Is Your Retirement Plan on Track? Australia’s Latest Superannuation Benchmark Revealed

A recent report highlights that the amount Australians need in superannuation for a comfortable retirement has risen in response to escalating living costs.

According to the Association of Superannuation Funds of Australia (ASFA), individuals aged 67 who own a home now require $630,000 in retirement savings to live comfortably. This figure marks an increase from the $595,000 benchmark set three years ago.

For couples who own a home, the necessary savings have also climbed, now standing at $730,000 compared to the previous $690,000.

Mary Delahunty, CEO of ASFA, attributes this adjustment to both the rising cost of living and the age pension’s inability to keep up with these increases.

“The age pension hasn’t matched the actual cost hikes that retirees encounter, especially concerning essential goods and services,” Delahunty explained.

“Costs in the categories that retirees tend to spend most on have risen faster than general consumer price inflation. So that means even though the age pension is indexed, a greater burden is placed on retirees’ personal super savings.”

Inflation, which is tracked using the Consumer Price Index published by the Australian Bureau of Statistics (ABS), rose to 3.8 per cent in the year to December, up from 3.4 per cent in the year to November.

The ABS identified housing, food and non-alcoholic beverages, and recreation and culture as the largest contributors to annual inflation.

Delahunty also noted that the recent increase in deeming rates — which are used to estimate income earned from financial assets for age pension eligibility — led to the revision of the benchmark.

“When deeming rates rise, a person’s assessed income can increase even if their actual investment returns have not, which can reduce their age pension. This shifts more of a retiree’s budget towards reliance on super rather than Centrelink,” she said.

How do you know if you’re on track?

In order to reach the comfortable standard of $630,000 in superannuation, Australians would need to aim for a balance of $571,000 by the time they turn 65 years old, working on the assumption that they have a steady pre-tax annual income of $65,000 that keeps track with inflation.

The recommended balance at 30 years old is $66,500, $168,000 at 40, and $296,000 at 50.

Despite the benchmark revisions, James Koval, ASFA’s head of policy and advocacy, told SBS News that Australians are on track to retire with more superannuation than ever.

“Some really important changes have happened to superannuation over recent years,” he said.

“The minimum rate of super that people will receive these days is 12 per cent, and people will also receive it in circumstances that they might not have in the past, such as when they take parental leave.

“These are very positive changes that help increase the balance of super that people have in super when they retire.”

Koval said the investment return from superannuation has also demonstrated strong performance in recent years, which leads to higher superannuation balances.

“What it actually means is that, for someone who is 30 years old today, with about 30 grand in their super, they are actually on track to retire with $645,000 in their super, which is, of course, above the amount you need for a comfortable retirement.”

Older Australians are hit most

While younger Australians have a “really positive” future with the growth of their superannuation balances heading towards retirement, Koval said, older Australians may face more negative impacts of the revised benchmarks for comfortable retirement.

“For a lot of Australians who are retiring today, super plays a very big part in their retirement, but also the age pension is a key factor for a lot of people,” he said.

He said the deeming rate in age pension has been updated twice since the COVID-19 pandemic began in 2020, meaning recent retirees may face greater pressures from living expenses on their superannuation balances.

He encouraged Australians approaching retirement to engage more with their super accounts, check investments and ensure payments are arriving.

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