Key takeaways
A super balance of $2.5 million could produce an estimated retirement income of around $143,000 a year.
To reach that target, MLC estimates you would need approximately $165,400 at age 30, $576,500 at 40 and $1.07 million at 50.
A more attainable balance of $1.25 million could provide approximately $83,000 a year.
Starting early matters because much of the eventual retirement balance is created through compounding in the final decades.
Your superannuation should form part of a broader wealth strategy that may also include property and investments held outside super.
Most Australians know they need to save for retirement, but very few have worked out what their retirement will actually cost.
They may have a superannuation target in mind, yet that figure often bears little relationship to the lifestyle they hope to enjoy once they stop working.
After all, there is a big difference between covering your basic expenses and having the freedom to travel regularly, help your family, maintain your home and enjoy the occasional luxury without worrying about every dollar.
New modelling from MLC reported in the Australian Financial Review provides some useful benchmarks, including the super balance Australians would need at different ages to retire with as much as $2.5 million.
What does a comfortable retirement really mean?
The Association of Superannuation Funds of Australia suggests that a single homeowner needs a super balance of around $630,000 to fund what it describes as a “comfortable retirement.”
That may provide private health insurance, occasional restaurant meals, an annual domestic holiday and an overseas trip approximately once every seven years.
For many Australians, that may represent a reasonable retirement, but I don't really think it resembles the lifestyle they imagined after spending 40 or more years in the workforce.
MLC’s 2025 survey of 2,500 Australians found that around 65 per cent were aiming for at least $750,000 in superannuation, while 10 per cent hoped to retire with more than $2 million.
This suggests many people want more flexibility than the conventional “comfortable retirement” benchmark allows. But in my mind, even that figure is nowhere near enough.
What would $2.5 million provide?
MLC modelled what it calls a “lavish” retirement, based on accumulating $2.5 million in superannuation by age 67.
Assuming an annual investment return of 5.5 per cent, that balance could provide a retirement income of approximately $143,000 a year.
That would allow a retiree to spend around $10,000 a month on everyday living while retaining roughly $20,000 a year for travel or other discretionary expenses.
Alternatively, someone with more modest everyday spending of around $84,000 a year could have considerably more available for regular overseas travel, hobbies or replacing a car.
Of course, these figures are illustrations rather than guarantees. Investment returns, inflation, tax rules, life expectancy and spending patterns can all change the outcome.
And who knows how the government may change tax rules about how we can use superannuation in the future?
However, the modelling gives us a useful picture of the difference between having enough to retire and having sufficient wealth to enjoy greater freedom throughout retirement.
Are you on track for $2.5 million?
MLC estimates that someone seeking to accumulate $2.5 million by age 67 would need the following superannuation balances along the way:
| Age | Suggested super balance |
| 25 | $30,000 |
| 30 | $165,400 |
| 35 | $330,800 |
| 40 | $576,500 |
| 45 | $774,900 |
| 50 | $1,070,800 |
| 55 | $1,430,000 |
| 60 | $1,943,600 |
| 65 | $2,314,700 |
| 67 | $2,500,000 |
These projections assume a starting salary of around $200,500 at age 25, increasing by 3.5 per cent annually.
They also assume the worker receives the 12 per cent Superannuation Guarantee and salary sacrifices an additional 2 per cent of their income.
Investment returns are assumed to be 6 per cent a year after fees and tax until age 55, followed by 5.5 per cent between ages 56 and 67. The figures are expressed in today’s dollars after allowing for inflation of 2.5 per cent.
Clearly, these assumptions describe a relatively high-income earner, so the target will be beyond the reach of many Australians through employer super contributions alone.
The power of starting early
One of the most interesting aspects of the modelling is how much of the final balance is accumulated later in life.
A super balance of $30,000 at age 25 grows to $330,800 by age 35 under MLC’s assumptions.
By age 45, the required balance is $774,900, which is still less than one-third of the eventual $2.5 million target.
The projected balance does not pass $2 million until sometime between ages 60 and 65.
This demonstrates the value of compounding, where investment earnings are reinvested and produce further earnings. It also explains why seemingly small improvements made early can have a significant effect several decades later.
What if $2.5 million is unrealistic?
A retirement target should be aspirational, but it must also be practical.
MLC estimates that a super balance of $1.25 million could generate an annual income of about $83,000. That could still fund regular leisure activities, weekly meals out and occasional international travel, though careful budgeting would be more important.
To reach $1.25 million, MLC estimates you would need approximately:
- $111,100 at age 30
- $288,800 at age 40
- $547,700 at age 50
Again, these benchmarks should be treated as guideposts rather than pass-or-fail tests.
Someone who owns their home outright will obviously need less income than a retiree who is still paying rent or servicing debt. Health costs, family commitments, travel plans and the desire to leave an inheritance will also affect the required balance.
How can you improve your position?
For the 2026-27 financial year, the concessional contribution cap is $32,500. This includes employer contributions, salary sacrifice, and eligible personal deductible contributions.
Where cash flow permits, using more of this cap can help build retirement savings while providing a tax benefit.
People with a total super balance below $500,000 at the previous 30 June may also be able to carry forward unused concessional contribution cap amounts from the previous five years.
Once concessional contributions have been maximised, after-tax contributions may provide another option. The non-concessional contribution cap is $130,000 in 2026-27, with eligible people potentially able to bring forward up to three years of contributions.
Australians aged 55 and over may also be able to contribute up to $300,000 per person from the proceeds of selling a long-held family home under the downsizer contribution rules.
These strategies need to be considered carefully because money contributed to superannuation is generally preserved until a condition of release is met.
Super should be part of a bigger plan
I have always believed that your retirement strategy should extend beyond the balance shown on your superannuation statement.
Superannuation offers significant tax advantages, but it also comes with contribution limits, access restrictions and rules that governments can change.
That is why many successful investors build wealth both inside and outside super. Their wider asset base may include investment-grade property, shares, cash buffers and other income-producing investments.
This can provide flexibility during their working years, while superannuation continues compounding in a concessionally taxed environment.
The real goal is to create enough reliable income to support the lifestyle you want without being forced to sell assets at the wrong time.
Your retirement number will be personal, but working it out early gives you something valuable: time to close the gap.
This article contains general information only and does not take into account your personal financial circumstances. Consider obtaining qualified financial advice before making superannuation or investment decisions.
