Get smarter about saving for retirement

Jason Prowd  |  29 November 2018  |  7 min read

Key Points
  • Saving for retirement is hard, but worth it, especially if you want to continue enjoying a nice lifestyle.
  • The Association of Super Funds Australia (ASFA) benchmarks the difference between a ‘comfortable’ and ‘modest’ lifestyle.
  • Use a super calculator to find out if your super’s on track for the retirement lifestyle you want.

Saving for retirement is the ultimate challenge in long-term thinking and planning. It’s tough to prioritise when there are so many demands on our cash in the short and medium term—things like housing, kids, and the odd holiday and night out feel more pressing than putting money away for the future.

When all the advice out there sounds something like ‘if you just cut out takeaway coffee forever…’, it’s easy to get discouraged, especially since coffee is immediate and cheap, and retirement’s the opposite.

So how much do you really need to have saved before retiring?

The magic number depends on a range of different variables, such as your age at retirement, whether you own your home outright, whether you’re single or in a couple and–the thing that literally none of us knows–how long you’ll live.

According to the Association of Superannuation Funds of Australia (ASFA), currently, in order to have a ‘comfortable’ retirement, a single person should retire with $545,000. A couple should have $640,000 in superannuation. Meanwhile, a ‘modest’ retirement requires only $70,000 in superannuation (that’s whether you’re a single or a couple). Both calculations assume that:

  • you own your own home
  • you’ll be supplementing the amount you draw down from your super each year with the aged pension
  • you and your partner are both relatively healthy.

And of course, the younger you are now, the more money you’ll need for retirement. 35-year-olds, for example, are looking at $1.17 million to maintain a comfortable retirement lifestyle as a single – more if you don’t own your home by then or are likely to live a long time.


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What’s the difference between a comfortable and a modest retirement?

ASFA goes into detail about the different standard of living you can expect from each kind of retirement. Here are a few examples:

  • A comfortable retirement has room in the budget for replacing your kitchen or bathroom over 20 years, whereas a modest retirement will mean that you’re stuck with what you’ve got.
  • Comfortable retirement allows overseas travel every so often, and a modest one will mean occasional domestic travel.
  • If you’re living comfortably, you can afford to run the air con, whereas a modest pension means that you’ve got to pile on a few more jumpers in winter.

Meanwhile, those living on the aged pension alone are looking at haircuts from friends, ‘basic’ clothes, less heating in winter and only rare trips to the movies – which sounds less than ideal.

Women and super

It’s important to note that women tend to be more at risk of retiring without enough super. There’s a cluster of reasons for this: lower pay, a higher incidence of part-time employment, career breaks to care for family members. Women also tend to live longer than men, so not only is their super balance lower, but it has to last longer, too.

How do you know you’re on the right track?

So how do you know if you’re on track to have enough money in your super by retirement? ASIC provides an in-depth calculator that takes into account age, income, whether or not you intend to have a career break, and any salary sacrifice that you put towards super.

Maybe you’ve been looking at the ‘comfortable’ lifestyle and feel like you want to see more of the world when you retire. If that’s the case, you’ll need to consider amping up your super contributions or investing to pass the ‘comfortable’ benchmark.

It’s never too late to increase your super contributions or investment savings. There are a couple of ways to do this: one is to take advantage of compound interest. Though your money will appreciate in value if you leave it in a high-interest, compounding savings account, making regular contributions on top of that will kick things up a notch. Or, if you’re still in the investing-is-something-other-people-do phase, check out my article on re-writing the procrastinator’s playbook. The earlier you start, the better off you’ll be when you retire.


Jason Prowd leads Morningstar Next: ready-made investment portfolios.

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