How much super should I have?
“How much super should I have?”
A question we get all too often, as Financial Advisers. Easy question to ask, often a difficult question to simply answer.
One approach is to look at the national average. Assuming a few variables such as sex, average salary, contribution rate, years of employment, average rate of return in superannuation, etc. This provides a broad-brush approach to answer the question.
The table below shows the average super balances for men and women at different ages:
The next logical question often then follows: “How much super do I need”? Once again simple question, complicated answer.
The yard stick that many “finance gurus” used to discuss was $1M – a nice round and simple number to work towards. However, in our experience, this number would often be wildly inaccurate and often unachievable for most Australians. This is particularly the case if mandatory superannuation only came into effect half-way through your working life. This also creates unnecessary anxiety and often delaying retirement plans, for those individuals that were no where near the “magic number”.
To answer this question and address this uncertainty, the first thing to do is to figure out your own numbers i.e. what income do you need. *Cash is King* As often this number will likely be the similar to what you will need at retirement.
Secondly, are there any big-ticket items you need to account for? New car replacement? Overdue Europe holiday? Repaying residual mortgage or debts? Home deposit to help the kids and simultaneously get them out of your house?? These items need to be factored in as they have an impact on your retirement plans.
Thirdly, are you planning on receiving any Centrelink Age Pension? Do a stock take of your current assets, cars, savings, investments, home contents (basically every excluding the family home). Additionally, will you receive any income during retirement i.e. rental income, dividend from shares or investment portfolio, interest on cash. Depending on your assets and income at retirement, you may qualify for some or the full Centrelink Age Pension.
If your combined assets, income and superannuation still falls short, you have a number of options to boost your superannuation. Depending on your timeframe to retirement, doing one or all of the following contributions may help considerably with achieving your goal:
- Salary sacrificing
- Personal tax-deductible
- Government co-contributions
To give you some idea in what direction your retirement plan is heading in, use publicly available retirement calculators: https://secure.amp.com.au/ddc/public/ui/retirement-needs/
These do a decent job of projecting superannuation assets leading into retirement and beyond.
Finally, if you have done all the above (or even if you haven not) but wanted to discuss your retirement plans with a professional, contact the team at 360 Financial Strategists.
We are more than happy to discuss your options and how we may be able to help.