Retirement Savings Targets: How much do you need to save for your retirement?
Most of us want to maintain our standard of living when we retire. To do this, we need to know how much money to save to last us through our retirement.
Super Consumers Australia’s Retirement Savings Targets are an independent tool to help people start to work out how much they need to save for retirement. The targets offer savings goals that are based on:
- Your age,
- Whether you are single or in a couple, and
- How much you want to spend when you are retired.
Based on these three things, the savings targets give you a starting point on how much to save in order to sustain your desired standard of living – so long as you own your own home outright, or you otherwise aren’t paying rent or a mortgage.
Most Australians are entitled to the Age Pension, which provides a fortnightly retirement income payment depending on your assets and living situation. Our Savings Targets show how much extra you might need to maintain your spending and standard of living throughout your retirement.
Savings targets for pre-retirees (aged 55-59)
Savings targets for current retirees (aged 65-69)
Questions or feedback? Get in touch at feedback@superconsumers.com.au
FAQ
How did SCA develop the savings targets?
These savings targets are ballpark figures based on a credible estimate of superannuation investment performance, increases in the age pension, and changes in the cost of living over time (inflation). The targets allow you to think about your current spending, and see roughly how much you should save to maintain that spending through retirement. We update our savings targets periodically to account for inflation and changes to the age pension. For more information about how we developed the retirement savings targets, click here.
The savings targets look a little low. Am I reading them right?
Our savings targets may be lower than you are expecting because we assume that you are receiving the age pension using the assumptions below. How much you receive from the age pension will affect how much you need to have saved. There are rules affecting how much you may be entitled to from the age pension, which are available on the Services Australia website. We also assume that you draw down the capital of your super.
What are the age pension assumptions made?
We have assumed that you will receive any age pension you are entitled to during your retirement. Even if you are not initially eligible for the Age Pension, we have assumed you will receive it later in your retirement as you spend down your super balance.
We apply the age pension eligibility test assuming that you have $25,000 in assets outside super. What you receive from the age pension may differ if this does not reflect your circumstances.
You can speak to Centrelink for more information about your age pension eligibility. The MoneySmart Retirement Planner can also help you understand your income from the age pension during retirement.
Why are there different saving and spending levels for pre-retirees?
The value of your money, or how much your money can buy, changes over time. This process is called inflation. We have estimated how much money pre-retirees will spend and need in the future, and converted it into today’s dollars. This is to give the most accurate representation of how much you may need to maintain your spending into the future.
What if I don’t own my own home outright?
Our savings targets are based on how much money people in retirement usually spend. Retirees who own their own homes spend much less than retired renters. This is because people who are renting have to fit rent payments into their budget.
The amount renters have to save in order to live comfortably and cover their rent repayments is significantly higher than the amount homeowners need to maintain the same standard of living, even when factoring in the age pension. For example, someone who is renting and spending a low amount every fortnight in a low expenditure household would need double the savings to keep pace with a homeowner. Accurate savings targets for retired renters either require them to save a large amount, which would be unfair and out of reach for many, or drastically reduce spending which would put them at risk of financial stress. Instead, we are working with other organisations to call for an increase to the Commonwealth Rent Assistance (CRA), which will help retired renters to make ends meet.
Do the savings targets include aged care costs and other unforeseeable expenses I might have when I retire?
Yes, our savings targets are based on ABS data about actual spending habits of retirees, so aged care costs and unforeseeable expenses of current retirees will be reflected in the data. To get a more accurate picture of your individual circumstances, we recommend you consult the federal government My Aged Care website.
Where can I find out more about retirement planning?
MoneySmart.gov.au or the Financial Information Service are the best places to start when looking for independent information about retirement planning.
If you’re struggling with credit and debt issues, you can always see a free financial counsellor. You can find one at the National Debt Helpline’s website, or call 1800 007 007.
