Look at the one individual who has $400 million in an account supposedly designed for retirement savings. Then look at the 80,000 people who have super balances of at least $3 million.
Only a tiny minority of Australians – about one in every 200 super fund members in 2019-20 – has accumulated more than $2 million in super. Yet these accounts contain almost one in eight dollars in the super system, or almost as much as the accounts of the two-thirds of Australians who have less than $100,000 in super.
“Less than 1% of people have got more than $3m in their super, the average amount that people have when they've got more than $3m is $5.8m,” Chalmers told Sydney radio 2GB.
There remains no limit on the size of account balances in the accumulation phase. Each person will have a Total Superannuation Balance (TSB) and those with over $3 million at the end of a financial year will be subject to a tax of 15% on earnings.
There are about 11,000 Australians with more than $5 million in their account. The higher tax rate applies to the earnings on balances over $3 million, rather than the entire amount, and would take effect on July 1, 2025.
After you retire any amounts over the cap need to be transferred into an accumulation account or withdrawn taken out as a lump sum. Earnings on any excess amount in your retirement account are taxed at 15%. This rises to 30% if you have previously had to pay the excess transfer balance tax.
The average superannuation balance required for a comfortable retirement is $640,000 for a couple and $545,000 for a single person, assuming they withdrew their super as a lump sum and receive a part Age Pension, according to the latest Retirement Standard document from the Association of Super Funds of Australia (ASFA ...
If you're currently living a frugal lifestyle and don't have any plans to change that after you leave the workforce, $3 million is likely more than enough. But if you hope to keep your big house and nice cars and travel widely, $3 million might not be enough. You also need to consider taxes.
A $3 million portfolio will likely be enough to allow a retired couple to spend reasonably and invest with moderate caution without any worries of running out of money. However, if expenses rise too high, it's entirely possible to drain a $3 million portfolio in well under 30 years.
Under Labor's plan, from 2025–26 the concessional tax rate applied to future earnings for balances above $3 million will double to 30%. This is still well below the top marginal tax rate of 45% and brings the taxation of super for wealthier individuals in line with the corporate rate.
There are roughly 5,671,005 households with $3 million or more in America, 4.41% of all US households.
According to ASFA, the median super balance for those aged 25-29 was $25,173 for men and $21,774 for women as of June 2019. Balances increased to $165,587 for men and $122,228 for women for those aged between 45-49, and peak at $464,565 for men and $403,268 for women at ages 70-74.
Yes, you can retire at 60 with three million dollars. At age 60, an annuity will provide a guaranteed income of $183,000 annually, starting immediately for the rest of the insured's lifetime.
The ATO classifies those who control a net wealth of $5 million or more as 'wealthy individuals'2.
The amount needed for retirement will be different for everyone, but for most people $2 million will be more than adequate. Here's a simple example of how a person could utilise that $2 million dollar amount over a 30-year period (60 to 90 years-old):
The Bottom Line
If you have $3 million saved, it's likely that you'll be able to retire comfortably. You'll need to factor in your living expenses, inflation and the expected rate of return on your investments.
Yes, for some people, $2 million should be more than enough to retire. For others, $2 million may not even scratch the surface. The answer depends on your personal situation and there are lot of challenges you'll face. As of 2023, it seems the number of obstacles to a successful retirement continues to grow.
Although being a millionaire sounds nice, it's not that impressive anymore thanks to inflation. In order to be a real millionaire, you will need to have a net worth of at least $3 million, not $1 million. A $1 million net worth provided a great lifestyle before 1990. Not so much today.
Is $4 million enough to retire at 60? Yes, you can retire at 60 with four million dollars. At age 60, an annuity will provide a guaranteed level income of $244,000 annually starting immediately for the rest of the insured's lifetime.
Now, 4% of $4 million is $160,000, so as long as you expect your retirement to last for about 30 years and that amount sounds like enough-or more than enough-for you, you're in a good place.
This obviously depends on what annual income you want to fund but if you want to be able to afford a comfortable retirement—which is an income of just over $48,000 a year for a single according to the ASFA Retirement Standard—then you need a balance of at least $500,000.
The ASFA Retirement Standard uses an earnings rate of 6% per year to estimate the lump sum required to achieve a comfortable lifestyle in retirement. As at December 2022, it estimated singles would need $595,000 to afford a 'comfortable' annual income of $49,642.
How Much Does a Couple Need to Retire in Australia? A couple needs $600,000 to retire in Australia to achieve a retirement income of $58,000 from retirement at age 65 until age 95.
The Association of Superannuation Funds of Australia (ASFA) standard shows that for a couple to have a comfortable retirement, they will need $640,000 saved for retirement. Singles will need to have $545,000 saved. These figures assume that retirees will draw down all their capital and receive a part Age Pension.