Hi Michael, I hear a lot about average super balances, although I don’t understand how this translates into how much I need in retirement. Can you help me quantify this and explain how I can map out how much I need?
Thomas, Brookvale

Thank you for your question, Thomas. Understanding how much you need in retirement can feel like navigating a maze without a map. The term ‘average Super balance’ often pops up in discussions about retirement, but it might seem abstract and disconnected from your personal financial goals.

To assist, picture your retirement like an artist envisaging a masterpiece. What does your ideal lifestyle look like? Will you be jet-setting across the globe, indulging in your passions, or savoring quiet moments at home? By defining your retirement dreams, you lay the foundation for assessing how much you need on an ongoing basis in retirement.

Once you’ve painted a vivid picture of your retirement, it’s time to crunch the numbers. Estimate your future expenses, factoring in everything from daily living costs to travel expenses and healthcare expenditures. Be mindful of inflation’s sneaky impact. Now that you have this magic number in mind, it’s a matter of working out what asset base you require to generate this income.

There are various asset classes and ownership structures that can be used to generate this income, with the common asset classes being shares, property and fixed income. One of the most compelling tax structures for building an assets base for retirement is superannuation, which enjoys favorable tax treatment.

During the accumulation phase, contributions are typically taxed at a lower rate than standard income tax rates, allowing individuals to grow their retirement savings more tax efficiently. Additionally, investment earnings within superannuation are taxed at a maximum rate of 15 per cent, which can significantly boost the growth of retirement savings over time.

Upon reaching retirement age, superannuation assets can be converted into retirement income streams, providing a regular source of income to supplement income from other assets. Options such as account-based pensions or annuities allow retirees to tailor their income stream to their needs, providing financial security and peace of mind throughout retirement.

Therefore, it’s not just about looking at how your super balance compares to the average, it’s more about determining how much income you require in retirement. Deciding how much superannuation is enough requires careful consideration of various factors, including retirement lifestyle, expenses, investment strategy and life expectancy.

While there’s no definitive answer, proactive planning, informed decision- making and professional guidance can help individuals achieve financial security and enjoy a fulfilling retirement. Start planning today to secure your tomorrow.

Any questions, please speak with your financial adviser, or call me to discuss on 8376 0350.

Regards, Michael

Financial planner Michael de Bomford of Up Wealth Management is an Authorised Representative of Consultum Financial Advisers Pty Ltd, AFSL 230323. Phone 8376 0350 or visit upwealthmanagement.com.au

Any advice or information in this publication is of a general nature only and has not taken into account your personal objectives, financial situation and needs. Because of that, before acting on the advice, you should consider its appropriateness to you, having regard to your personal objectives, financial situation and needs.