How long will your super last?

How long your superannuation will last really depends on how quickly you spend your savings and how you choose to access your money.

Perhaps the most important thing is to work out how much you will need as income, once you have taken into consideration the lifestyle you hope to live and indeed, how long you are likely to live.

So, how long will you live?
We all know that generally we’re living longer, but what you may not realise is that the older you get, the longer you’re likely to live – this is called the survival bonus. While the average life expectancy of someone who is currently 65 is 84, this increases to 87 if you live to 75 and 91 if you make it to 85. Therefore, your superannuation may have to fund an extra seven years if you remain hale and hearty.

If you’re interested in calculating for how long you could possible live, why not try the SHAPE Analyser?

What kind of retirement lifestyle do you want to have?
While jet-setting around the world may appeal to many, the reality is that it costs a considerable amount of money. More realistically, you should consider the following:

  • where you want to live – will you own your home, have a mortgage or need to pay rent?
  • what your big expenses will be – will you travel, buy a new car regularly, or have to cover high medical and health costs?
  • what your everyday expenses will be – do you hope to continue eating out regularly, enjoy going to the theatre or plan to lead a more frugal existence?

The cost of living in retirement can come as quite a shock to many people. The Association of Superannuation Funds of Australia (ASFA) issues a Quarterly Retirement Standard that breaks down the budgets required to live a modest or comfortable life in retirement. The latest (June) quarter suggests that, for a single female, the annual amount for a modest lifestyle is $23,767 and $43,062 for a comfortable lifestyle. However, it should be noted that neither of these figures takes into consideration paying off any debt or rent, nor does it allow for money spent on gifts, alcohol or tobacco.

When you have a detailed idea of the costs you have to cover, consider the other income that you will receive in retirement:

  • work – will you continue to earn an income from part-time work, consulting, or your own business?
  • investments – do you have shares, property or business investments that will provide a regular income?
  • Age Pension – will your income and assets be such that you are eligible to claim a Government support payment?
  • savings – do you have other money from which you can draw an income or cover larger, one-off expenses?

Taking into account how long you are likely to live, what your annual expenditure will be and how much income you can derive from other means, you should be able to calculate how long your super will last based on the income it needs to provide.

If you plan on converting your super to an account-based pension, Moneysmart has a useful calculator that enables you to gauge how long your savings will last.

Written by Debbie McTaggart

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