Troy Burns
Updated Dec 19, 2022
Mate Checked
It’s a fundamental question, and one that needs to consider many different things: How much super do I need to have to retire?
Some say that if you can save around 10% to 15% of your income each year, you’ll give yourself a fighting chance, but you can think about a more personalised super savings goal with some considerations below.
Generally speaking, saving around 10% to 15% of your pretax or gross income for your super is what many financial professionals talk about. Individuals who earn more than $150,000 per anum lean closer to 15%, and low-income earners might typically save 10% as the pension could replace some of their income when they retire.
Exactly how much super you will need to save for retirement will depend on things like:
To estimate your future living expenses or income requirements, you can start by analysing your current expenditure. You can work this out by entering your average monthly spending in an Excel spreadsheet. Next, you have to think about which of these expenses might change the closer you get to retirement. Ideally, some might disappear altogether (like the mortgage), and other costs might increase (like golf fees). Try and also consider the things you would like to spend money on later (travel, leisure, entertainment) and you will have a rough idea of your monthly future monthly living expenses.
It’s an unfortunate reality that most Australian’s below the age of 45 haven’t given much thought to their retirement. If you’re one of the many who won’t give this a second thought, then it’s essential to consider the income-replacement calculations. It provides a one-size-fits-all style approach which is not going to be perfect, but it is far better than nothing.
By saving around 10% of your income now, you could comfortably live on 90% of your income in retirement with only minor adjustments to your monthly expenses.
To calculate where you might end up, work out how much of your income you’re saving for super. You only have to do this until you reach the retirement age, which means if you increase your savings to 15%, you could comfortably live on 85% of your income without adjusting expenses which is starting to sound very achievable.
To get the most out of your super savings calculations, it is best to take a closer look at your expenses and refine your estimates as much as possible. After all, there’s a big difference between surviving and actually enjoying your retirement, so spend some time on this and play with a few different scenarios.
Once you have considered the above, the SMSF Mate retirement calculator can give you an idea of how your retirement projections are looking. It compares things like spending estimates with a whole range of considerations. Things like economic growth, inflation, life expectancy and market returns are all set by default based on historical information.
With any calculator, the devil is always in the details, so you have to consider if the assumptions made in the SMSF Mate retirement calculator are correct given your situation. Questions to ask yourself are:
Life can often change pretty quickly, so it’s essential to reassess your super savings plans annually at the very least.
Starting your super savings plan now and adjusting as required is much better than playing catch up in your later years. You might get a new job, or decide to take some time off or even start a family and all these things can impact your super savings plans.
This kind of thing can be quite overwhelming, so talking to a financial advisor could be the way forward, or you might like to roll up your sleeves and learn the ropes yourself.
