SMSF couples need $2 million in savings at retirement to be confident of affording a $100,000 p.a. lifestyle in retirement. The good news is that 40% of 65-year-old SMSF couples have saved enough in their funds to meet this aspirational lifestyle.

Accurium’s latest SMSF Retirement Insights Volume 8 released today has drawn on data from around 65,000 SMSFs with balances in retirement phase, and utilised Accurium’s stochastic Retirement Adequacy Model to assess how SMSF retirees are tracking against achieving their goals of a comfortable or aspirational lifestyle in retirement.

Our data shows that as at 30 June 2018 a typical 65-year-old SMSF couple had a combined balance of $1.49 million and achieved an imputed investment return over the 2018 financial year of 5.1%. This is down on the 6.7% achieved in 2017, but close to the average investment return of 5.1% p.a. earned by typical 65-old-year SMSF households over the past five years. The median balance for single member SMSFs at age 65 in our study was $1.31 million.

We estimate that these balances are sufficient for the typical 65-year-old SMSF couples to be confident of affording an $82,400 p.a. lifestyle in retirement and singles $65,300 p.a. Our modelling considers 2,000 different scenarios for investment, inflation and longevity outcomes and we assume that retirees want an 80% probability of not outliving their savings to be confident in their retirement lifestyle.

Our previous research has shown that many SMSF trustees are hoping to achieve more affluent lifestyles in retirement, with around a quarter of couples planning on spending over $100,000 p.a.1 To assess the adequacy of SMSF retiree savings, we’ve analysed what proportion of SMSF households have enough in their funds to meet this aspirational retirement goal. For singles we assumed an aspirational benchmark of a $70,000 p.a. lifestyle.

We calculate that couples will need around $2.0 million in savings at retirement to be confident of achieving a $100,000 p.a. lifestyle throughout retirement. Singles will need $1.43 million and $1.34 million for women and men respectively. The required savings are higher for women than men due to their higher life expectancy.

Analysis of Accurium’s database shows that a good proportion of those who take control of their superannuation with an SMSF are well placed to achieve these benchmarks, with 40% of couples and 46% of singles having enough in their SMSFs to be confident of an aspirational lifestyle in retirement.

Three quarters of 65-year-old SMSFs will achieve a comfortable retirement

ASFA suggests that a 65-year-old couple needs to spend $61,522 p.a. to be comfortable in retirement and singles $43,601 p.a.  Our research shows that around three quarters of all 65-year-old SMSFs have enough in their funds to be confident of affording this comfortable retirement, noting that a 65-year-old couple needs $750,000 in savings to have confidence in achieving a comfortable lifestyle and singles need $640,000 for women and $580,000 for men. That leaves only a quarter of SMSF retirees having to accept a less comfortable lifestyle or risk running out of savings, unless they have means outside their SMSF.

The steady, if not stellar, 5.1% p.a. average return achieved by typical 65-year-old SMSFs over the last 5 years compares to an average return achieved by larger APRA regulated funds of 8.2% p.a.2 over the same period. However, comparing returns across sectors is fraught with difficulty due to significant differences in methodologies. Also, the 65-year-old SMSF households in our study are just entering retirement and therefore at the point when their ability to absorb poor investment returns is at its lowest. By comparison, the majority of APRA fund members are in the accumulation phase, meaning investment objectives and strategies are likely to be very different.

To find out more about the amount of savings required by single and couple retirees of different ages to achieve a comfortable or aspirational lifestyle in retirement view the SMSF Retirement Adequacy Report here.

1. Accurium: SMSF Retirement Insights – SMSFs treading water volume 6 (September 2017)
2. APRA: Quarterly Superannuation Performance Statistics June 2019

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