Dear Google, How much Super do I need?

To confirm the self seeking belligerence of BigSuper as we saw in Mary's Case, we Googled that question and the top entry was for a well known Telco Fund [name withheld for privacy reasons].

As expected the website was advising that a single retiree at 65 [Let's call him Terry of Tel----] needed an income of $50,000 pa to live "comfortably" and that that equated to capital of $700,000 in his Super Fund by 65.  They boast of an historical investment rate of 9.89% but we have cut that back to 8% to be conservative.

Firstly they of course mention the "impossibility" of living on the Age Pension

"The Age Pension is currently set at 29.4% of Average Weekly Earnings for a male (a maximum of around $427 a week for singles and $644 a week for a couple)."

What they don't say is Terry will have no mortgage/rent, tax, cost of raising kids or "employment costs", and may find $427 to be quite adequate for his retirement lifestyle.  Terry simply likes fishing and not taking 2 boring Rhine River Cruises per year [and risking being attacked by a ''gay divorcee lady'' after his hard earned money].

Now as you can see Terry is told to Drawdown $50,000 pa which is a bit more than the Minimum Drawdown of $35,000 pa, but not much.  At the conservative 8% Growth Rate figure, if he died at 85 [2 years past his Life Expectancy] he would still have about $800,000 left - ie more than he retired on.

So the Fund has him retiring on $960 pw, which just happens to be [only] double the Age Pension rate, ie the rate had he kept the whole $700,000 [not paid any Super] and put it into his home [which of course does not enter into the Centrelink calculations].  The big loser would be BigSuper as just for the years 65 to 85 their fee would be about $115,000, but that's not Terry's worry.

But if Terry came to us, having already retired with $700,000 Super we would suggest he actually USES it and would tell him that an income of $71,134 pa [$1,367 per week - more than THREE times the Age Pension] would exhaust his funds in 20 years.  Alas the Fund fees would drop by $47,000 but as for Mary, that is not Terry's problem.  Terry can now take 4 boring Rhine Cruises a year, but he really just wants to go fishing.

Of course the advisors have looked Terry straight in the eye and explained they are doing this in ''his own best interests'', citing ''market uncertainty'' as the bogey man.

So let's backtrack to see WHY Terry sacrificed ''leisure etc'' during his life to accumulate this huge $700,000 of Super.  The website starts by throwing up numbers as to why Terry will need this amount and if we just consider ''leisure, clothes, transport'' they are saying he needs $450,000 over 20 years to ''get by''.

The great irony is that young people of today are being convinced they can not afford to take that backpacking "Grand European Experience" that was simply part of  vital ''life experience'' in the 1960s and 1970s because they need to put the money into Super.  But then when they are old and perhaps in a wheelchair with no advantage to be gained from that Rhine Cruise, they are being told they must do it as they mortgaged their lives away to HAVE it.  And the Funds rub their hands in glee as another sucker takes the bait.

The bottom line is there is a happy medium somewhere between the Fund plan for Terry and simply the Age Pension, and as for last 30 years or so with compulsory employer contributions it is impossible to have no Super at all unless you lose the shirt off your back in the lousy Family Court.  So let's assume by paying nothing himself Terry ended up with the same $200,000 as in Mary's case [but now with 8% investment rate].  It is not important if he or the company paid the $200,000, but simply that it is $500,000 LESS than the Fund Plan.

We now use the LOPS once more to find that if Terry Draws Down $20,327 pa he will exhaust his capital in 20 years.  Doesn't sound a lot until we find that for Age Pension he goes from a big fat ZERO for the Fund Plan to $428,591 over 20 years, a massive 92.82% of the Maximum Age Pension.

So his total Income Stream is now $803 per week, which is 84% of what the Fund said he needed, or exactly one less boring Rhine Cruise a year [which Terry didn't want anyway].  But as for fishing, the extra $500,000 invested into his home would not only have given him a luxury swimming pool but a fully stocked barramundi pool as well.

And as you guessed, the fees to his Fund over 20 years are reduced by $86,846.

Terry may of course have ethical/ego reasons as to why he would not want to "resort to accepting money from the government", but in all our time helping retirees we have never found a person with such ideas, but rather the opposite in millionaires, indignant they are not "recouping their hard earned tax dollars".

So the message to those younger folk is simply plan YOUR retirement on YOUR needs and not those trumped up by greedy BigSuper.  You will probably find that the employer contribution is quite adequate.  Simply do the sums yourself.