We Asked Students to Guess How Much Money They'll Need to Retire, and They Were Way Off

This post is presented in partnership with Zuper.

Do you know how much money you’ll need to retire? $20,000? $30,000? $80,000?

We asked some students for their predictions. Then, with some help from new super startup Zuper, we told them how much they'll really need.*

And, yeah, the students were way off.

We also asked if they knew much about their super, and what, exactly, their fund invests their hard-earned dosh in. (Because some put money into tobacco, landmines and chemical weapons. Yes, really.)

They were pretty shocked to discover the truth, if the photo above didn’t already give that away.

So, do you know how much money you'll need to save for retirement? And are you keeping tabs on your super fund?

Either way, you need this video.

*Wondering how we reached the figures in the video?

Let Jess Ellerm, CEO of Zuper, explain:

"While there are lots of ways to skin the retirement cat, I quite like how financial planner Lauren Lyons Cole approaches things: she says the key to working out when you can retire depends on how much you want to spend each year once you are retired. It’s similar to the same way we think about how much a year we want to earn right now. The only difference is during retirement you’ll be paying your own salary, out of your super and your savings! Lauren says take the 'salary' you want to live off per year, divide this number by four per cent (0.04) and it will give you a pretty good estimate of the total amount you need to have saved by the time you walk out of your boss’s door for the last time."

Here’s an example.

"Let’s say you were happy to live off $50,000 a year," Jess says.

"Divide that by four per cent and you get $1.25M. If that $1.25M didn’t earn any extra interest, you could live work-free for 25 years, on an annual income of $50,000. Once the 25 years were up, you’d have to get back to driving an Uber, as your cash will have run out. But if that $1.25M earned five per cent extra per year, because you invested it, you could live work-free until you finally shuffle off."

Do I really need $50K a year?

"Well, you might be okay with less," Jess says.

"The Association of Superannuation Funds Australia thinks a single person aged 65 today needs $24,506 to live modestly, and $44,011 to live comfortably. But that number assumes they own a house. And with fewer millennials getting on the property ladder, renting during retirement is a reality you have to consider, and possibly start budgeting for.

"Also, while those industry numbers work today, unfortunately while youth is on your side, inflation isn’t. Inflation means over time a dollar buys you less and less. Just think about how cheap movies were when you were 10 verses when you turned 20; the same thing applies to your savings!

What if I want to retire early?

"If you’re 20 today, the following table shows you how much you’ll need to save per year to support your non-working years, assuming an annual average inflation rate of 1.5 per cent," Jess explains.

"It also assumes you’ll die at 85 and that you want an 'ASFA comfortable' lifestyle.

"These calculations don’t factor in pension payments—who knows, we might not even have these by the time we retire! It also doesn’t factor in that you could be earning money on your money while you retire (i.e. through investments). So, we’re thinking about it as cold hard cash."

"And remember, if you’re born after 1 July 1960, you can only start accessing your superannuation at age 60!"

Do you know where all your super is? Or what it’s invested in? With the Zuper app everything is visible and controlled by you. Check balances, payments, and other cool stuff in real time, anytime. Find out more at zuper.com.au

Header Image: Student Edge