How much superannuation should I have?
The amount of superannuation you need to have at retirement is based on how much money you would expect to spend each week during your retirement. That, in turn, depends on whether you expect to lead a modest retirement or a comfortable retirement.
The Association of Superannuation Funds of Australia (ASFA) estimates you would need the following amount per week:
Here is the superannuation balance you would need to fund that level of spending:
These figures come from the March 2017 edition of the ASFA Retirement Standard.
The reason people on modest lifestyles need so much less money is because they qualify for a far bigger age pension.
Here is how ASFA defines retirement lifestyles:
|Holidays||One annual holiday in Australia||One or two short breaks in Australia near where you live||Shorter breaks or day trips in your own city|
|Eating out||Regularly eat out at restaurants. Good range and quality of food||Infrequently eat out at restaurants. Cheaper and less food||Only club special meals or inexpensive takeaway|
|Car||Owning a reasonable car||Owning an older, less reliable car||No car – or, if you do, a struggle to afford the upkeep|
|Alcohol||Bottled wine||Casked wine||Homebrew beer or no alcohol|
|Clothing||Good clothes||Reasonable clothes||Basic clothes|
|Hair||Regular haircuts at a good hairdresser||Regular haircuts at a basic salon||Less frequent haircuts or getting a friend to do it|
|Leisure||A range of regular leisure activities||One paid leisure activity, infrequently||Free or low-cost leisure activities|
|Electronics||A range of electronic equipment||Not much scope to run an air conditioner||Less heating in winter|
|Maintenance||Replace kitchen and bathroom over 20 years||No budget for home improvements. Can do repairs, but can’t replace kitchen or bathroom||No budget to fix home problems like a leaky roof|
|Insurance||Private health insurance||Private health insurance||No private health insurance|
Superannuation is taxed. It is generally taxed at 15 per cent. However, if you earn less than $37,000, you will be automatically reimbursed up to $500 of the tax you paid. Also, if your income plus concessional superannuation contributions exceed $250,000, you will also be charged Division 293 tax. This is an extra 15 per cent tax on your concessional contributions or the amount above $250,000 – whichever is lesser.
If your employment is terminated, superannuation will not be paid on unused annual leave.
Superannuation in Australia is currently 9.5 per cent – which means that your employer must pay you superannuation equivalent to 9.5 per cent of your salary.
The ‘superannuation guarantee’, as it is known, has been at 9.5 per cent since the 2014-15 financial year. It is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.
Yes, permanent and temporary residents are entitled to superannuation.
Australia’s modern superannuation system – in which employers make compulsory contributions to their employees – started in 1992. However, before that, there were various restricted superannuation schemes applying to certain employees in certain industries. The very first superannuation scheme was introduced in the 19th century.
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