WHY YOU ONLY NEED $260K IN SUPER TO RETIRE

If you hit the right combination, where your nest egg combines with the full age pension, here’s how you can fund a comfortable retirement

- SUSAN HELY

If you worry that your superannuation savings are inadequate, you’re not alone. Around 65% of Australians retire with less than $250,000 in superannuation.

If you’re one of them, however, you could be pleasantly surprised and find you are in a better position than you thought. You could even have a healthier retirement income than people who have a lot more super.

There are good reasons to feel more confident about your retirement because your modest savings could be close to what’s called “the sweet spot.”

This is where singles with $280,000 and couples with $419,000 in superannuation and other assets could be in better shape than people who have diligently saved hundreds of thousands of dollars more.

In fact, a home-owning single with $280,000 in super and other assets could have the same income as a single person with total assets of $830,000.

A couple with $419,000 in super could have around the same income in retirement as a couple with $1.25 million.

This means that for many people (often middle-income earners), saving more in superannuation could leave them no better off. How could this be?

In 2017, the government sharpened the taper rate for the age pension. (The taper rate is a sliding scale that sits between entitlement for a full age pension, a part age pension and no pension at all).

Eligibility for a part age pension falls away sharply in what is known as the “taper trap”. Your chances of getting any government assistance drop and you have to rely more heavily on your own savings.

With high levels of superannuation, people are in a no-man’s land, as their partial age pension shrinks. The sting is that their super may not be high enough to compensate for missing out on the age pension.