MLC report: The super balance you need for a dream retirement

A new MLC report found the combination of a higher superannuation guarantee and the maturing of the superannuation system was benefiting particularly younger Australians.

According to the modelling, workers making $62,593 a year are on target for a “modest” $750,000-a-year retirement, while those on $82,724 a year could reach $1m by the time they retire.

For Australians wanting to have more than $1.25m a year in their retirement nest egg, they would need to have an income of $102,800.

Australian Bureau of Statistics figures show the median salary for a full-time worker in Australia is $90,532.

When casual and part-time workers are included, this figure falls to $74,100 a year.

MLC head of technical services Jenneke Mills said younger Australians were on track for a “luxe” retirement due to a jump in the superannuation guarantee from 9 to 12 per cent.

“For the younger generation they’ve had the benefit of the superannuation guarantee for their entire working life, so they are more likely to be on track compared to previous generations,” she said.

MLC points out this is a guide for people, who would need 6 per cent returns in their superannuation balance after taxes and fees, which slides to 5.5 per cent by the age of 65, a salary growth of 3.5 per cent a year and inflation of 2.5 per cent.

They would also need to be getting these wages from 21 years of age.

‘Glorious retirement’

MLC has broken up retirement into three main categories:

• Modest retirement: up to $750,000 in super

• Luxe retirement: $751,000 to $1.25m

• Champagne retirement: more than $1.25m

It was almost an even split in the report, with 34 per cent of respondents telling MLC they are aiming for up to $750,000, while 31 per cent want between $751,000 and $1.25m and 35 per cent aiming for more than $1.25m in retirement.

Ms Mills told NewsWire these figures were a guide for Australians to roughly work out how much superannuation they may need to fund their lifestyle.

“It is getting people familiar with what retirement number they might need before taking that important next step of an annual income and what it might provide,” she said.

MLC chief customer officer Renee Howie said the research revealed Australians were setting ambitious retirement targets.

“Whether you’re targeting up to $750,000 or more than $1 million in super, having a plan and understanding whether you’re on track can go a long way to helping you have a glorious retirement,” she said.

”It’s why we’re putting out modelling to help workers understand what goals they may need to work towards to achieve the glorious retirement they’re aspiring to.”

A “modest retirement” can include regular leisure activities such as lawn bowls, golf, bridge club, museum visits, occasional meals out every few weeks, annual domestic holidays, and a few overseas trips.

A “luxe retirement” lifestyle includes weekly meals out and more international travel.

MLC calls a champagne lifestyle one with financial freedom and plenty of money available to travel.

How much do Aussies need in retirement

In terms of how much money Australians need to retire, experts differ, pointing out retirement is individual and based on personal expenses, lifestyle choices and access to the pension.

The Association of Superannuation Funds of Australia (ASFA) says Australians need a little less in their nest egg than the MLC figures for a comfortable retirement.

ASFA says a single person needs an annual balance of $55,932 or $78,566 for a couple.

According to ASFA, a 65-year-old needs to leave the workforce with $630,000 if they want a comfortable retirement, while couples previously needed $690,000 but now need at least $730,000.

The lump sums required for a “modest” retirement have also increased, up to $110,000 for singles and $120,000 for couples after previously being $100,000 for both groups.

This has the major caveat of owning a home in retirement.

Super Consumers Australia (SCA) says retiree surveys show most people will spend less than what experts say they need at the end of their working life. In its modelling, it also factors in the pension, which acts as a financial safety net.

SCA says a typical single retiree will need $322,000 in superannuation when they retire to support spending of $44,000 per year, while a couple will need a combined superannuation balance of $432,000 to support spending of $64,000 per year when they leave the workforce.

Again, this is based on owning a home in retirement.

A single person who is still renting needs a super balance of $659,000 to meet basic needs when they retire, according to SCA, more than double what a person who owns their own home needs at $322,000.

SCA deputy chief executive Katrina Ellis previously told NewsWire that it was “pretty grim” for Australians approaching their retirement if they didn’t own their own home.

“By doing these numbers we are quantifying the gap,” she said.

“Renters are exposed to the whims of the rental market and whatever landlords want to charge. They have that as an ongoing, relentless cost throughout their retirement.