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Most SMSFs satisfying adequacy targets

The latest joint SMSF Association and Accurium sector research has shown the majority of SMSF trustee couples are well placed to have an asset balance high enough to fund at least a comfortable lifestyle in retirement.

The report, titled “Are trustees prepared for retirement?”, showed the median balance of SMSFs run by couples over the age of 65 with a pension phase component included was $1,104,000.

Based on Accurium data, this median balance is high enough to service a retirement income of $58,922 per year, which was considered a comfortable level by the Association of Superannuation Funds of Australia (ASFA), or even a retirement income of $70,000 per year, considered typical for an SMSF.

“For a 65 year old couple we estimate they would need around $702,000 in their SMSF to afford the ASFA comfortable lifestyle with an 80 per cent confidence,” Accurium senior actuary Doug McBirnie said.

“The median balance for a 65 year old couple is $1.1 million so the really good news for the SMSF sector is these guys are really well placed to have a comfortable lifestyle in retirement.

“Those 65 year old couples looking to spend the SMSF typical [amount] of $70,000 [per year] would need around $1.1 million in their fund and that is the median balance so again around half are in that fortunate position.”

McBirnie added that the only level of annual income in retirement the median SMSF balance for a couple over the age of 65 could not support was $100,000, categorised as aspirational.

The study found an asset balance of $1,886,000 would be needed to fund this annual income stream amount and only 29 per cent of SMSF couples above the age of 65 would have the assets to support it.

In regard to desired annual spending levels, the report showed the average preferred level of spending was $92,000 per year, the median desired level of spending was $75,000, with 30 per cent of SMSF households planning to spend in excess of $100,000 per year in retirement.

SMSF Association chief executive Andrea Slattery said the data highlighted the issues of adequacy for people in retirement and presented a strong case to have the issue of adequacy included in the defined purpose of superannuation.

“The concept of the government introducing an objective for super, and enshrining it, we believe adequacy is something that has to be included as part of the principles that underpin that objective or actually as part of the objective itself,” Slattery said.

“This whole piece is about adequacy. It’s about whether or not you have the capacity to build for it.”

The study was conducted using the Accurium SMSF database that includes over 65,000 funds and around 130,000 trustees.

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