How Much Super Should I Have at 40?

Many Australians in their 40s find themselves asking, “How much super should I have at this age?” At this stage in life, it’s natural to want to know if your super balance is on the right track for a comfortable retirement. With the average super balance for this age group showing a wide range, it’s important to understand where you stand and what you can do to improve your retirement savings.

Current Super Balances for Australians at Age 40

Knowing how much superannuation you have compared to others in your age group can help you assess your financial situation and set realistic retirement goals. Your super account is a key part of your retirement income, so understanding your position now can make a big difference later.

• The average super balance for Australians aged 40-44, according to the Australian Taxation Office, is about $123,993, with a median balance of $91,590. These figures show that while some people have built up substantial super savings, many have less than the average. If you’re wondering how much superannuation you should have at 40, these numbers provide a useful benchmark.
• There’s also a noticeable gap between men and women. Males in this age group have an average super balance of $139,431, while females have an average of $107,538. This difference often comes down to career breaks, part-time work, and other personal circumstances that affect super contributions over time.

When comparing your own super balance to these figures, it’s helpful to look at the median as well as the average. The median gives a clearer picture of what most people have, since the average can be skewed by a few different ways high balances are accumulated.

Recommended Super Balances at Age 40

It’s one thing to know the average super balance, but it’s another to know if you’re on track to achieve your retirement goals. The ASFA Retirement Standard provides a guide for how much super you should have at different ages to retire comfortably.

For a single person aiming for a comfortable lifestyle in retirement, the ASFA suggests a super balance of around $156,000 at age 40. If your annual income is about $65,000, you should aim for a balance of $162,000 at this life stage. For those with a higher annual income, such as $95,000, the target at age 40 might be closer to $113,000, as higher employer contributions and super earnings can help you catch up over time.

These targets are based on the idea that you’ll continue to make regular contributions, including employer contributions under the super guarantee, and that your super fund will deliver reasonable returns through your chosen investment options and asset allocation. Of course, your personal circumstances, such as your retirement age, whether you own your home, and any other investments or retirement savings you have, will also play a role.

Factors That Impact Your Super Balance

A range of factors can affect how much super you have at 40. Understanding these can help you make informed decisions about your superannuation funds and your overall financial situation.

Income and Contribution History

Your super balance is closely tied to your ordinary time earnings and the super contributions made by your employer. The super guarantee currently requires employers to pay 11.5% of your ordinary time earnings into your super fund, and this rate will progressively increase to 12% next year. If you’ve had steady employment and regular contributions, your super savings are likely to be higher.

Periods of part-time work, career breaks, or lower income can reduce your super balance. If you’ve missed out on employer contributions or made fewer voluntary contributions during these times, you may need to take extra steps to boost your super.

Career Breaks and Work Patterns

Many people experience changes in their work patterns, such as taking time off for parenting or study. These breaks can lead to gaps in your super contributions and affect your future performance in terms of super growth. Women are particularly affected by this, which is one reason for the gender gap in average balances.

If you’ve had a break from work, consider making voluntary contributions or spouse contributions to help your super fund recover. Even small, regular contributions can make a big difference over time.

Investment Strategy and Fees

The investment strategy you choose within your super fund can have a significant impact on your super earnings. Growth-oriented investment options may offer higher returns over the long term, especially if you’re still several years away from retirement age. However, it’s important to remember that past performance isn’t a guarantee of future performance.

Fees also matter. High fees can eat into your super savings, so it’s worth reviewing your super account to ensure you’re not paying more than you need to. Comparing superannuation funds and their fee structures can help you make the most of your retirement savings.

Strategies to Boost Your Super at 40

If your super balance isn’t where you’d like it to be, there are a few different ways to improve your position. Your 40s can be a great time to focus on growing your super fund and setting yourself up for a comfortable retirement.

Salary Sacrifice and Concessional Contributions

A salary sacrifice arrangement allows you to make extra super contributions from your pre-tax pay. These contributions are taxed at 15% in your super fund, which is often lower than your marginal tax rate. This can help you boost your super balance while reducing your taxable income.

Remember, there’s a cap on concessional contributions (including employer contributions and salary sacrifice), currently set at $27,500 per year. It’s important not to exceed this cap, as extra tax may apply.

Catch-up (Carry-forward) Contributions

If you haven’t used your full concessional contributions cap in previous years, you may be able to make catch-up contributions. This is especially helpful if your super balance is below $500,000. Making use of these rules can help you add more to your super fund in years when your income is higher or when you have extra savings available.

Non-Concessional (After Tax) Contributions

You can also make after tax contributions to your super account. These are called non-concessional contributions and can be a good way to boost your super balance if you receive a bonus, inheritance, or have extra savings. The annual cap for non-concessional contributions is $110,000, but you may be able to bring forward up to three years’ worth if your total super balance allows.

Planning for a Comfortable Retirement

To retire comfortably, it’s important to have a clear understanding of your retirement goals and the lifestyle you want. The ASFA Retirement Standard provides a useful benchmark for what a comfortable retirement looks like, including the ability to enjoy leisure activities, own a reasonable car, keep up with good clothes, electronic equipment, air conditioning, private health insurance, and streaming services.

A comfortable retirement is different from a modest lifestyle, which covers only the basics. The ASFA suggests that a single person needs about $595,000 in super savings for a comfortable lifestyle, while a couple needs around $690,000. These figures assume you own your home and may receive some government age pension.

If your super balance at 40 isn’t on track for these targets, don’t worry. There are practical steps you can take to improve your retirement income, such as increasing your voluntary contributions, reviewing your asset allocation, and making sure your super fund is performing well.

Taking Action: Next Steps to Improve Your Super Position

No matter your current super balance, there are always ways to improve your financial situation and work towards your retirement goals.

• Start by checking your super account details and making sure your tax file number is recorded correctly. This helps ensure you receive all your employer contributions and any government co-contributions you may be eligible for.
• Consider consolidating multiple super accounts to save on fees and make it easier to manage your super savings. Review your investment options and make sure your asset allocation matches your life stage and risk tolerance. If you’re unsure, a retirement calculator can help you estimate how much super you’ll need and whether you’re on the right track.
• Making regular contributions, whether through salary sacrifice, after tax contributions, or spouse contributions, can help you grow your super fund over time. Even small amounts add up, especially when invested over many years.
• Finally, seek general advice from a qualified financial adviser if you’re not sure where to start. They can help you review your personal circumstances, set realistic retirement goals, and choose the best strategies for your needs.

Conclusion

Understanding how much super you should have at 40 is an important step in planning for your future. While the average super balance for this age group provides a helpful guide, your own needs will depend on your personal circumstances, retirement goals, and the lifestyle you hope to enjoy.

By making the most of your super fund, reviewing your investment strategy, and considering voluntary contributions, you can put yourself in a strong position to retire comfortably. Remember, it’s never too late to take action-small, consistent steps today can make a big difference to your retirement lifestyle in the future.

What steps will you take to grow your super savings and secure your financial future? The choices you make now can help you enjoy a comfortable retirement, with the freedom to pursue the leisure activities and living standards that matter most to you.