How much do I need to retire in Australia? The answer to this question can help you plan better for your future financial security.
As simple as the question is, the answer might not be as straightforward. You need to understanding the Retirement Age Australia sets, lifestyle you want to live, Superannuation, and more.
So, we've created a comprehensive guide for anyone who wants to enjoy a comfortable retirement lifestyle in Australia. This guide demystifies the must-knows—predicted expenditures, source of income, inflation, and government assistance—to enable you to have a secure financial future.
As you stand on the threshold of one of life's most transformative phases, you're bound to wonder: "What's the magic number for a comfortable retirement in Australia? How can I safeguard my financial future?" Let's answer those burning questions and more.
How Much Do I Need to Retire Comfortably in Australia?
The answer isn't as simple as most would think, but we're here to provide clarity on this matter. There are a few things that you should know before we arrive at a number, starting with the considerations that affect how much retirement income you need to retire earlier on.
Some of the most important considerations are:
- Expected Expenses - That includes your living expenses, healthcare costs, and desired leisure activities (travel, hobbies, and so on)
- Sources of Income - Where will your income come from? Will you live on social security, pension, investments, or business income?
- Life Expectancy - Determine how long you expect to live in retirement. This can be difficult, but considering family health history and advances in medicine can give some indication.
- Inflation - The purchasing power of your retirement savings can decrease over time due to inflation. It's essential to factor in an annual inflation rate when calculating future expenses.
- Tax Implications - You might need help with tax planning for shorter-term income needs. Financial advice can be highly beneficial in this scenario to make sure that tax is kept to a minimum or even have it tax-free if possible.
- Estate Planning - If you wish to leave a legacy for your heirs, it's crucial to factor estate planning into your retirement plan, including the likely amount/s you wish to leave and to whom.
According to the most recent ASFA retirement standard, these are the budgets that you will need to retire "comfortably" or "modestly." Check out the full guide here.
What Does it Mean to Have a 'Comfortable Retirement' or a 'Modest Retirement' in Australia?
In Australia, when people talk about modest and comfortable retirement, they’re describing two different lifestyles after you stop working.
- Modest retirement means you can afford the basics — food, clothing, housing, and some activities — but you need to be careful with your money. It’s better than just living on the government Age Pension, but you won’t have a lot of extras like big holidays or a new car.
- Comfortable retirement means you can live more easily and enjoy extras like eating out, traveling in Australia and overseas, buying a nice car, upgrading your home, or doing hobbies you love. You’re not rich, but you don’t have to stress about money for the things you enjoy.
The Association of Superannuation Funds of Australia (ASFA) gives a rough guide.
Modest Retirement
- Lifestyle: Covers basic necessities and activities, but may not include many leisure or recreational options. That would be around $73,007 for couples and $51,805 for a single person (per annum) aged 65 to 84 years old.
- Superannuation Balance: Around $100,000 in superannuation savings for a single person.
Comfortable Retirement
- Lifestyle: Enables retirees to enjoy a broader range of leisure and recreational activities, purchase household goods, private health insurance, and travel. That would be around $47,470 for couples and $32,897 for a single person (per annum) aged 65 to 84 years old.
- Superannuation Balance: Around $595,000 for a single person and $690,000 for a couple.
When Do I Need to Retire?
There are many variables when deciding when to retire. The two most important factors are your financial status and lifestyle objectives. Many use the ASFA retirement standard as a guideline. It suggests that for a comfortable retirement, you could aim for a specific level of savings.
The official retirement age varies for each person. You should always make this decision based on your unique personal circumstances and aspirations. One thing you could also do is to check your preservation age, even if there is no set retirement age in Australia. If you're married, have a conversation about pension age with your spouse and set goals together. It helps to discuss this with your financial planner also.
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Do You Need Help Preparing For Retirement?
We get that retirement calculation might not always be the simplest process for everyone. That's why we at Northeast Wealth are always ready to provide the insight and guidance needed to help you plan for your financial future, if that be in the short term or the long term.
We work hard to help you set your financial goals and create a plan to achieve them. When you work with us, we will help you with your retirement planning and wealth management, and feel confident that you have the right plan for your unique retirement plans.
To get started, feel free to contact us today.
7 Steps to Retirement Planning in Australia
If you'd like to start your retirement planning journey, these are the first seven steps you will need to take today.
1. Create a retirement goal.
Start by identifying your personal objectives for retirement. Reflect on the lifestyle you envision, from a comfortable retirement close to home or one filled with extensive travel and leisure activities.
2. Decide when on a retirement age.
Determine your preferred retirement age, which significantly impacts your retirement savings timeline and the required savings amount you might require.
3. Plan your spending after retirement.
Carefully determine your post-retirement budget, including essential expenses such as housing, healthcare, and daily living costs, while also considering funds for leisure and recreational activities.
4. Calculate how much money you'll need in retirement.
Using your completed retirement budget, determine the likely funds you will need to meet these costs from now until life expectancy. You can also check out and use our budget planner to help you create a healthy and practical budget.
5. Project income you expect to receive after you retire.
As you get ready for retirement, it's vital to think about your current income and sources. This involves factors like the age pension entitlements, your superannuation, any investments you hold, or even earnings from part-time work.
6. Pick an investment account for retirement savings.
Selecting an appropriate investment vehicle, such as superannuation funds, self-managed super funds (SMSF), investment bonds, or retirement accounts is vital. Any selected investment should align with your risk tolerance and financial objectives while considering potential investment returns.
7. Start saving for retirement.
Initiating your retirement savings early is crucial. Regular contributions, coupled with prudent management of personal savings, can substantially enhance your retirement fund.
Is there Government Assistance for Retirees in Australia?
Yes! In Australia, the government assistance available for retirees is in the form of payments under the Age Pension. This program aims to support Australian resident retirees 67 years or above or those who have lived in Australia at least 10 years.
Age and residency are two characteristics that affect eligibility. Calculating your benefits considers your annual income amount, assets, and marital status. This is done to guarantee that retirees can maintain a comfortable standard of living.
Frequently Asked Questions (FAQs)
How much do you need to retire comfortably in Australia?
The ASFA Retirement Standard outlines that a comfortable retirement requires $690,000 in superannuation for a couple and $575,000 for a single individual. To determine your own retirement needs, consider using a retirement calculator or speaking with a financial adviser.
Does the age pension make a difference in the amount I need?
Other government benefits like the Age Pension can significantly impact the amount you need for retirement. They provide essential financial support and reduce the overall savings requirement to maintain a comfortable lifestyle during retirement.
It's important to understand your likely eligibility and entitlement to Age Pension when you are undertaking your retirement planning and when you plan to start taking out pension payments.
Who is eligible for the Age Pension?
To be determine age pension eligibility, you generally must meet several requirements:
- You must be Age Pension age, which is 67 years or older.
- You need to meet specific residence rules.
- You must satisfy an income test.
- You must satisfy an assets test.
There is a special condition where you may be able to claim the Age Pension without being assessed against the income and assets tests if you are legally blind and not claiming Rent Assistance. In this case, you would need to provide an ophthalmologist report to support your claim.
However, you may not be eligible if you receive certain payments from the Department of Veterans’ Affairs (DVA).
If you are Age Pension age but do not meet all the rules for the Age Pension, you might be eligible for a Commonwealth Seniors Health Card, which can provide access to cheaper medicines and other concessions.
The income test and assets test are used to help determine eligibility and can affect the amount of Age Pension you receive.
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How much super should you have as a couple?
Before you access your super, couples should see if they have enough. The amount of superannuation needed for a comfortable retirement could vary depending on a number of factors, such as lifestyle and location.
According to ASFA, a couple should strive for a superannuation balance $690,000 when they reach pension age to enjoy a comfortable retirement. For a modest retirement, you'll need a balance of $100,000.
Remember that each person has distinct needs and that this is only a broad guideline. Take into account your specific situation and speak with a financial specialist.
How much super should you have at 40 years old?
The ASFA Super Guru website states that, in order to be on track for a decent retirement at age 40, those born in 1984 need to have $156,000 in super.
In Australia, the average super balance as of June 2021 was $139,431 for male workers between the ages of 40 and 44 and $107,538 for female workers.
Have you started having dreams regarding your post-work plans? Financial objectives that are doable can be advantageous. If your super doesn't fit with those goals, it's also important to think about the kinds of financial advice you can get from an advisor.
Your membership includes full access to personal financial advice about your accounts with us.
Can I retire at 60 with $500k in Australia?
Retiring at 60 with $500,000 in Australia can be feasible, but it largely depends on your lifestyle expectations and other sources of income, such as the government Age Pension. Calculations considering your desired lifestyle, expenses, and potential income are crucial for a realistic retirement plan.
Can a couple retire on $2 million in Australia?
A couple with $2 million in Australia can likely retire comfortably, provided they manage their finances wisely.
This substantial nest egg can support a comfortable retirement lifestyle, covering living expenses and potentially allowing for some luxuries. Careful financial planning and investment decisions are key to making the most of these savings.
What are pre-retirement income investment options?
Pre-retirement income investment options are financial tools and strategies designed to help individuals secure a modest or comfortable lifestyle in retirement. Here are five pre-retirement income investment options in Australia:
- Superannuation — Boost contributions to your super for tax benefits and steady retirement income.
- Annuities — Invest a lump sum for guaranteed income over time.
- Term Deposits — Low-risk, fixed-interest investments with secure returns.
- Managed Funds — Diversify investments for regular income and potential growth.
- Dividend Stocks — Invest in high-dividend stocks for consistent income and growth potential
What is the usual life expectancy for retirement?
The length of your retirement depends on many things, like your age group, how healthy you are, your lifestyle choices, and even your family history. In Australia, on average, guys usually enjoy their retirement until about 83, while ladies often have a few more years, typically around 85.
What is TTR (Transition to Retirement Pension)?
TTR stands for a Transition to Retirement pension. It is described as an account-based pension that provides regular payments from your super . You may be able to access a TTR if you have reached your preservation age and are under 65.
However, there are limitations on how much you can withdraw with a TTR; you can only withdraw between 4–10% of your super savings every financial year .
Accessing a TTR could potentially offer several benefits:
- Reduce your working hours or increase your before-tax (salary sacrifice) contributions to super, using the regular income stream payments to supplement the pay you might miss out on.
- Reduce tax if you are under 60, and the income stream payments are tax free if you are 60 or older.
- Keep your super balance invested while accessing some of your savings .
If you are considering whether a transition to retirement strategy is the right approach for you, the sources recommend reading the Product Disclosure Statement or speaking to a financial advisor . For more information about the transition to retirement strategy, check out this article.
What is the Association of Superannuation Funds?
The Association of Superannuation Funds of Australia (ASFA) is a prominent industry organisation that provides valuable insights and guidance on super savings. It plays a vital role in shaping superannuation policies and promoting the interests of supersavers by offering information on retirement planning, investment strategies, pre-tax contributions, and government regulations.
Final Thoughts
Retirement is one of the largest achievements in life, and sound planning is the secret to living it worry-free. With knowledge of your projected costs, sources of income, and investment products, you can gain control over your future finances and retire securely.
These strategies and insights are meant to give you a general direction along your path to retirement. Hopefully, you now have a general sense of how much you need to retire and how you can achieve it.
At Northeast Wealth, we specialise in guiding Australians through the twists and turns of retirement planning. If you're just starting or you want to refine your existing retirement strategy, we’re here. Are you ready to build a clear andconfident path to your future? Let’s make it happen. Contact us today.
James O’Reilly is the Director of Northeast, a fast-growing financial advice firm that empowers clients to achieve meaningful financial progress and well-being. He's also the co-host of the Australian Retirement Podcast, one of Australia's fastest-growing podcasts.