- I have a super balance of around $900,000 at age 60 and am exploring whether that will lead to a “comfortable” retirement (whatever that means). Everyone I talk to seems to have a different idea and they all end with “Well, it depends.” We understand that your retirement lifestyle choices will impact your super.Do you have any thoughts on what my wife and I should do between now and when I reach her 67th year to maximize our savings? Thanks a lot, Rob
I like your comment. ”Have a comfortable retirement, whatever that means.”.
What tends to happen is that people ask questions in the wrong direction.
Instead of asking, “How much money do I need to live a comfortable retirement?”, why not start by asking, “What do you want to do and spend your retirement with?”
We will then calculate the required amount.
Even if you approach it from this angle, some people still find it difficult to get started.
So let’s take a look at what ASFA’s retirement criteria include. It provides a weekly cost breakdown that explains what a “modest” and “comfortable” income looks like in retirement for both married couples and single people.
Please compare and adjust the costs in the table below as a guide. These numbers assume you own your home. Also note that the following numbers increase each year due to inflation.
Given your current super-savings levels, you are on track to meet ASFA’s definition of comfort and even beyond, although your own definition may be different.
Maximizing your contributions and investing them appropriately before retirement will also help you maximize your savings.
This allows you to enjoy a higher standard of living in retirement or retire earlier than age 67 if you wish.
Table 1: Retirement criteria for ASFA retirees (June 2023)
(Calculating “modest” retirement benefits and “comfortable” retirement spending levels)
Unless otherwise specified, numbers are in weekly units.Due to rounding of price adjustments, total may not exactly equal component sum
- My daughter is 19 years old, working part time and attending college full time. When she has a little money to spare, she wonders if it’s a good idea to invest it in super or if she should pay off her HECS/HELP debt.
Given that she won’t have access to super until she’s 60 at the earliest, I’m not going to make any additional contributions to super.
Employer SG contribution rates currently move to 11% of wages and will move to 12% from 1 July 2025.
If your daughter has had a regular employment pattern throughout her life, her super will already have a good base from which to grow. She may consider making additional contributions in the future once some other financial goals are achieved.
Your question suggests that your daughter will have extra cash at some point. In fact, this is the most important aspect of achieving your financial goals. The money you save cannot be overstated.
The question is whether to pay off HECS/HELP or save for another goal.
HECS/HELP loans are indexed to CPI, which means they were indexed by a whopping 7.1% last year.
Hopefully, Australia will get inflation under control and indexation rates will fall to levels that are considered more normal. We note that between 2015 and 2021, the annual indexation rate for HECS/HELP ranged from 0.6 percent to 2.1 percent.
When I talk to many young people with HECS/HELP debt, I find it can be psychologically stressful to see their debt increase year after year. So, while paying off your HECS/HELP debt is not necessarily the best financial strategy, it can psychologically relieve some stress.
One strategy to consider is to make some repayments to keep your debt from accumulating, and then consider redirecting any extra funds to other investments or savings goals.
Then, it comes down to what your daughter’s goals are.
- What is the maximum part-time income that will not affect my pension?
No matter what your income is, you can receive $150 a fortnight without affecting your superannuation.
In addition to the above, there is something called a work bonus where the government encourages older workers to stay in the workplace.
With Work Bonus, your first $300 is employment Income (and self-employment income) is excluded from the fortnightly pension income test.
Effectively, this means that you can receive $450 per fortnight as long as at least $300 is earned from employment and your superannuation is not affected.
This is a simple explanation.
In fact, if your salary income is less than $300 (including zero) per fortnight, taking into account temporary or seasonal work, you will accrue a labor bonus that can be used for the next two weeks.
Centrelink will do this automatically as long as you keep yourself updated on the situation. Learn more about.
Craig Sankey is a Certified Financial Advisor and Head of Technical Services and Advice Enablement at Industry Fund Services.
Disclaimer: The answers provided are general in nature and are developed based on the questions asked, but without considering all of your objectives, financial situation, and needs.
Before relying on any information, please consider whether it is appropriate for your purposes, financial situation or needs. To the extent permitted by law, IFS and its representatives assume no liability for errors or omissions.
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