How Much Super Should You Really Have at Age 40?

I'm trying to understand the amount of Super people should have compared to what they do.

Comments

    •  

      Do the figures add up?

      It says for a comfortable retirement you need to spend $62,562 per year and to achieve that you'll need $640,000.

      The general wisdom is you'll have your money invested conservatively in your retirement years so not likely to be getting any high returns. So I would say at that spend rate you'd run out in about 10-15 years.

      Seems would get a bit tight towards the end there.

  • +11 votes

    This is hard to answer as there are many factors to consider :

    1) How long are you intending to work? Or when will you retire?
    2) How much do you want when you retire? Or what lifestyle do you want in retirement?
    3) Your income - no use comparing to others if your income is not in the same range.
    4) Your current assets - If you have put more money into paying off debt or investing in getting more passive income then less Super may not be that bad.

    Having less Super when you have a fully paid off home and accumulated a decent portfolio is not that bad.

    Having less Super when you are still renting at retirement is not prudent.

    • +2 votes

      Pensions will always be there for those that don't cut it.
      Just you will have to wait longer to get access (over age 67) and prepare for a very basic frugal living

      • +16 votes

        Don't count on the pension. It'll be continually raised to the point where only the oldest get it. We are living longer so 67 will be far too low to 25yrs time. I expect the pension will slowly creep to 75yo by 2045.

        • +7 votes

          Going on history that seems unlikely, cuts to pension seem to be politically very unpopular. It came in at 65 in 1901 and 120 years later it is still only 67, despite life expectancy increasing dramatically. The current increase has been phased in gradually with lots of warning and I'd expect the same would be necessary for any govt to introduce future increases.

          • +4 votes

            @md333: That's partially because the state can still afford it…. once it runs out of money it has no choice but to either raise the age or cut the allowance ….

            • +4 votes

              @AllWins: The state cannot run out of money, we have our own currency. Raising the age does nothing if people can't find jobs and it or cutting the pension is a great way to become the opposition.

          • +1 vote

            @md333: This, a perspective government lost an election due to trying to make way less significant changes to people's retirement plans. If anything we're likely to see a decrease in the far future as we enter a low employment economy due to automation.

          • +1 vote

            @md333:

            cuts to pension seem to be politically very unpopular

            Its almost so small an amount to start with that you cant cut it

          •  

            @md333: Old ppl started to get the old age pension around 1910; women at 60, men at 65.

        •  

          Meanwhile the same people will be entitled to unemployment benefits until retirement age.- - whatever that may be.

          So they just jump from one pension to another.

          As long as they are prepared to accept a very basic frugal living

  •  

    doesn't really matter
    it depends on your individual circumstances
    have u got a home?
    is it paid off
    what's the value
    you got kids?
    are ur parents rich
    other assets? shares, bitcoin
    what's ur expenses like

  •  

    I'm not worried about my Super. I understand it's a lifestyle based estimate.

    Other people that tell me they make 60k per year and only have 30k to 50k in Super as a majority. Is this the median? Is this the average?

    I'm trying to get some perspective.

    Removing all variables how much do you think people should have in Super by age 40?

    I think by age 40 you should have at least 100k

    • +1 vote

      I don't think anyone really knows. I looked into it a few years back and found articles saying the average in Australia at age 40 is $55k, another saying $140k and several others in between.

      Personally I'd be seriously worried if I only had $40k. I'm well above that (and a few years older) and don't think I have enough.

      •  

        I agree with you wholeheartedly. How do people have something to strive for if they don't know?

        I'm doing fairly well, but for other people I know of that earn 1/3 to half of what I do. I think WTF how will you ever retire?

        or is retirement really just a social construct?

        • +1 vote

          "how will you ever retire?"
          Some are happy with the pension
          .

          • +6 votes

            @Nugs: You're assuming there'll still be a pension 25+ years from now. They've already raised the age from 65 to 67 and wanted to raise it to 70 but that's been abandoned for now. Won't surprise me to see further changes before someone who's 40 today reaches retirement age.

          • +1 vote

            @Nugs: That’s if there will still be one.

        • +1 vote

          You are thinking about it backwards.

          Start with WHEN you want to retire and HOW MUCH you will want to spend each year in retirement. Then there are a number of calculators that will show you how much your super should be (roughly) each year to meet that projected goal. If you don't have enough, you can always contribute more.

          •  

            @JayEmmGee: Link to calculators please

            •  

              @Tleyx: First one that came up in a search was Australian Super: https://www.australiansuper.com/tools-and-advice/calculators...

              Shows year on year what your projected super balance is based on salary and current balance (assuming nothing changes) and how long it will last for at your desired retirement age and annual income in retirement. You can then project out the impact of additional contributions or changes to retirement age/income.

    • +2 votes

      There's no one right answer. Do you know how much you need at retirement? Decide on that first, then work backwards.

      Visit the MoneySmart compound interest calculator. Play with it by putting in the current balance at age 40 as the starting amount and the monthly contributions (based on your current pay or and other sources) and a period of say 20-25 years. Keep fiddling till your retirement nest egg is the result. That starting amount is the answer for you

  • +1 vote

    Don't forget to check your investment mix because that has a big influence on how much it grows.

    • +5 votes

      Include alts?

      • +2 votes

        All in on micro-caps.

    • +2 votes

      I'm asking for opinions. I'm not sure how this helps.

      • +4 votes

        Other people that tell me they make 60k per year and only have 30k to 50k in Super as a majority. Is this the median? Is this the average?

      • +2 votes

        It helps because if you're ahead of the average you're doing ok.

        I'm 39 my super balance is 350k… that's more than most 60 year olds. I guess by 60 I should have around a million or more. Hopefully retired by then.

        • +1 vote

          Very nice. I'm 39 too. My balance is….less.

          • +1 vote

            @BartholemewH: Dont worry.
            Its like Whirlpool where everyone is a millionaire and everyone earns more than 150k with lot of money in their super…

    • +1 vote

      Far out, median balances are lower than I expected. I'm 35, $100k in super.

      • +2 votes

        I had $350k at 45yo when I left Qantas in 2007. That was almost 18 years of compulsory and voluntary contributions into a weird hybrid fund (Fund 3) that was half market returns and half "if you put in an extra dollar, we'll put in 50c". When I worked out how the system was structured it was a no-brainer to put in extra.

        I just put in any pay rises I got and didn't miss it

        • +10 votes

          That's a good way to go about it. I personally don't put any extra in at this point, don't trust the government not to make it "more difficult" to access in the future, and I can put the money to paying off my home etc now.

          •  

            @brendanm: This is my thinking as well, I used to put in extra due to the govt co-contribution when in my early 20s, but i think i'd rather have access now to purchase assets than keep it in the maybe bank.

          • +5 votes

            @brendanm: Pay rises….those were the days!

          • +4 votes

            @brendanm: There have been many changes to superannuation (and retirement / pension rules) in the 32 years I've had a super fund (42 years FT work last March). Each one has been a backward step for the consumer and you just have to roll with the punches and adjust your plan.

            I could give you lots of reasons to put extra in up to the $25k Concessional Cap ($27.5k next FY) combined SGA and personal contributions but I'm aware that everyone's situation is different.

            The best example I can give is that if you earn $70,000 then the employer SGA contribution is $6650. That leaves you $18350 to reach the cap. If you put in $5k and claim the tax deduction it will cost you $3375 out of your take home pay. That's $65/week.

            Sure, it doesn't help you much now but compounding will be great over 15-25 years.

            • +2 votes

              @brad1-8tsi: 100% that it will make a massive difference, it's just the worry that I'll be 85 before actually being able to use it, which will be of zero help at that point.

              • +2 votes

                @brendanm: They keep changing the age you can access the pension (67 now?) but the superannuation age has been stable for many years.

                You can access at 55 but have to pay tax on the drawdown

                or

                access at 60 as a tax free income stream.

                NB: You can have superannuation and access the aged pension as well. IIRC, the sweet spot is $235,000 in Super will get you 95% of the aged pension.

                You're a mech just like I was. I full confidence in your ability to make an achievable plan that will give you a full lifestyle while working and a really comfortable retirement (because your back will be a bit dodgy by then ;-) ).

                •  

                  @brad1-8tsi: My backs already dodgy 😂 Plan to not be on the tools at some point, dont want to do this forever.

                  What did you go to after swinging spanners?

                  •  

                    @brendanm: I did an Mech Tech Certificate and then an Associate Diploma in Mech Eng (should have done production eng) both part time. Basically, I worked (lots), bought & sold cars, and studied from 1980-1990 and did nothing else. My GF still mentions bands and movies from the '80s and I haven't a clue what she is talking about.

                    Went on the tools at Qantas fixing engine components then became a planner in their workshops, then Facilities Planning (buying and commissioning new equipment) and a short role in change management during the Y2K bug and more facilities planning / analysis. That was almost 18 years.

                    Voluntary redundancy in 2007 and I sub-contracted to an engineering company for 9 months doing whatever they wanted me too. Great work but the hours were too variable.

                    Then I went into state government managing large water assets (dams, pipelines) as a maintenance planner and contract liaison person. That job disappeared after 8 years and a role inspecting the assets and writing condition reports was offered. Did that for 2 years and it disappeared and I was dumped into a role planning / implementing maintenance tasks (not my strong suite). That's been 3 years of "not fun" and I'm burning leave at the moment and planning my escape.

                    All the mechs I've worked with were smarter than me but you need the piece of paper and a few lucky breaks.

                    •  

                      @brad1-8tsi: Good on you for using your brain instead of your body! I have wanted to do engineering for a while now, but figure I'm too old to bother, part time uni will take forever, and engineering doesn't seem to pay like it used to, unless I'm mistaken.

                      Planning maintenance sounds extremely dull though, I can see why you would want out of that.

        •  

          What happened to your Qantas super after you left the place? My old man took a package round about the same time as you left the place and was told he could no longer contribute to that super given he's no longer an employee.

          •  

            @mini2: Yes, when you leave you have to rollover funds into a complying entity. QF did offer a fund but the fees and charges were ridiculously high and designed to dissuade you from using it.

            I rolled my money into MTAA Super which at the time was one of the best performing funds due to the valuations on their direct investments. Unfortunately, GFC hit hard and by 2008 my $350k had decreased 30% to $245k due to some realistic revaluations of their assets (a bit of shonkiness I think). I left that money in that fund and it took around 5 years to recover back to $350k, then I transferred it into my active super fund with my new employer

      •  

        33 turning 34 mines 81k, never put in anything extra

  • +10 votes

    A few things to help think about this.
    With a reasonably conservative investment mix, your balance will double every decade just based on returns.
    Add contributions too, of course.
    Retired people will earn about half the money they take out of super after they retire (because of investment growth even after they start drawing it down).
    Retired people typically spend much less than working people just a few years younger - they have time to avoid charges people pay when they are short on time (simple examples like catch the train off peak, shop for specials, cook from scratch more), and they are likely to have reduced housing costs, and already own most things they need.
    Many retired people die with substantial super balances, as they over estimate their needs.
    Many retired people will get a part pension, so the super income is only part of the income mix, and you don't have to plan for ridiculous life expectancy (that is, you can rely on the age pension is you are the one in a million who lives over 105yrs, for example)
    The figures for 'basic' and 'comfortable' retirements bandied about are set by the super industry, and they have a vested interest in you over committing to super. The 'comfortable' retirement includes overseas trips, never owning a car older than 5 years, regular restaurant dining and substantial budgets for clothes etc.
    The retired people I know spend less on these types of expenses.
    The 'basic' and 'comfortable' super estimates also estimate no savings out of super.
    Almost everybody has money outside super at retirement (even if you aren't a saver consider inheritances, downsizing property, selling a second car, and other places you might find chunks of money).

    My conclusion is if you are lucky enough to be in a stable relationship, and you both have made regular contributions for most of your working life (which might mean a little catch up if there are non-working parents for a few years) you will end up with a reasonable retirement nest egg.
    If you had a divorce, prolonged ill health or unemployment, or will need to pay rent/mortgage in retirement, you probably need to do your best to add some extra to super, or accept a bit less extravagant retirement.

    •  

      I wonder how many pensioners died as their bank balance hit $0

    •  

      According to https://moneysmart.gov.au/grow-your-super/how-much-super-you..., a comfortable retirement is only 64k per year per couple.

      That doesn't sound like a lot of money to do all that you've described.

      •  

        Remember the figures are effectively after tax. So the comfortable yearly is the almost the take home pay of somebody on $100000 today.
        The average worker income is only around $85k.
        The modest and comfortable definitions are here:
        https://www.superannuation.asn.au/resources/retirement-stand...

        So the super industry is saying average workers and below need to have a lower income now in order to have a comfortable level in retirement.

  • +5 votes

    I’ve only recently started kicking more into super (only $300 per pay). In hindsight, should have done it a lot earlier

    • +20 votes

      …said absolutely everyone ever.

    • +16 votes

      read that as $300 per day, thought yeah that would help nicely

      •  

        Heh me too…

  •  

    I just wonder is it even worth putting extra money into super (aka from your personal salary to super)

    • +9 votes

      It does have tax advantages.

    • +3 votes

      You can do it via salary sacrifice or personal contribution and claim a deduction so there are tax benefits as well as the long term benefit.

    • +2 votes

      yeah. Super gets taxed at 15% rather than your nominal tax rate which could be around 30c on the dollar.

      • +2 votes

        nominal tax rate which could be around 30c on the dollar.

        32.5% + 2% Medicare = 34.5%

        Less 15% tax in super = 19.5% tax savings

        I do love a good bargain!! And saving tax! (Even if it is locked up for a while : that's pretty good returns)

    • +4 votes

      If you are on 30% tax rate you get an immediate 15% return. It's a no brainer.

      • +4 votes

        Well, immediate in the sense that, you can access that money in 30+ years time (depending on your age).

        Yes there are tax savings to be had but I'd hardly call it a no brainer, some people would rather invest outside of super so they can retire early/live life etc.

        •  

          I've done plenty of living. Retiring very soon (kind-of already as I'm currently burning up leave). Don't need a pension.

          My ex-wife, who earnt double my wage and didn't believe in super and made minimum contributions will be working another 10 years.

    • +4 votes

      You're better off paying off your credit cards and paying down your mortgage first.
      And once money goes into super, it is locked in there until you retire (though if you are lucky enough to get cancer or some other fatal disease, you can draw it out early). And super is controlled by the government who are notorious for changing the rules, and pulling the rug from under the feet of savers and retirees - this is called legislative risk.
      PS at 40, I was still living in England, so my super then was zero.

      •  

        Yea got quite a lot of student hecs/help loan better pay of those first

        • +11 votes

          You are probably better off not paying off HECS, and putting money into super.

          •  

            @Shacktool: ato jumped on me to pay off hecs and its not like i had a high paying job, how do people string along their hecs debt like that?

            •  

              @juki: How do they jump on you? They only take a small percentage of your annual income

              •  

                @Shacktool: they made me pay 50% one year and the remaining the next (i was working but hadnt finished my studies). i was earning above the threshold that isnt all that high. it did represent 8% of my annual salary roughly, but unexpectedly felt like a big chunk (i am sure doctors ect have way bigger hecs debts, it was just "traumatic").

        • +10 votes

          Paying off your HECS early is very rarely a good idea. You are definitely better off putting that money into Super.

          •  

            @Autonomic: There were some incentives to pay it off early many years ago, but I haven't seen those for about 15 years.

          • +1 vote

            @Autonomic: I didn't pay off HECS early, so I was paying a compulsory 5% of my salary into HECS until I was nearly 40. Once HECS was paid off it was easy to put extra 5% into super.

      • +4 votes

        I was about to write similar about paying off mortgage first but then I thought about it. A mortgage is 2.4% and super makes average 10%.
        Wouldn't it actually make financial sense to pay the absolute minimum on the mortgage and put all the rest into super, then at retirement pay off the mortgage in full.
        It actually seems financially beneficial (maybe risky) to get the maximum amount loaned against the house and stick all of it in super.

        •  

          I've heard this theory all around the traps….but interest rates will not stay low forever. Plus, if you keep your money in an offset a/c it is tax-free and is available in case you run into some unexpected trouble.

  •  

    I'm 39 and I have about $140k in mine, my wife has zero. I don't think it's enough but there's a couple of things I'm expecting to happen by the time we reach retirement age like my mortgage will be paid off and we will receive some inheritance from both of our parents, also hoping some investments I'm starting to make now will be pretty healthy too by that time.

    • +3 votes

      how does you're wife have zero? has she never had a job? if she is in her 30s as well i got to say that is impressive to avoid the ball and chain of working for the man your whole life!

      •  

        In her 40's, she had a few casual jobs cash in hand before we had kids but yeah, no income for her for 13 years. She also worked overseas before we moved to Australia.

        • +10 votes

          If your wife has zero it may be worthwhile you make a spouse contribution then take advantage of the government co-contribution. Maybe seek some advice.

          •  

            @brad1-8tsi: The low income co-contribution is only available if she earns some income herself in that financial year (and savings account interest doesn't count). I found that out the hard way last year…

            •  

              @Judicat0r: OK. My eldest was getting it but she had income.

              I've been throwing $25/week into my youngest daughters account to get the co-contribution but she doesn't have income. I'll read the rules (again) when I do her tax in July (yes, she still has to submit a return even when her income is zero).

        •  

          Yeah seems a bit unfair that she has to take care of the kids and not get super

          •  

            @zrach: Seems unfair to expect to get super for taking care of kids as there are many couples who are not having kids because they cannot afford to and have pets instead. Kids are also already funded by taxpayers in may forms towards their education, health, playgrounds etc. If so even people who have pets should get super.

      •  

        Mine is the same, only been in Australia a few years and the pension is quite good where she's from.

    • +2 votes

      You should be fine if you start investing right now and don't do anything stupid like take out car loans or use credit cards. You still have over 25yrs to build up a warchest.

    •  

      I'm expecting to happen by the time we reach retirement age like:

      My kids gonna spend me some cash

  •  

    Depends on when you want to retire? how you want to live when you retire?

    If you want to retire at 40 i would say $1.5m and your house must be paid off

    if you want to retire 67y.o then ~200k is probably reasonable

  • +37 votes

    This is disappointing, 4 hours since the post and not a single 22 year old with 400k in super has shown up.

    • +3 votes

      That is because you can't get that much of your crypto profits into super given the limits.

      •  

        Yes but if you just keep pouring money in like it's a backup/bonus super fund you'll probably retire early.

        •  

          probably

          More probable or less probable that is the question.

          What is 100% certain is you will get old and won't be able to work, what you end up with is uncertain.

    • +1 vote

      This is ozbargain, not Whirlpool.

      • +2 votes

        On Whirlpool they are all 22yo with 400k retirement funds because they all got crypto coming out of all orifices