Let's get straight to the point: superannuation is for your retirement income, nothing else.

The Federal Government finally recognised that last year with its commendable changes to super to stop the wealthy using it as an estate planning tool to leave millions of dollars to their children.

Lose your super, lose your retirement dreams

In reality, the wealthy don't need super.

You and I do, though.

From July 1, $1.6 million will be the maximum amount allowed in the retirement phase of super, which will provide an income of around $80,000 a year, assuming your fund earns 5 per cent a year.

So, as the debate about using superannuation to help fund the purchase of increasingly out-of-reach houses in Sydney and Melbourne continues, let's have a look at the facts.

Lose your super and you lose your retirement dreams of living near the sea, joining the grey army and travelling the outback, cruising down the Seine, or whatever else you couldn't do while working.

You'll be living on the aged pension, which is about $23,000 a year for a single person and $34,000 for a couple.

Enough to buy food, pay the basic bills and maybe run a dilapidated car, if you own your own house, but not much more.

According to the Association of Superannuation Funds of Australia, for what they call a "comfortable" retirement, a single person will need $39,000 a year and a couple $54,000.

That will allow luxuries like holidays, eating out, better clothes, a better car and so on.

Even on $54,000 for a couple though, that sort of lifestyle will be tight.

To fulfil your retirement ambitions you may need more.

The nuts and bolts of super are that there are two things that drive it - tax breaks and compounding - and it's the compounding where your retirement income can be turbocharged.

Compounding is interest on interest.

To give a simple example, if you have $100 and earn 10 per cent interest you'll have $110 at the end of the year.

The following year you'll earn 10 per cent of $110 ($100 + the $10 interest from last year) which is $11, and so it goes on, with the interest on the interest, or the compounding, meaning you earn more every year and your balance grows faster.

Of course, with super, you're increasing the capital by at least 9.5 per cent of your salary every year, which helps that compounding process.

$54,000 a year retirement means saving $1m over working life

Now let's really crunch the numbers.

Using the peak superannuation body, ASFA's, figures, to achieve an income of $54,000 a year in the current investment environment where a return of around 5 per cent a year is all you can realistically hope for, you will need to save $1,080,000 over the course of your working life.

The lower the rate of return, the tougher that goal becomes and, yes, there will be years when your fund will earn a lot more than 5 per cent, but there'll be years when it will earn a lot less.

With interest rates still exceptionally low (although rising) and inflation almost non-existent; with financial markets and the property market looking increasingly like they're poised for a major correction; and with so much uncertainty around the global economy, it would be a brave person to predict regular high returns in their super fund on a regular basis any time soon.

So if you use your superannuation to pay for a house and the bottom falls out of the housing market, your retirement is going to be behind the eight ball.

Even if house prices continue their upward momentum you may have to downsize on retirement because you will have robbed yourself of the benefits of that compounding I spoke about earlier.

There's no denying that if you live in Sydney and Melbourne in particular, getting into the housing market is very, very hard unless you have help.

But you don't want to throw out the baby with the bathwater.

What's important for your long term financial wellbeing (as opposed to what we want now) is to be living in a home without a mortgage when you retire.

A better strategy may be to save as much money as you can both inside and outside super over the long term, and that may mean winding back your current lifestyle, but there are no easy fixes here.

Let the compounding work for you and only when you know you have enough in your super fund to pay for your retirement should you consider using part of it to help fund a house.

And one final point.

The intergenerational wealth transfer to baby boomers that Michael Janda identifies in his article won't last forever because our parents won't last forever.

If your parents own their house (or houses) the chances are you'll be getting some of that intergenerational transfer back, in time.

Focus on the long term.