We often hear that we’ll need one million dollars in super before we’re able to think about retiring comfortably. And while it’s a lovely round number, it’s also completely wrong. There’s certainly no one-size-fits-all when it comes to knowing how much you’ll need in retirement, and there’s a bit of legwork involved in figuring out how much you need.
How much you need will depend on a few factors, such as how much you’ll receive for the Age Pension, when you want to retire, and your relationship status. Your superannuation will play a significant role in funding your retirement, and there are a few options available in how you receive these funds.
So, what is available to me?
At 65, you can access your super and seeing as it’s your money, there’s no limit as to how much you can take out once you’re fully retired. If you want to access your super before then, you’ll need to meet a condition of release.
The Age Pension is available to you from age 65.5 to 67 (depending on your date of birth) and this might be years after you retire. Your super could be used to help bridge that gap before your government benefits kick in.
Account based pension
An account-based pension uses the money you have accumulated in super to pay you a regular income stream. The pension will pay you the amount you nominate at the frequency you choose into your bank account and while there is a minimum you need to take each year, there’s no maximum. And, because you have retired, your investment returns are tax free!
Leave your funds in your accumulation
Not sure whether you’ll need a regular payment? You can leave your funds in your accumulation account and simply take out lump sum withdrawals as you need them. If you’ve met the preservation rules, there’s no restriction on how much you can take out, but remember your investment returns are not tax free as they would be in an Account based pension.
The Age Pension
The rules surrounding how to access the Age Pension, on the other hand, are entirely different. The Age Pension is a government benefit and is available to anyone who meets the age and residency requirements. The amount you receive depends on a range of factors like total assets and other sources of income. Accessing these benefits also depends on your birthday, with most people now being able to access the Age Pension at age 67.
The maximum Age Pension, including supplements, is currently $933.40 a fortnight for a single person and $1,407.00 a fortnight for a couple1. When you think about this amount compared to your current fortnightly expenses, will it be enough, and will you need your super to get you over the line?
So what’s best for me?
Of course, there is much more to the Age Pension and super payments than can be described in such few words, and it all depends on your individual circumstances. Vision Super has a range of resources available to you like our calculators, which can help you work out how much super you may end up with, how long your super may last, and how extra contributions could make a difference. Once you've tried our handy calculators and you want to give your super a boost than there are some strategies that may help:
- Consolidate your super into one account
- increase your super contributions
- change investment options (we recommend seeking advice before you do this)
Otherwise, we can offer personal financial advice to you and your spouse, and explain the options that are available to you.
1 Department of Human Services – Age Pension (How much can you get) www.humanservices.gov.au/individuals/services/centrelink/age-pension/how-much-you-can-get September 2019