There’s a whole host of factors that will determine your lifestyle in retirement – super, savings, tax, investment strategy and more. There are tools and strategies that can help you enjoy your retirement if you start preparing for it now.

One of the most common questions we are asked is “How much do I need to retire comfortably in Australia?”

The answer depends to a large extent on how you’d like your retirement to look and how much (or little) you want to do during your retirement years.

We often hear specific figures bandied about, with some observers saying you need a million dollars, but that is not necessarily the case.

The reality is that most Australians have much more modest super balances, with the Australian Tax Office reporting that the median super balance for Australian men aged 60-64 is $211,996 and $158,806 for Australian women in the same age bracket.

What is clear is that after spending decades working, you don’t want to spend your retirement years scrimping for cash.

There’s a whole host of factors that will determine your lifestyle in retirement — savings, super, tax, investment strategy and more.

It can be complex, but it doesn’t have to be. There are tools and strategies that can help you enjoy your retirement if you start preparing for it now.

What you will need for a comfortable or a modest retirement

According to the Association of Superannuation Funds of Australia’s Retirement Standard, to have a ‘comfortable’ retirement, single people will need $595,000 in retirement savings, and couples will need $690,000.¹

This table reflects budgets for various households and living standards for those aged 65-84 (December quarter 2023).

The figures in each case assume that the retiree(s) own their own home and relate to expenditure by the household. This can be greater than household income after income tax where there is a drawdown on capital over the period of retirement.

A modest retirement lifestyle would be one that’s slightly better than you’d enjoy on the Age Pension.

A comfortable retirement lifestyle allows retirees to maintain a good standard of living (including better consumer goods), private health insurance and more recreational activities.

Supporting your retirement lifestyle

ASFA’s figures give a good starting point, a sense of what the average retirement might look like and what it would cost.

But what’s more important, is knowing how much capital you need to support the lifestyle you want—and how you can go about accumulating that capital.

A retirement calculator can help you answer these questions because it covers a whole range of factors.

• Your current and potential super savings. It takes into account how much you’ve currently saved and your future saving based on income and your ability to save extra money into super.
• Your investment choices. Increasing the return on your super savings can make a big difference to the amount of capital you retire with and your retirement lifestyle when you get there.
• Your family situation. A retirement calculator allows you to include your spouse’s income, contributions and final super balance into the calculation.
• Social Security and part-time work are two crucial ways in which many people at least partially fund their retirement. The calculator helps estimate the effect any Age Pension you are eligible for (and any work you do) has on your retirement income.

Other factors to consider

There are a number of things to take into account when determining how much you need to retire.

Your age and lifespan

The age you retire can have a significant impact on how much money you have, and how much money you need in retirement. It can depend on many things such as your health, debts, investments, super balance, age you can access your super, whether you have dependants, and your retirement plans.

Keep in mind that if you're planning to retire at around age 65, it’s likely you’ll live for another 20 years or so. Men aged 65 in 2019–2021, could expect to live another 20.3 years² (expected age of death of 85), while women could expect to live another 23 years (expected age at death of 88 years).

Your retirement goals

Having a clear idea of the type of retirement lifestyle you’re after, is a key factor in determining how much you’ll need to live on.

This may be hard to know if you’ve still got a while to go before retiring, but the sooner you start thinking about it, the sooner you can implement a plan to turn your retirement dreams into a reality.

Some of the things you might consider are:

• How often you would like to travel and the types of holidays
• Whether a sea change or tree change is part of your plan
• Downsizing – or upsizing. What are your accommodation plans in the future?
• The types and frequency of any recreational activities
• Do you intend on providing financial assistance to your family?
• What options would you like to have in relation to help and support either at home, or perhaps in a retirement village or aged care facility?

Once you’ve decided on your retirement lifestyle, you can work through the likely cost of your expenses, where your retirement income will come from, and finally—“how much do I need to live the life I want in retirement?”

Your sources of retirement income

The money you use to fund your life in retirement will likely come from a range of different sources including:

• Super: knowing how much super you have—and are likely to have in the future—is a crucial part of planning for retirement, as it generally forms a substantial part of your retirement savings
• Age Pension: depending on your circumstances, income and assets, you could be eligible for a full or part Age Pension, or alternatively, may not be eligible for government assistance at all
• Investments, savings and inheritance: you may be planning to downsize your house, sell shares or an investment property, or use money you’ve saved in a savings account or term deposit to contribute to your retirement. Or perhaps an inheritance or the proceeds from your family’s estate may help you out in your later years.

Ways to increase your retirement savings

After using a retirement calculator, you may get an indication that there’s a shortfall between how much you’ve estimated to have and how much you’ll need in retirement. But there are steps you can do now to address the situation.

Some of these include:

• Consolidate your super into one account: bringing your super together into one fund will make it easier to manage. You may avoid paying multiple fees.
• Make extra super contributions: adding more into your super is a great way to increase your retirement savings. If you don’t exceed the cap, it can also have tax benefits too.
• Review your super investment options: choose investment options that align with how much risk you’re willing to take on and how much time you have until retirement—generally the more time you have, the more risk you can afford to take on. Diversifying your portfolio across many asset classes can also help to manage risk.

How to avoid running out of money in retirement

Implementing strategies, and staying vigilant about your financial situation, can help to ensure you don’t run out of money in retirement.

Here are some strategies you could implement:

• Create a retirement budget: estimate your retirement expenses including housing, healthcare, utilities, transport, entertainment and other necessities. This will help you determine how much income you need to cover your costs.
• Diversify your investments: maintain a diversified investment portfolio that balances risk and potential returns. A mix of shares, bonds and other assets can help manage risk while allowing for growth
• Set up a withdrawal strategy: determine a systematic way of accessing money from your retirement account. The 4% rule, for instance, suggests drawing down 4% of your initial retirement savings, and adjusting the amount for inflation in every year after
• Healthcare: account for potential healthcare costs or consider setting up a health savings account to cover any medical expenses
• Seek professional help: a financial adviser can help you integrate other factors that might make a significant difference, whether that’s your investment approach or super contributions strategy. From this knowledge they can create a personalised retirement strategy that aims to give you to the retirement lifestyle you’ve dreamed of.

Frequently Asked Questions

Can I retire at 60 with $500k?

According to the ASFA Retirement Standard, to have a ‘comfortable’ retirement, single people will need $595,000 in retirement savings, and couples will need $690,000, if they retire at age 67, assuming they receive part Age Pensions.

How much does the average Australian retire with?

There is no average retirement income for Australians. It varies depending on each person’s individual circumstances including the type of lifestyle they want to have, everyday expenses and health care costs.

How much do you need to withdraw from your pension?

You need to withdraw a minimum of 4% from an account-based pension each year if you are under age 65. This minimum withdrawal increases as you age.

Bottom line: while benchmarks set by ASFA provide a guide for a comfortable retirement, using retirement calculators can give you a more in-depth view of how much you can save for retirement and what that turns into as a regular income. Seeking professional advice is always recommended.

¹ ASFA Retirement Standard: December quarter 2023 www.superannuation.asn.au/resources/retirement-standard
² Australian Institute of Health and Welfare: www.aihw.gov.au/reports/life-expectancy-death/deaths-in-australia/contents/life-expectancy