and then understand what role super will play, and how much you will need.

Once you’ve crunched the numbers, what should you do if you are short on super?

Supercharging your super

The superannuation guarantee currently sits at 11.5 per cent and will rise to 12 per cent on July 1, 2025.

It’s a set and forget contribution for every Australian worker.

But by boosting that contribution, you can get ahead of the curve and supercharge your super fast!

Here’s how:

Understanding compound interest

The earlier you add more money to your super, the better.

That’s because of the magic of compound interest.

Compounding is basically interest on your interest and it helps you accumulate those dollars much faster.

Hence, the longer those dollars are in your super account, the more years they have to work for you and the more interest you earn.

It’s why your super balance climbs faster, the closer you are to retirement age.

It’s basic maths and it works!

Salary sacrifice

If you are worried about how much super you have, salary sacrificing is a great remedy.

This occurs when you direct an extra portion of your income straight into your super, over and above the superannuation guarantee.

So you take home less pay but put it away for a rainy day – your retirement.

The benefit is twofold.

Firstly, you increase your super balance which also utilises the benefits of compound interest to give your money the chance to work for you for longer.

Secondly, it reduces your tax bill because when you salary sacrifice, you are only taxed at 15 per cent rather than the 32.5 per cent paid by an Australian on the average wage.

You can salary sacrifice up to $30,000 annually, including what your employer is already paying on your behalf.

That represents an annual tax saving of $5250 for the average Australian worker.

If you have unused contribution cap amounts for up to five previous years, you can carry them forward, allowing you to deposit more than the $30,000 cap in one financial year.

This applies as long as your super balance is below $500,000.

After-tax contributions

Sometimes known as personal, voluntary or non-concessional contributions, you can top up your super with money you have already paid tax on.

It could be from your wages, savings, the sale of an asset or even an inheritance.

Because you have already paid tax on the money, it is not taxed again when it is deposited into your super.

You may even be eligible for a government co-contribution.

If your before-tax income is less than $60,400, the government may contribute 50c in the dollar from your after tax pay.

The maximum government contribution is a maximum of $500 for those making an after tax contribution of $1000 and who earn less than $45,400.

You can contribute up to $120,000 annually as an after-tax contribution into your super and may be able to deposit up to $360,000 in one single year by using the ‘bring forward’ rule.

Spousal contributions

For anyone earning less than $37,000 per year, their spouse can make a contribution into their super and earn a rebate of 18 per cent up to a maximum of $540.

A partial tax offset is still available if they earn up to $40,000.

Super fund checklist

Even if you choose not to contribute extra money into your super, it is worthwhile regularly checking the status of your super account.

Check your employer is paying super

Be vigilant and check they are paying what they owe you. That’s because in 2021-22 the Super Members Council discovered nearly three million Australians were being denied $5.1 billion in super payments.

Check your super fund

Not all super funds are equal. Their performance and their fees all vary. Ensure yours is working hard enough for you and you are not wasting fees on products that you don’t need.

Consolidate your super funds

When people change jobs, their super is often paid into their new employer’s preferred fund. But this often creates multiple funds for individuals and that means multiple fees which is counterproductive to the end goal. Ensure you consolidate all of your super accounts into one fund.

Get advice today

Superannuation was created to support and sustain us in retirement.

But it is challenging to know for sure how much super you need.

Even Australians on a modest wage should expect to have a super fund that avails them a comfortable retirement.

But if neglected, there are many ways super can fail to achieve its intended goal.

The key is to act early while you still have plenty of time in the workforce.

But you need sharp and shrewd advice to ensure your super fund is back running on all four cylinders and your retirement goals are in place.

That’s where Calder Wealth Management can help.

CWM are financial planning experts who have been preparing a comfortable retirement for generations of South Australians for more than half a century.

Our team of professionals will analyse your superannuation account and other investments and recommend strategies to boost, protect and safeguard your future.

We’ll work closely with you to develop a safe and sound investment portfolio whatever your age and financial goals.

There really is no substitute for quality financial advice from a team personally invested in your wealth accumulation.

At CWM, we pride ourselves on leading our clients into the future with structure, financial stability and confidence. 

Contact us today to discuss all of your financial needs and concerns.

Written by Aaron Doig

The information contained in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

Taxation, legal and other matters referred to on this website are of a general nature only and are based on Calder Wealth Management’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.

Calder Wealth specialises in wealth management with a focus on advice, investment, sustainability, insurance and finance.