How to Get Your Super in Shape for Retirement

Retirement planning is a critical part of financial health, and one of the most crucial aspects of that plan is your superannuation. On ABC Radio Melbourne’s On The Money show, superannuation expert Marco Mellado shared valuable advice on how to prepare your super and finances for a comfortable retirement. Whether you’re just beginning to think about your retirement or already feeling the pressure of time, here’s how you can get your super in shape for your future.

1. When Should You Start Thinking About Retirement?

According to Marco, there is no “golden age” to begin planning for retirement, but the best time to start is when that first thought crosses your mind: “Oh boy, retirement is coming.” As soon as you start thinking about it, it’s time to take action. The key is to start early. The longer you wait, the more you’ll have to rush later, potentially scrambling to make up for years of missed opportunities.

Even if you feel like you’ve left it too late, it’s never too late to begin. The important thing is not to wait until the year before retirement. Starting early gives you more time to adjust, plan, and make decisions that can positively impact your financial future.

2. Managing the Panic: What If Your Super Isn’t Enough?

When it comes time to check your super balance, many people experience a moment of panic, thinking that they haven’t saved enough. Marco advises taking a step back and looking at the bigger picture: What does your retirement actually look like?

Your superannuation balance may not be the only thing determining whether you have enough for retirement. Other assets—such as property, investments, or a part-time job during retirement—can contribute to your financial security.

Start by thinking about the lifestyle you envision. Will you travel? Do you want to downsize your home? Would you work part-time? Figuring out what your retirement lifestyle looks like in detail will help you estimate how much money you need. Marco suggests using online calculators or consulting a financial advisor to get a better understanding of your needs.

3. Build a Budget: Understanding Your Spending Needs

One of the most essential steps in planning for retirement is building a budget. Marco emphasizes that many people don’t have a solid budget, and that’s a huge mistake. Understanding your spending habits now—and how they will change in retirement—is crucial.

It’s not just about tracking every single cent, but about identifying the general range of expenses you’ll incur in retirement. According to Marco, most retirees need about 70-75% of their pre-retirement income to maintain their standard of living. This number may fluctuate depending on lifestyle changes, such as paying off debt, travel plans, and whether you intend to work a bit longer.

Key changes include:

• Debt Reduction: Ideally, you’ll enter retirement without a mortgage or significant debt.

• Increased Spending: Early retirement often means more leisure activities like travel, dining out, and possibly helping family members.

• Reduced Spending: Over time, these expenses may taper off as you settle into a quieter lifestyle.

A realistic budget allows you to understand the gap between your desired lifestyle and your super balance and helps you strategize to bridge that gap.

4. ASFA Guidelines: What’s Considered Comfortable?

The Australian Superannuation Funds Association (ASFA) provides useful guidelines for what a comfortable retirement looks like in terms of income. Their recent data suggests that a couple needs around $75,000 a year (after tax) for a comfortable lifestyle, while a single person needs about $55,000.

These guidelines are not just arbitrary figures. They’re based on extensive research and data gathered from thousands of retirees. The figures consider things like dining out, holidays, and even gym memberships. However, Marco warns that inflation and unexpected life changes could affect these estimates, and it’s always a good idea to err on the side of caution.

For many, $75,000 per year may not seem extravagant, but it ensures a more comfortable lifestyle than relying solely on the age pension.

5. Starting Early: Is 19 Too Early?

One of the listeners wrote in asking whether starting retirement planning at 19 was too early. Marco’s answer? No, it’s never too early. In fact, setting up the right super fund and ensuring the correct amount is being contributed from the start is crucial. At 19, you likely won’t be able to save large sums for retirement, but getting your superannuation fund right early on will make it one less thing to worry about as you enter adulthood.

The advice here isn’t to go overboard at 19—there are other expenses like travel, mortgages, and family to consider. But starting early sets a solid foundation for a secure retirement later in life.

6. Managing Debt and Homeownership

A major part of retirement planning is managing debt. Ideally, you want to enter retirement debt-free or with minimal debt. One challenge facing many retirees today is the rising number of individuals who do not own their own home.

For renters, there’s an additional financial burden—rent. Renters in retirement need to ensure they have enough capital to cover both their living expenses and their rent. This can be a concern if homeownership isn’t in the cards. Marco suggests starting early to understand whether owning a home in retirement is possible, and if not, planning for higher capital needs.

Retirees who rent may also face mobility issues. It’s essential to understand that retirement might involve moving a few times, especially if you need to downsize or find a more affordable rental. This will impact both your budget and your financial planning.

7. Innovative Solutions for Non-Homeowners

With more retirees now renting instead of owning their homes, Marco highlights the need for better financial solutions. At present, superannuation balances allow retirees to access funds without restrictions. However, to extend the longevity of your capital, solutions like annuities are gaining popularity.

Annuities allow you to draw a fixed income for life, which can help stretch your superannuation for a longer period. Though they come with restrictions on lump-sum withdrawals, they can provide greater peace of mind for people without other reliable income streams in retirement.

Conclusion: Start Planning Early for a Secure Retirement

Retirement might seem like a distant future, but the truth is that the earlier you begin planning, the more options you’ll have when it’s time to retire. By understanding your lifestyle needs, building a budget, and managing debt, you’ll put yourself in a much better position to enjoy the retirement you deserve.

Whether you’re 19 or 59, take action today. Review your super, start budgeting, and make sure you’re on track to live your best retirement life. As Marco Mellado suggests, it’s never too late to start—but the earlier, the better.