Do you see yourself retiring at 60? It’s somewhat of an optimal age for retirement in Australia – favourable both from a tax and access to super perspective.
But before you hang up the boots, you want to make sure you’ve got enough super, right?
How Much Super Do I Need to Retire at 60?
Retiring at 60 is the first time you are able to get unrestricted, tax-free access to your super; so there really is no better time to retire.
Knowing how much super you need to retire can give you a good idea of what to work towards and how much you need to save between now and then. Hey, you might already be there!
In fact, many people think they need a lot more in super for retirement than they actually do.
The two main reasons people overestimate the amount they need in retirement is because they either don’t accurately calculate the tax-free earnings from superannuation investments, or they don’t factor Centrelink Age Pension payments into their calculations.
I can already hear a few of your grumbling ….”Can’t rely on the Age Pension, the Government changes their mind whenever they want to suit themselves”.
Well, maybe you’re right, but the way I see it, you have two options. You can either calculate how much super you need and not take into account the Age Pension – an integral pillar in the Australian retirement system that is very unlikely to be abolished overnight; or, you can accept that the Age Pension is likely to be here for a while yet.
The problem with excluding the Age Pension from your calculations, is that your calculations will conclude that you need significantly more than you actually do, requiring you to work around 5-10 years longer – missing out on, arguably, the best years of retirement. And for what? Because of your unsubstantiated gripe against the Government?
Since the beginning of my career in 2006, I’ve listened to 60 year old’s swear black-and-blue that the Age Pension won’t be around in ‘a few years’ time’. Well blow me, it’s still here supplementing retirement income streams! And if it ever does get removed, it’s only going to get replaced with some other form of safety net.
All I’m saying is that doomsday-prepping for an Age Pension wipeout is only going to result in you working longer than you need to. If it makes you feel better, maybe factor in an extra $50-$100k in your super for possible future Age Pension payment reductions, but don’t exclude it all together. Also, keep in mind that, even if you’re not eligible for Age Pension payments as soon as you hit Age Pension age, there will likely come a point in your later stages of life that your assets will reduce to such a level that you will become eligible.
Now that we’ve cleared the air on why I calculate how much super you need to retire at 60 the way that I do, we can get down to business.
The table below shows you how much super you need to retire at 60 based on a range of retirement income levels and longevity of income.
|Income Until 90||Income Until 95||Income Until 100|
|Single||Couple (combined)||Single||Couple (combined)||Single||Couple (combined)|
The table above assumes a net investment return of 6% p.a. (after all fees and assuming no other costs) eligibility for the Age Pension, when applicable, and a rise in the cost of living (inflation) of 3% p.a. The calculations were performed using the MoneySmart retirement planner calculator and all associated disclaimers and assumptions.
Hopefully this table gives you a good idea of how much super you need to retire at age 60. Obviously to achieve these retirement income goals, you need a suitable and robust investment strategy that has a high probability of achieving the required long-term returns. There are also plenty of retirement planning strategies available that can help build your super quicker and provide you with a retirement income for longer.
What are your plans for retirement? Are you going to do more travel overseas, explore the beauty Australia has to offer, or nestle in at home and spend more time with family? Let me know in the comments below.