It’s never too late to boost your super. But what can you realistically achieve as you approach retirement?
Turns out there’s considerable opportunity to build on your savings.
Using our retirement calculator, we’ve looked at how a typical Australian can potentially add an extra $100,000 to their retirement balance in just three steps.
The scenario
Adam is 55 years old and single. He earns $80,000 annually, has $200,000 in super, and is in a default investment option. He plans to work until he’s 65. According to our retirement calculator he will have a super balance of approximately $307,000 by the time he retires.*
That can give him an annual income of $42,000 (including Age Pension entitlements) until he’s 82, which is just shy of ASFA’s comfortable income for single retirees. After 82 he’ll have to rely on the Government Age Pension.
3 small changes
According to our retirement calculator, a number of small changes could have a big impact on Adam’s future balance.
- If Adam can afford to salary sacrifice $5,200 a year (that’s $200 per fortnight), the final balance when he retires will be closer to $353,000. That’s an extra $46,000.
- If Adam also changes his investment options to a higher risk/return strategy, this can potentially increase his retirement balance to $395,000. An extra $88,000.
- And finally, if we add one extra year to his working life, Adam is looking at a super balance of $418,000 by the time he’s 66. That’s an extra $111,000 more than his initial projection.
That $111,000 difference can have a significant impact on his retirement lifestyle and options.
It means his $42,000 annual income would last him until he’s 97. Which means he can probably afford to enjoy a higher income in retirement or make some lump sum withdrawals from time to time to meet any unexpected expenses.
Transitioning to retirement
The scenario above provides a very general look at ways you can boost your retirement savings. Depending on your circumstances (e.g., marital status, other assets, your tolerance to risk), you have a range of options, and can enter your own details in our retirement calculator for a projection based on your circumstances.
You should also consider a Transition to Retirement Pension (TRP) strategy.
A TRP allows you to draw an income from your superannuation while you’re still working. That means you can cut back on your working hours while maintaining your income. Alternatively, you can use it to help boost your super as you approach retirement.
Ultimately, it allows you more flexibility, so you can approach retirement on your own terms and needs. Combine that with the steps we’ve mentioned above, and you may be surprised by how much your super can grow in a relatively short space of time.
How to plan for the future
Everyone’s income, financial situation, and retirement goals are different, but knowing where you’re headed allows you to make adjustments and plan for the sort of life you want to live. Here’s how you can get started.
1. Try the retirement calculator and see how different contributions, investment strategies, and choices can impact your retirement income.
2. Talk to your employer about salary sacrificing. Your payroll team can take care of the details, just let them know how much extra you’d like to contribute. Read more here.
3. You can check and adjust your investment option by logging into your Equip account. Learn more about options and returns here.
Retirement planning can be complex and somewhat daunting. We recommend our members seek professional, specialist advice with one of our financial planners. They can help you map out a path towards your financial goals, and the initial appointment is available at no additional charge.
*Please note this is a case study scenario designed to show how certain steps can help you boost your super. It is general in nature and should not be taken as advice. Any changes to investment strategy should be done in line with your risk profile. We recommend you seek financial advice before implementing an investment option change. Higher return options carry higher risk.
The results from Equip’s Retirement calculator are based on the following assumptions: A moderate investment option (‘Neutral’ returning 5.7% per year), annual insurance cost of $111, wage inflation of 3.5% per year, price inflation of 2.5% per year, weekly administrative fee of $1.50 and an asset based administrative fee of 0.20% on the account balance up to retirement age (up to a maximum account balance of $450,000). Aggressive option to return 7.4% per annum, assumes super guarantee contribution rate will rise to 12% in 2025.
