Your Superannuation Benchmark at Age 60
When planning for retirement, benchmarks can offer a valuable guide, but they are not one-size-fits-all. The Association of Superannuation Funds of Australia (ASFA) provides one of the most widely used standards for Australian retirees, outlining budgets for both a 'comfortable' and a 'modest' lifestyle. While the ASFA standard often refers to retirement at age 67, using these figures to project your needs at 60 is a smart move. Retiring at 60 means your super must cover living costs for an additional seven years before you can access the Age Pension, if eligible. Financial experts and funds like Equip Super provide estimates for early retirement, suggesting figures such as $515,000 for a single person and $660,000 for a couple to maintain a comfortable retirement from age 60.
Factors Influencing Your Personal Super Target
Your magic number isn't a national average; it's a personal figure based on your unique circumstances. Several factors will significantly influence how much super you actually need:
- Desired Lifestyle: Do you dream of extensive international travel, or a quieter, more local life? The ASFA standard helps distinguish between a basic, modest lifestyle and a comfortable one with more luxuries.
- Homeownership: Owning your home outright is one of the most significant financial advantages in retirement, drastically reducing your living expenses. If you will still have a mortgage, you'll need a larger super balance to cover those payments.
- Health and Medical Expenses: Healthcare costs can rise as you age, and they can be unpredictable. Budgeting for private health insurance before Medicare eligibility, or potential long-term care needs, is crucial for early retirees.
- Other Income Streams: Your super won't be your only source of income. Consider other assets such as investment properties, share portfolios, or part-time work, which can help supplement your super drawdown.
- Inflation: The cost of living will increase over time. Your retirement savings plan should account for inflation to ensure your purchasing power is maintained throughout a long retirement.
ASFA Retirement Standards: A Comparison
To put your personal needs into perspective, here is a comparison of ASFA's estimates for singles and couples aged 65-84, assuming they own their home outright. These figures are a benchmark to help determine your required income level, which in turn helps calculate your super lump sum needs, especially for those retiring early at 60.
| Lifestyle Standard | Annual Income (Single) | Annual Income (Couple) | Super Balance Needed (Age 67) | |
|---|---|---|---|---|
| Comfortable | Approx. $52,383 | Approx. $73,875 | Single: ~$595,000 | Couple: ~$690,000 |
| Modest | Approx. $33,386 | Approx. $48,184 | Single: ~$100,000 | Couple: ~$100,000 |
Actionable Steps for Age 60 and Beyond
If your current super balance doesn't align with your retirement goals, especially for an earlier retirement, you still have powerful options available at age 60.
If You Are Under-Saved:
- Work Longer: Postponing retirement by even a few years can significantly increase your savings. Each year you continue working is another year you contribute to your super and delay drawing down on your nest egg.
- Make Extra Contributions: If you can afford it, make extra voluntary contributions to your super to catch up. The government offers incentives, such as the co-contribution scheme, to boost your retirement savings.
- Use a Transition to Retirement (TTR) Strategy: If you've reached your preservation age (which is 60 or older for most), you can start a TTR Income account while you are still working. This allows you to receive a regular income stream from your super, which can help you work less while maintaining your income or use it as a tax-effective strategy to top up your super.
If You Are on Track or Ahead:
- Consider a Retirement Income Stream: At age 60, you have reached your preservation age and can begin to convert your super into a tax-free income stream. This provides a steady income and allows the remainder of your super to stay invested and grow.
- Review Your Investments: As you approach retirement, it's prudent to review your investment strategy. A financial planner can help ensure your risk profile aligns with your new stage of life.
- Maximise Other Assets: Evaluate other assets, such as selling a family home, and incorporate them into your overall retirement plan.
Conclusion
Determining the exact superannuation needed at age 60 is a highly personal exercise that requires careful consideration of your individual goals, expenses, and expected income sources. While Australian benchmarks from ASFA provide an excellent starting point, they must be viewed in the context of retiring earlier than the Age Pension eligibility age. Your path to a successful retirement may involve a combination of strategic savings, extra contributions, and leveraging options like a Transition to Retirement strategy. The key is to act now, assess your situation honestly, and make a plan that reflects the retirement lifestyle you truly desire. For more in-depth information on the ASFA Retirement Standard, you can visit their official site here: https://www.superannuation.asn.au/consumers/retirement-standard/.
