Super stash: Your retirement forecast vs what you need

Let’s figure out how much super you will retire with (and whether it’s enough).

Elderly couple on a park bench organising their super on a tablet, with an inset of Australian banknotes.
The amount of super you need for retirement has increased by $50,000. (Source: Getty)

How big will your super stash be by retirement? And will it be enough?

Using your age, income and current super balance, I can tell you whether your forecast lump sum will get you over the comfortable line. But, to do so, we need to work a little backwards and look at the income you will need and want first.

How much each comfy year of retirement costs

Sadly, retirees are among those being hardest hit by the cost-of-living crisis. That’s because they have a set lump sum, which they have to stretch across the rest of their lives. With costs getting dramatically higher, and as that sum gets lower, their financial capacity is shrinking and stress levels are likely rising.

Also by Nicole Pedersen-McKinnon:

What retirees have to outlay extra for a year of comfortable retirement is up slightly more than inflation over the past year - 6.1 per cent versus 6 per cent - on figures by the Association of Superannuation Funds of Australia (ASFA). The total annual cost for a couple to be comfortable is now $70,806. For someone who lives on their own - and so needs to cover the entire cost of running their household - it’s $50,207.

Inflation on food, fuel, travel and power prices in particular, has made it $4,081 more expensive in only a year for a couple and $2,824 for a single. So, with such a price spike, just what lump sum do you need to retire with now, to make that happen?

The lump sum you now need to fund it

First up, know that these figures assume you own your own home – they are for people who have bought and paid off their home before retirement and so have no outlay for the roof over their head, beyond running it. That - along with a big enough super stash - should be your other retirement goal.

These figures also assume you draw down all your capital over the course of your retirement. In other words, you go “SKI-ing” (spend the kids' inheritance).

Hand in hand with that is another important assumption: you receive a part age pension from the get-go, which increases as your superannuation balance shrinks.

So, what lump sum do you need to afford a comfortable retirement?

It is nowhere near the $1 million that sometimes gets scarily thrown around but, yes, it has just increased by $50,000. ASFA now says a couple can fund a comfortable retirement for their life expectancy with a combined lump sum at retirement of $690,000. Someone who is single is said to require $595,000. So, the life-changing question is: How much will you have?

How to figure out the size of your super stash

A fantastic and powerful calculator at the government’s will tell you exactly what your end balance will be at retirement. When I say “exactly”, of course, it relies on a few variables.

Among them are the average investment returns your super will earn over time, and the fees and insurance premiums you will pay. However, coded into the default setting are a realistic – even conservative – set of assumptions. As such, all you need to do is input your own super situation. Tell it your age today and at desired retirement, your income, and current super balance, and it will tell you the lump sum you will have at retirement.

If it’s below the $595,000 or $690,000 sweet spot, you will also be able to play with the figures and model making extra contributions to see how you can get your post-work life over the ‘comfortable’ line.

Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available at Follow Nicole on Facebook, Twitter and Instagram.

Follow Yahoo Finance on Facebook, LinkedIn, Instagram and Twitter, and subscribe to our free daily newsletter.