At age 57 you're approaching your final few working years before you can retire and live the life you've worked so hard to build. But do you have enough superannuation to support yourself when your retirement years finally come?
Here's a breakdown of what the average Australian has in their super at age 57, and what you actually need to retire. Because the two figures are wildly different.
What is the average superannuation balance at age 57 in Australia?
There aren't exact figures, but brackets determined by the Association of Superannuation Funds of Australia (ASFA) provide a handy guide.
The data shows that the average Australian male aged 55 to 59 has around $319,743 in their super.
Women the same age have quite a lot less, typically because they have to take time out of the workforce to raise children or they work fewer hours.
The average balance for Australian women aged 55 to 59 is around $242,945.
How does your superannuation balance compare to people the same age as you?
And most importantly how does it compare to what you actually need to retire comfortably?
Let's break it down.
What does a comfortable retirement look like?
The Association of Superannuation Funds of Australia (ASFA) splits retirement into two broad categories: comfortable and modest.
A comfortable retirement is defined as one that enables retirees to maintain a good standard of living well beyond the age pension. It budgets for expenses beyond a modest retirement, including top-tier private health insurance and regular leisure activities. It allocates funds for home repairs or renovations, and perhaps even an annual holiday.
Meanwhile, a modest retirement is defined as being able to cover expenses just slightly above what the full Centrelink Age Pension would provide from age 67.
How much will that cost me?
According to ASFA, a comfortable retirement is expected to cost roughly $55,923 per year for single Australians. A couple living together can expect to spend around $78,566 per year combined.
In order to fund a comfortable retirement, ASFA calculates that at age 67, single Australians will need around $630,000. Meanwhile, couples will need a superannuation balance of around $730,000.
How much should I have in my superannuation at age 57 to meet that required balance by age 67?
Let's assume you're aiming for a $630,000 balance.
In order to be on track to reach that amount within the next 10 years, your balance at age 57 should be close to $439,500.
How does your superannuation balance compare now?
Why is that so much higher than what the average Australian has the same age?
Yes, a quick sum shows that the average balance is significantly lower than what you'd need to retire comfortably. In fact, the average Aussie is behind by up to $196,000.
That's a huge difference.
Part of the problem is that Australia's compulsory Superannuation Guarantee only began in 1992. That means many people now in or very soon approaching retirement likely didn't earn super through their early working lives.
There is also the misconception that accumulating superannuation alone is enough to be able to fund retirement. The reality is, while superannuation is a great tool to help, it isn't enough to rely on alone.
The key is extra contributions. Even a small additional contribution today can make a big difference to your end balance. The power of compounding returns means the more money you can invest when you're younger will have more impact on your final balance.
The post Average superannuation balance at age 57 in Australia, versus what you actually need to retire comfortably appeared first on The Motley Fool Australia.
Motley Fool contributor Samantha Menzies has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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