How much do I really need in retirement?

It's one of the most common questions I'm asked - how much do I need in retirement? New research suggests it could be a lot less than you thought.
By · 4 Apr 2022
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4 Apr 2022 · 5 min read
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A recent study by Super Consumers Australia is turning the notion of how much we need in retirement savings on its head.

Until now, we’ve really only had one source to go by, and that’s the Retirement Living Standard produced by super industry body ASFA. As a guide, it says that to lead a comfy retirement, a single (home owner) retiree needs to spend around $1,768 per fortnight, which would mean having retirement savings of $545,000. For a couple, a comfortable retirement demands fortnightly spending of about $2,491, which calls for savings in excess of $640,000.

Super Consumers has questioned these numbers, and offered some considerably lower benchmarks. They say a retiree with low spending levels of $1,077 per fortnight only needs $70,000 in super to meet their needs. A couple with low spending of $1,538 fortnightly, needs just $88,000 in super.

In fact, it’s not until we’re talking about a high level of fortnightly spending – say, $2,808 for a couple, that over $1 million in super is necessary.

That’s a big difference compared to ASFA’s figures.

There are a few disclaimers here. The first is that a ‘low’ level of spending assumes relying on the age pension. To be fair, 39% of retirees in Australia currently rely on the age pension.

In addition, Super Consumers based their numbers on household spending data from 2015 and adjusted the figures for inflation between then and now. However, this begs the question, were retirees enjoying life on the spending they made, or were they penny pinching because of low savings? Moreover, these are past figures, and you don’t need me to point out that living costs are rapidly rising right now.

By contrast, ASFA is more aspirational. It looks at budgets now, and then includes the impact of inflation to work out how much you need to enjoy a dignified retirement.

Either way, the fact remains that the average Australian is a long way off the level of super savings that ASFA says is needed for a comfortable retirement. 

As we stand, the average super balance for men aged 55-59 is $201,420. The average for women of the same age is $156,172. The point Super Consumers makes is that by setting the benchmark high, as can potentially be the case with ASFA figures, people won’t be bothered to chase it. And that’s entirely reasonable.  

The key aspect of all this, is this need to determine what you regard as a decent retirement – and plan accordingly.

It may be that time spent fishing from a tinnie on the Costa-Notta-Lotta is your idea of a dream retirement. Good for you! But if your ideal retirement is the ‘all the bells and whistles’ variety, chances are you will need a lot more in super and other investments.    

The bottom line is that we now have two benchmarks to choose from on how much we need in retirement. But it’s up to you to do your own sums.

I should point out that Super Consumers Australia received a grant for this research from the Ecstra Foundation, of which I’m a Director.

Check out InvestSMART's retirement calculator to see if you're on track.

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Effie Zahos
Effie Zahos
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