Am I On Track For The Future I Want?
If you’re thinking about whether you’ll have enough super to last your retirement, check out these tips and resources to help estimate how much super you need.
Written by Victoria Kent, Senior Investment Specialist
This information does not take into account your personal objectives, financial situation or needs. You should consider if the relevant investment is appropriate having regard to your own objectives, financial situation and needs.
If you ever bought a lottery ticket, you’ve likely indulged in an imaginary spending spree.
Perhaps you would buy a nice car, a house, a massive wine cellar and chocolate fountain (or is that just me?).
After you’ve imagined all you could buy with your winnings, you have most certainly imagined handing in your resignation at work.
Instant retirement and hello life of luxury.
Sadly the odds of you winning the lottery are actually less likely than the odds of being crushed to death by a vending machine.
That’s roughly 1 in 112 million, incidentally twice as likely than being bitten by a shark.
So realistically, we need to plan for our retirement. But what does that mean? And how much super do we really need?
For Australians, the retirement income system is based on three pillars:
a means-tested Age Pension,
compulsory superannuation; and
voluntary savings, including home ownership.
The amount you have in each pillar will dictate the kind of life you will have once you retire — whether you will have enough to live modestly or comfortably.
This can mean very different things from one person to the next. I suppose I could forgo the chocolate fountain if I must, but would be hard-pressed to give up my coffee a day.
The Association of Superannuation Funds Australia (ASFA) have come up with some indicative standards for just how much you will need for a modest vs comfortable retirement.
The more comfortable lifestyle allows for overseas travel every two or so years, A$163 per couple per fortnight on dining out, and even A$81 on alcohol “or equivalent spent with charity or church”.
Now factor in how long you will live, plus any medical costs, and you have a rough approximation of what you will need.
But let’s be more proactive here.
How about we dictate the kind of lifestyle we want to live, rather than the other way around? It’s clear we need to work on bolstering those retirement pillars.
Because of compulsory superannuation, you might already have a fair bit stashed away in your super account (winner winner chicken dinner).
As you know, each month 9.5% of your wages go into your super account.
Interestingly the Australian government MoneySmart website warns:
‘Your employer’s super contributions may not be enough if you want to be financially secure when you retire.’
So, to get around this, you may want to consider other ways to boost your pre-tax super income.
Speak to a qualified financial planner or check out the various online resources the government has created to help you optimise your super contributions.
Even if you don’t win the lottery, you can still dream of your life in retirement.