How much for a comfortable lifestyle?

For a comfortable lifestyle, a couple will require about $510,000 super balance at the start of retirement. A single retiree will require about $430,000 super balance at the start of retirement.

Given 30 years of 9% contributions are likely to produce a super balance at retirement of $183,000 (assuming a wage of $50,000) and $366,000 (assuming a wage of $100,000), there is likely to be a very material gap between the required super balance and the likely super balance.

For a couple on a single wage of about $100,000, this gap will be $144,000 and their likely super balance will be about 71% of the required balance.

Clearly there are three options. The first option is to increase their contribution rate above 9% for the couple’s working life (say about 30 years). The second option is for the couple to materially downsize their retirement lifestyle expectations. The third option is that the couple will have to extend their working life. Most likely two or all three options will have to be considered.

Assuming the SG rate is increased from 9% to 12%, the gap for a couple on a single $100,000 wage would be $23,000 or about 4½% of the required super balance.

However this good news only applies to people who are likely to retire in about 2050/51. That is 30 years after the SG rate reaches 12%.

Simply increasing the SG rate from 9% to 12% will not, by itself, address the gap between likely super balances and the required balance at the start of retirement.

These comments are based upon the recently released (February 2012, based on December 2011 quarter figures) Retirement Standard of ASFA. The likely super balance is determined assuming the current tax treatment of super is unchanged, that the contributions have been made to a taxed super fund and that the super investors are home owners who are entitled in part to the Age Pension. The above is not financial advice. Any super investor should consult with a licensed financial adviser before making any investment decisions.