Super is the largest asset most Australians will have, outside the family home. But while it’s exciting to finally get your hands on such a large sum of money, it can be hard to figure out how it will actually translate to a regular income that lasts you a few decades of retirement.
Though it may seem old school, a budget is key. While you’re probably no stranger to the humble budget, there are a few new things to consider as you work out how much to spend in retirement.
How much super do you have and how long will it last?
The biggest factor in creating any budget is determining how much money you have to work with, and how long you’ll need it for.
According to the Australian Institute of Health and Welfare, men aged 65 in 2015-17 have a life expectancy of almost 85, while women aged 65 have a life expectancy of 87 – so your super will need to be with you for quite some time.
As a guide, the Association of Super Funds of Australia (ASFA)’s Retirement Standard* estimates that a couple will need a lump sum of $640,000 in combined super savings at retirement in order to enjoy a ‘comfortable’ retirement. A single person, meanwhile, will need a lump sum of $545,000 in super savings.
Broken down into a yearly figure, ASFA estimates that a single retiree will need an income of $44,146 a year to enjoy a comfortable lifestyle, while a couple will need $62,269.
These estimates assume that the retirees own their own home outright, are relatively healthy, and will draw down all their capital and eventually receive a part age pension.
Of course, everyone’s needs in, and dreams for, retirement are different. You can calculate your income in retirement with our Retirement Income Simulator.
This tool allows you to make adjustments for factors like your personal desired annual income, one-off purchases like a car, the age pension, and any other investments or income you may have from other sources, to show you how long your super will last.
How will your expenses change?
*December quarter 2019
How often do you want to get paid?
This is perhaps the biggest question you need to consider not only when setting up your budget, but also when choosing where to keep your super.
This is because there are different requirements depending on the type of account you keep your super in during retirement.