How to build a $1 million superannuation fund

Here's the secret to living a comfortable life in retirement.

| More on:
Happy couple enjoying ice cream in retirement.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If you want a comfortable retirement, then you will likely need a sizeable superannuation fund.

While everybody's needs are different, a $1 million superannuation fund is thought to be a good fit for most.

That's because having $1 million available in retirement means you could invest it in a group of ASX dividend shares that average 4% yields and earn $40,000 of passive income from dividends each year to fund your lifestyle.

But how could you build such a nest egg? Let's have a look at your options.

Building a $1 million superannuation fund

How you get to $1 million will largely depend on when you start the process.

As with all investing, the sooner you start, the better. That's because of the way that compounding supercharges your returns. The longer you leave it to do its thing, the more you benefit.

For example, an investor with a $10,000 superannuation fund at the age of 30 could conceivably grow it to our target amount by the time they are 60 if they add $5,000 a year to their fund each year (based on a 10% per annum return).

And if you're living well within your means and have spare capital each month, you could consider making additional contributions to your super. Not only could this be a tax-efficient thing to do with your money, but it could accelerate your wealth building.

If we circle back to our previous example and adjust our annual contribution to $10,000 per year, you would have a $1 million superannuation fund by the time you're 53, all else being equal.

What about if you're older?

If you're in your 50s or 60s then you may need to make bigger contributions to your superannuation as you may not be able to leverage compounding as much as someone in their 20s to 40s.

Let's imagine you have just turned 55 and have $250,000 in your superannuation. To get that to $1 million, you will need to add $20,000 to your fund for 10 years and generate an average 10% per annum return.

What else could you do?

It's important to keep an eye on the performance of your superannuation fund.

While it may be unnecessary to switch funds if you have a year of underperformance, if you notice a trend of this happening, you might want to move your money to a new fund.

After all, it could make a very big difference over the long term.

For example, $100,000 compounding at 7% per annum would become $387,000 in 20 years.

Whereas $100,000 compounding at 10% over the same period would become $673,000 million. That's almost $300,000 more because of that 3% outperformance.

Final thoughts

Overall, it is entirely possible to build a $1 million superannuation fund. You just need to map out your path to that figure based on your age and capital.

Should you invest $1,000 in Kinatico right now?

Before you buy Kinatico shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Kinatico wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Retirement

Happy couple enjoying ice cream in retirement.
ETFs

How ASX ETFs could help you retire rich

These funds could be helpful for investors looking to retire with a nice nest egg.

Read more »

A couple are happy sitting on their yacht.
Retirement

Want to retire rich? I would invest $1,000 a month into ASX shares

$1,000 a month could go a long way if you have time on your side.

Read more »

Superannuation written on a jar with Australian dollar notes.
Retirement

Have you checked your superannuation balance this month?

What do you look for when choosing a super fund to help you retire in style?

Read more »

A mature age woman with a groovy short haircut and glasses, sits at her computer, pen in hand thinking about information she is seeing on the screen.
Retirement

From today you can earn and own more and still qualify for a pension in retirement

Indexation changes to age pension payments and the asset and income tests become effective today.

Read more »

An older gentleman leans over his partner's shoulder as she looks at a tablet device while seated at a table in their classic Australian old person's home, complete with comfortable furniture and family photographs on the walls.
Retirement

Changes to age pension and retirement assets and income tests announced

Indexation changes to the age pension will come into effect on 20 March.

Read more »

A woman wearing a bright multi-coloured dress, blue sunglasses and hat stands on a beach laughing with her arms outstretched enjoying herself
Retirement

3 ASX retirement shares to buy with $10,000

Analysts think these shares could be worth considering for a retirement portfolio.

Read more »

Smiling elderly couple looking at their superannuation account, symbolising retirement.
Retirement

These 3 ASX dividend shares are perfect for retirees

Retirees have different investing needs to other investors.

Read more »

A happy elderly man wearing a red cape smiles as he jumps up like a hero from a massage table.
Superannuation

Is my superannuation on track?

Here's how much superannuation you should have at your age right now to fund a comfortable retirement later.

Read more »