How much super do you need to retire comfortably?

ALL eyes will be on the nation’s $2.6 trillion superannuation sector which is expected to cop a battering as it becomes the next target of the financial services’ Royal Commission in August.

Revelations of chronic underperformance of funds, high fees and complex products are all serious problems that have plagued the industry and been singled out in the Productivity Commission’s recent report.

And there’s no denying many Australians have found super incredibly difficult to understand.

This has been exacerbated by the constant tinkering of rules and has led to member disengagement with many people accumulating multiple accounts.

With members’ superannuation statements beginning to roll in from now through to September it pays to open them up and read through them closely to check if your savings are on track. RETIREMENT RETURNS Superannuation fund members have had a volatile first half of the year and have just experienced a weak quarter.

The latest SuperRatings figures show the median balanced fund grew by an estimated 1.3 per cent in June, bringing the June quarter to 3.3 per cent growth.

The 2017/18 financial year delivered single-digit growth for the median balanced option at about 9.2 per cent.

The five-year returns are 8.9 per cent and 10-year returns are 6.5 per cent.

But new figures from AMP have revealed for Australians to live a retirement lifestyle they aspire to from 65 their accumulated savings will only last them five years.

It found with the average life expectancy being 82.5 years, Australians will have a shortage of money for 12.5 years.

And for women it is even worse, the findings showed they would have a shortage of 14 years versus men of 11 years.

AustralianSuper’s group executive Paul Schroder said regardless of your retirement plans you should be checking where you are at now.

“Consider how long you might need your retirement savings to last,’’ he said.

“With current life expectancies and depending on when you retire your retirement could need to last 20 years or longer.”

As to working out a magical number you need to have Mr Schroder said it depends on how much debt, if any, you are saddled with at retirement.

“How much you actually need will also depend on any outstanding debts you might have,’’ he said.

Sometimes retirees will also look at downsizing to free up some more extra cash if there’s a shortfall.

For those over 65, if they are thinking of downsizing there are some helpful provisions if the sale is made after July 1 this year.

Anyone can make a nonconcessional contribution into their funds from the proceeds of their home up to $300,000.

SUPERANNUATION GUARANTEE

Compulsory contributions — the superannuation guarantee is 9.5 per cent and won’t move again until 2021.

This is when it will start to steadily increase to 12 per cent by 2025.

AMP financial planner Dianne Charman said many people incorrectly believe the “SG will be enough.”

“It depends on your income, have you been proactive with your retirement saving from an early age,’’ she said.

“The more early planning you can do the better.

“If you put more money into your super, say $50 a month in your 20s rather than trying to catch up in your 40s, that compounding interest will be the key and you’ll end up better off.”

HOW MUCH DO YOU NEED

The Association of Superannuation Funds of Australia’s retirement standard said for Australians who want to live a comfortable retirement, as a single person they require $545,000 and a couple $640,000.

If a single person saves $545,000 come retirement at 67 this will provide them with an annual income of $42,764.

This is on the premise the person owns their home outright and has good health.

A comfortable retirement allows retirees to be involved in a range of leisure and recreational activities and have a good standard of living.

They should also be able to purchase things without concern including private health, household goods, a reasonable car and can travel domestically and internationally. INVESTMENT OPTIONS This is critical for all members — it determines the level of risk a person is willing to take on.

Typical investment options including conservative, balanced and growth but as to what exactly the money is invested in this varies between funds.

A conservative investment option usually invests around 30 per cent in shares and property, balanced options invest around 70 per cent and growth options invest around 85 per cent.

EXTRA CONTRIBUTIONS

Mr Schroder said for those nearing retirement it’s important to work out if you will receive money from the Age Pension alongside any super savings.

“Find out if you’re eligible for the Age Pension but don’t rely on it as your sole income as government policies can change,’’ he said.

“Instead consider using your super to top up any Age Pension you may be eligible for.”

It pays to ask your fund member or your employer if you putting enough into super and check what your balance is.

If you need to catch up or fatten your balance salary sacrificing allows you to tip in a portion of your pre-tax salary and it can be tax effective.