How Much Should I Save for Retirement?

Have you ever wondered how much you should save for retirement in Australia? Planning for your retirement can be a daunting task, but it is an essential one.

According to the Association of Superannuation Funds of Australia (ASFA), a couple needs approximately $640,000 in retirement savings to maintain a comfortable standard of living. But is this number a one-size-fits-all solution for everyone?

The answer is no.

The amount you need to save for retirement depends on several factors, including your current age, lifestyle, and retirement goals. However, the ASFA provides a useful guide that can help you estimate the amount you may need to save.

The guide suggests that a single person will need around $545,000 in retirement savings, while a couple will need approximately $640,000 to enjoy a comfortable retirement.

If you want to know how to save enough money for your retirement in Australia, then this article is for you. We have consulted several experts in the field, and we have collected their insights on the best retirement planning strategies.

So, whether you are in your 20s or 50s, you can start preparing for retirement by following the tips in this article. 

Let’s dive in and learn how to secure your future!

How Much Retirement Income Do I Need to Have Saved Up Before I Can Retire Comfortably?

In accordance with the Retirement Standard published by the Association of Superannuation Funds of Australia (ASFA), the median superannuation balance at the time of retirement ought to be approximately $640,000 for couples and approximately $545,000 for singles who want to have a "comfortable retirement."

These estimates are based on the assumption that you own your own home outright and do not have a mortgage payment to make.

They also take into account the money you spend on daily necessities, as well as on things like going out to eat, working out, participating in other forms of recreation and entertainment, and going on vacation occasionally. 

You should also think about how your life will be during retirement, such as whether or not you will be in good health, how long you may live, and whether or not you believe you will require the assistance of an elderly care facility.

Consider what kinds of purchases you intend to make after you stop working so you may better understand how much money you'll need in retirement.

For instance, living a "modest retirement" lifestyle is regarded as superior to receiving an age pension. However, it is still insufficient to cover the costs of more involved hobbies and pursuits.

The Market-Based Approach

The retirement withdrawal rate can also be determined by basing it not only on the level of stock market danger in the total portfolio but also on the overall valuation of the markets.

This is another popular strategy that certain financial planners utilise.

This one is a bit more convoluted, but it prescribes a higher withdrawal rate in practice. Generally speaking, the rate for moderate-risk retirees begins at around 4.4% and can reach as high as 5.7%.

The rate begins at approximately 3.9% and can reach a maximum of 5% for investors with a more cautious investment strategy.

The Custom Approach

Using a tailored strategy places a large emphasis on your goals and aspirations for retirement. In addition to that, it should consider the level of risk you are willing to accept with your investments, the present valuations of the market, and the timing of your revenue and expenditures.

In actuality, the process of planning for retirement is unique for each individual. As a result, the individualised strategy may be a significantly superior choice to the alternatives.

The procedure described above could create difficulties for retirees who require flexibility if the steps are not tailored to each person's specific situation.

For others, the "Australian dream" of owning a residence can get in the way of supporting your retirement and create a gaping hole in several people's savings because of the funds going towards their home or property.

This is because the cash goes towards funding the "Australian dream." Yet, for many people, the estate could be the ace in their pocket when it comes to supporting their retirement. In fact, most people use the property to cover at least half of their post-work living expenses.

Yet, some people choose to downsize in order to complement their lifestyle or because they do not have sufficient resources for retirement, despite the fact that numerous would prefer not to sell their family home since they would rather live in it.

Because individuals live longer than several traditional retirement approaches allowed for in the past, it is strongly advised that a more individualised strategy be taken. Age pension eligibility for Australians is currently set at 65; however, this will soon be raised to 67.

The Federal Government said that the minimum age for retirement would be raised to 70 years old by 2035. 

Retirement advisors are financial professionals that specialise in developing individualised plans for their clients based on the unique aspects of their lives, such as their desired standard of living in retirement. These advisors also provide you with the chance to monitor your progress.

Accessing Your Superannuation

You will typically require that you be retired and have achieved your preservation age before you are eligible to receive your superannuation. Nevertheless, there are certain extenuating circumstances that could let you withdraw your superannuation at an earlier age. 

Suppose you've achieved your preservation age but aren't quite ready to leave your job. In that case, you might want to consider taking up a "transition to retirement" pension in order to gain access to some of your superannuation savings.

Even if you are still working for a company or own your own business, you can still qualify for a "transition to retirement" pension that will allow you to access a portion of your superannuation in the form of regular payments (up to 10% per fiscal year).

Imagine you cease working at any point between the ages of 60 and 64 after having done so for whatever length of time. If this is the case, then you are regarded as retired for the reasons of accessing your super — even if you've got no plans to retire totally at any point in the foreseeable future!

Even if you start working again under a new employment arrangement, this does not prevent you from cashing out the superannuation you have collected to this point and using the funds any way you see fit.

When you turn 65, you are no longer subject to any further restrictions or requirements in order to get complete access to your retirement savings and benefits.

If There Is a Gap, What Steps Should I Take To Fill It?

If you are examining your super balance and believe that your balance may benefit from an improvement, the following are a few things that you might want to consider doing:

1. Make Sure That the Fundamentals of Your Super Are in Order

You may assist in putting yourself on the right path towards increasing your superannuation balance by making sure that your super account is set up appropriately.

Recording your Tax File Number (TFN) will help you avoid paying any taxes that aren't required, and keeping your personal information up to date will allow your retirement savings fund to get in touch with you regarding any relevant news or updates.

These are just a few examples of some straightforward actions you can take.

2. Pay Yourself Back

Suppose you were given permission to access your money early as part of the COVID-19 early access programme.

In that case, it is highly recommended that you make an effort to pay those monies back to yourself as soon as possible if you are in a position where you are able to do so financially.

You may discuss a salary sacrifice plan with your company, or you could make some voluntary payments on your own time throughout the course of the year.

You can use the superannuation calculator on MoneySmart to get an idea of how little payments made on a consistent basis could add up over the course of your working life and perhaps help you build up a larger super balance.

3. You Should Begin Making Contributions as Soon as Possible and Continue Doing So as Frequently as You Can

Your retirement account earnings work in accordance with the same concept as compounding, and in general, the sooner you can start putting funds into the account, for example, by sacrificing a portion of your salary, and the more regularly you contribute, the higher probability your retirement account has of growing.

4. Combine Your Super Accounts

More than six million people in Australia have more than one retirement savings account. If you are one of these persons, you should give some thought to the possibility of combining all of your accounts into a single one.

You might be capable of saving cash on various fees, and that cash could be kept invested in helping your entire retirement account balance increase.

5. Boost Your Super as Much as You Can

If you contribute extra money to your account on an annual basis – over and beyond the 10.5% that you typically receive from your company – you will provide your retirement fund with the chance to expand more quickly and more significantly.

6. Keep an Eye on Your Various Investing Opportunities Throughout Time

Investing your retirement savings at every stage of your life is crucial. Despite this, you should revisit your investment strategy from time to time because the same plan might not be suitable for different stages of your life.

Steps to Retirement Planning in Australia

1. Determine Your Retirement Goals

Establishing your objectives is the first thing you should do while planning for retirement.

What do you want your retirement to look like? Will you embark on a lengthy trip, take up an exciting new pastime, or devote more time to your family?

You will be able to have a good idea of how much money you will need to save and what kind of lifestyle you will be able to afford if you first determine what your goals are going to be.

2. Assess Your Financial Situation

After you have decided what you want your retirement to look like, it is time to evaluate your current financial condition.

This entails being aware of your current expenditures, savings, and any debts or liabilities you might have. It is essential to evaluate all potential sources of income during retirement, including superannuation and pensions, to prepare a reasonable budget.

3. Create a Retirement Plan

It is time to create a retirement plan, and you should keep in mind your retirement goals and current financial status.

This includes choosing a date for when you will retire, determining an estimate of the costs associated with retirement, and determining the sum of cash you will be required to save.

To further assist in the growth of your assets for retirement, you might also wish to think about contributing to a superannuation plan or making investments in other types of investment vehicles.

4. Implement Your Retirement Plan

After you have developed a strategy for your retirement, it is time to implement that strategy.

This may mean changing your spending patterns, raising the percentage of the money you save each month, and diversifying your investments in your portfolio.

It is absolutely necessary to evaluate your retirement plan on a frequent basis and make modifications as required.

5. Seek Professional Advice

The process of planning for retirement can be difficult, so consulting with an experienced and knowledgeable financial advisor is absolutely necessary.

A financial advisor may assist you in formulating an all-encompassing strategy for your retirement, offer guidance on investments, and assist you in navigating the complexities of the applicable tax rules and regulations.

Steps to Help Grow Your Super

1. Know Your Super Fund

The first thing you need to do to boost your retirement savings is to familiarise yourself with your retirement fund. It is imperative that you have a thorough understanding of the costs, investment opportunities, and insurance coverage provided by your super fund. 

You are able to access this information by visiting the website of your super fund or by getting in touch with their customer care team.

If you are familiar with the specifics of your super fund, you will be more equipped to make educated choices regarding the management and growth of your super.

2. Consolidate Your Super Funds

Consolidating your retirement savings can be an efficient approach to managing your super and cutting down on expenses that aren't essential.

If you have more than one retirement account, it can be difficult to monitor all of your money, and you can end up having to pay more than one set of fees.

The management of your retirement savings can be made easier and more cost-effective if you consolidate those funds into a single account.

3. Choose the Right Investment Option

Your retirement savings plan provides you with a variety of investment choices, including high-growth, balanced, and conservative options.

It is crucial to select the form of investment that corresponds with your desired level of financial risk, the amount of time you have till retirement, and your desired level of income.

Selecting the appropriate investing strategy can facilitate the growth of your super and the accomplishment of your retirement objectives.

4. Make Additional Contributions

Your retirement savings might be greatly increased if you make additional payments to your superannuation plan.

You are able to make further contributions by either sacrificing a portion of your salary or contributing after taxes have been taken off. 

By using salary sacrifice, you can reduce the amount of money subject to taxation on your return by contributing a portion of your income before taxes.

Contributions made after taxes come out of a person's nett income and are subject to a lower rate of taxation.

You can enhance your retirement savings and qualify for tax benefits by making additional contributions to your retirement account.

5. Take Advantage of Government Contributions

The Australian government encourages individuals to set money aside for their retirement by providing a variety of financial incentives. The co-contribution plan is one example of this type of incentive.

Make contributions to your retirement fund after taxes have been taken out of your paycheck and satisfy certain eligibility requirements. 

The government will match your contribution up to a predetermined limit. You can accelerate the growth of your super and the achievement of your retirement objectives by taking advantage of contributions made by the government.

6. Review Your Insurance Coverage

The majority of super funds provide their members with access to several types of insurance coverage, including income protection insurance, total and permanent disability insurance, and life insurance. 

It is necessary to conduct periodic reviews of your insurance coverage to confirm that it satisfies your requirements and contributes to achieving your monetary objectives.

Evaluating your insurance coverage will help you avoid paying premiums that aren't essential and ensure that you have sufficient protection in the event that something unexpected happens to you.

7. Seek Professional Advice

You can improve the quality of the decisions you make concerning your superannuation and retirement planning by seeking the professional assistance of a financial planner or advisor. 

When it comes to investing strategies, contribution choices, and insurance coverage, getting advice and insights from a professional can be extremely beneficial.

Obtaining the assistance of a specialist can facilitate the increase of your superannuation and the accomplishment of your retirement objectives in a more reasonable manner.

Bottom Line

In conclusion, retirement planning is extremely important, and it is never too early or too late to get started on the process.

Australia has a well-established retirement savings system that consists of personal contributions, contributions made by employers, and benefits provided by the government.

Nonetheless, there is still the matter of how much money you should put away for retirement in Australia.

The response to this question will differ from person to person based on factors such as their current age, their anticipated retirement age, the lifestyle they lead, and the aspirations they have for their retirement.

It is recommended that retirees shoot for a retirement income equal to or more than 70 per cent of their income before retirement.

It is essential to make use of internet calculators, financial guidance, and any other tools that are accessible in order to accurately estimate the amount of money you will need to save for retirement in Australia.

You can get an estimate of how much money you need to put away every month in order to achieve your retirement objectives by using these tools.

How much money should you put away each year in order to have a comfortable retirement in Australia?

The response is going to be specific to your circumstances, but it is extremely important to get an early start on planning and conserving money.

What kind of preparations are you making so that you can enjoy a comfortable retirement in Australia? Have you determined how much money you need to put away for the future by using any of the online calculators available or by consulting with a financial professional?

Share your thoughts with us in the section below!

Content Summary

• Planning for your retirement can be a daunting task, but it is an essential one.
• According to the Association of Superannuation Funds of Australia (ASFA), a couple needs approximately $640,000 in retirement savings to maintain a comfortable standard of living.
• The amount you need to save for retirement depends on several factors, including your current age, lifestyle, and retirement goals.
•  In accordance with the Retirement Standard published by the Association of Superannuation Funds of Australia (ASFA), the median superannuation balance at the time of retirement ought to be approximately $640,000 for couples and approximately $545,000 for singles who want to have a "comfortable retirement."
•  You should also think about how your life will be during retirement, such as whether or not you will be in good health, how long you may live, and whether or not you believe you will require the assistance of an elderly care facility.
•  The retirement withdrawal rate can also be determined by basing it not only on the level of stock market danger in the total portfolio but also on the overall valuation of the markets.
•  Using a tailored strategy places a large emphasis on your individual goals and aspirations for your retirement.
• In addition to that, it should consider the level of risk you are willing to accept with your investments, the present valuations of the market, and the timing of your revenue and expenditures.
•  In actuality, the process of planning for retirement is unique for each individual.
• As a result, the individualised strategy may be a significantly superior choice to the alternatives.
•  For others, the "Australian dream" of owning a residence can get in the way of supporting your retirement and create a gaping hole in several people's savings because of the funds going towards their home or property.
•  Yet, some people choose to downsize in order to complement their lifestyle or because they do not have sufficient resources for retirement, despite the fact that numerous would prefer not to sell their family home since they would rather live in it.
• The Federal Government said that the minimum age for retirement would be raised to 70 years old by 2035.
•  You will typically require that you be retired and have achieved your preservation age before you are eligible to receive your superannuation.
• In that case, you might want to consider taking up a "transition to retirement" pension in order to gain access to some of your superannuation savings.
• Even if you are still working for a company or own your own business, you can still qualify for a "transition to retirement" pension that will allow you to access a portion of your superannuation in the form of regular payments (up to 10% per fiscal year).
• If this is the case, then you are regarded as retired for the reasons of accessing your super — even if you've got no plans to retire totally at any point in the foreseeable future!
•  When you turn 65, you are no longer subject to any further restrictions or requirements in order to get complete access to your retirement savings and benefits.
•  You may assist in putting yourself on the right path towards increasing your superannuation balance by making sure that your super account is set up appropriately.
• Recording your Tax File Number (TFN) will help you avoid paying any taxes that aren't required, and keeping your personal information up to date will allow your retirement savings fund to get in touch with you regarding any relevant news or updates.
•  Suppose you were given permission to access your money early as part of the COVID-19 early access programme.
• In that case, it is highly recommended that you make an effort to pay those monies back to yourself as soon as possible if you are in a position where you are able to do so financially.
•  More than six million people in Australia have more than one retirement savings account.
•  If you contribute extra money to your account on an annual basis – over and beyond the 10.5% that you typically receive from your company – you will provide your retirement fund with the chance to expand more quickly and more significantly.
• Despite this, you should revisit your investment strategy from time to time because the same plan might not be suitable for different stages of your life.
•  Establishing your objectives is the first thing you should do while planning for retirement.
•  After you have decided what you want your retirement to look like, it is time to evaluate your current financial condition.
•  It is time to create a retirement plan, and you should keep in mind your retirement goals and current financial status.
•  After you have developed a strategy for your retirement, it is time to implement that strategy.
•  The process of planning for retirement can be difficult, so consulting with an experienced and knowledgeable financial advisor is absolutely necessary.
• The first thing you need to do to boost your retirement savings is to familiarise yourself with your retirement fund.
• It is imperative that you have a thorough understanding of the costs, investment opportunities, and insurance coverage provided by your super fund.
• If you are familiar with the specifics of your super fund, you will be more equipped to make educated choices regarding the management and growth of your super.
•  Consolidating your retirement savings can be an efficient approach to managing your super and cutting down on expenses that aren't essential.
•  Your retirement savings plan provides you with a variety of investment choices, including high-growth, balanced, and conservative options.
•  Your retirement savings might be greatly increased if you make additional payments to your superannuation plan.
• You can enhance your retirement savings and qualify for tax benefits by making additional contributions to your retirement account.
• Make contributions to your retirement fund after taxes have been taken out of your paycheck and satisfy certain eligibility requirements.
• The government will match your contribution up to a predetermined limit.
• You can accelerate the growth of your super and the achievement of your retirement objectives by taking advantage of contributions made by the government.
•  The majority of super funds provide their members with access to several types of insurance coverage, including income protection insurance, total and permanent disability insurance, and life insurance.
• It is necessary to conduct periodic reviews of your insurance coverage to confirm that it satisfies your requirements and contributes to achieving your monetary objectives.
•  You can improve the quality of the decisions you make concerning your superannuation and retirement planning by seeking the professional assistance of a financial planner or advisor.
• When it comes to investing strategies, contribution choices, and insurance coverage, getting advice and insights from a professional can be extremely beneficial.
• Obtaining the assistance of a specialist can facilitate the increase of your superannuation and the accomplishment of your retirement objectives in a more reasonable manner.
•  It is essential to make use of internet calculators, financial guidance, and any other tools that are accessible in order to accurately estimate the amount of money you will need to save for retirement in Australia.
• You can get an estimate of how much money you need to put away every month in order to achieve your retirement objectives by using these tools.
• The response is going to be specific to your circumstances, but it is extremely important to get an early start on planning and conserving money.