The official age at which Australians can access the age pension is 67, but the average retirement age is far earlier, at just 56 years old. This means that many people will begin drawing from their superannuation almost a decade before they qualify for government support which may not even support their lifestyle, raising the question: do most Australians have enough super to last almost 30 years in retirement?
With life expectancy in Australia approaching 84 years, this is a crucial consideration.
It’s important to remember that while retirement lifestyle and super performance vary greatly from person to person, national averages can give us an idea of whether Australians are on track for a comfortable retirement or face relying on the pension.
Retirement often brings lifestyle changes, and it's generally accepted that retirees need about 80% of their pre-retirement income. This is largely because many retirees have paid off their mortgages, no longer need to support children, and reduce everyday costs like commuting and food through senior's discounts. According to the Association of Superannuation Funds of Australia (ASFA), a comfortable retirement income is about $51,000 per year for singles and $72,000 for couples.
By comparison, the age pension provides just over $27,000 annually for singles and $41,000 for couples, well below what is considered “comfortable”. Clearly, having enough super to avoid relying on the pension is a smart financial goal.
To avoid running out of super during retirement, it’s vital to ensure that your super balance generates a return equal to or greater than what you withdraw each year. Chant West data shows that super funds have achieved an average annual return of 5.2% over the last 30 years (adjusted for inflation). Based on this, to maintain the “comfortable” retirement above forever, a single retiree would need a super balance of about $980,000, while couples would need around $1.38 million. If you're aiming for your super to last only the 30 years, those numbers drop to $750,000 for singles and $1.06 million for couples.
Unfortunately, many Australians fall short of these targets. ATO data shows that the average super balance for 55 to 59-year-olds is $315,000 for men and $235,000 for women—well below what’s needed for a comfortable retirement. Without intervention, this means many Australians may run out of super within a decade of retiring and may have to return to the workforce or rely on the age pension for the remainder of their lives.
While boosting your super by $450,000 or more might seem overwhelming, if you spread that amount across your entire working life, it works out to about an additional $9,000 per year. Many Australians don’t begin thinking about their super balance until later in life, but small, regular contributions or becoming actively involved in how your super is invested early on can make a significant difference to your balance over time.
Making informed decisions about your super today can secure a comfortable future tomorrow. And did you know that you can often use your superannuation to invest in properties to provide you with ongoing rental income in your retirement?
Contact The Property Mentors to discuss how property investment could help to support your retirement. Our mentors can help you take steps now to ensure you have the financial security to enjoy a comfortable retirement later.
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