How Much Do I Need To Retire?


You’ve found yourself asking a big question – perhaps one of the biggest financial questions of your life – “How much do I need to retire?” It’s important that you get a practical answer to this question; an answer that helps you take the next step towards a secure retirement. We’ve been answering this common question for over 1000 clients over the last 10 years, so here I share what we know.

First, each person’s ideal retirement is unique – there is no one-size-fits-all amount, so coming up with an exact figure depends on the type of lifestyle you’re hoping for in retirement. However, Moneysmart suggests aiming for around 67% of your current annual income to maintain your lifestyle in retirement.

But you need more information than that, so we’ve created this comprehensive guide on how to plan how much money YOU will need to make your dream retirement happen. We’ll cover the essentials, like:

  • Why you need to save for your retirement
  • Calculating how much money you need to retire
  • Planning your timeline to retirement & knowing when you can stop working
  • How to tailor your retirement savings goal to your needs

Key Takeaways

  • You can decide now if you want to live a modest or comfortable life in retirement. This will make a big difference to your retirement savings
  • You need to plan for big costs like medical bills as part of your retirement plan.
  • Average life expectancy is increasing, so include that in your planning to avoid running out of money
  • You can use a variety of different options to fund your retirement and generate additional income, like assets and investments outside of superannuation

Your Retirement Lifestyle Expectations

When you’re in your 20s, 30s and 40s, the focus is on building your savings and growing your superannuation fund. For those in their 50s and 60s, approaching retirement, you need to know where your current finances place you in terms of your future retirement lifestyle.

You should continue to bolster your savings and wealth as long as you can, however, as you age it’s also time to make calculations based on your current financial situation. As you think about your superannuation, using your assets, structuring your investments, Social Security, and aged care, you’ll need to know how far your retirement fund will take you.

Here is something that maybe you haven’t considered: How long are you going to live?  No one knows the answer to this question but we do know that life expectancy in Australia has risen by over 10 years since 1970, and continues to rise. In calculating for a modest or comfortable retirement, consider how long your funds will need to last.

ABS_Life expectancy Australia

No matter what your age, it’s not too late to improve your financial circumstances or your retirement prospects. Consider consulting with a retirement planning professional to make sure you are not missing anything.

Modest, Comfortable or Age Pension: What’s the Difference?

The difference between modest and comfortable is about $25,000 a year.

The Association of Superannuation Funds of Australia (ASFA) provides a Retirement Standard to gauge how far your money will go in retirement. This standard, updated to June 2023, takes into account the increase in the cost of living, as well as national trends like living standards or lifestyle expectations. A couple aspiring to lead a comfortable retirement lifestyle will require $70,806 a year, assuming they own their own home. Those aiming for a modest post-work life should budget $45,946 per year.

As you imagine and plan for your retirement, think about what you’d like to do during those years. Perhaps you’d like to slow down and stay close to home, or maybe you’d love to travel, start a new hobby or play sport. These priorities and ideas can help shape your retirement budget.

Think about what level of comfort would satisfy you. Would you like to enjoy meals at five-star restaurants, wear new clothes, or feel confident while driving a new car? If you’re accustomed to a certain standard of living, you’ll need to assess if that is still sustainable during retirement.

The chart below provides a handy reference to look at different retirement spending levels.

Household Budgets for Retirees Aged 65-84

AFSA Retirement Standard 2023

Lifestyle Expenses Age Pension Modest Retirement Comfortable Retirement
Travel Limited to 1 short break or local day trips 1-2 short breaks near your home Annual domestic holiday & occasional overseas trip
Groceries & Dining Out Limited to Grocery budget, discount meals or inexpensive takeaways Average range & quality of groceries Infrequent dining out Good range and quality of groceries Frequent dining out
Leisure Activities Low cost or no cost activities. Infrequent trips to cinema Can partake in some paid leisure activities Able to regularly participate in paid leisure activities & cinema trips
Car Ownership Limited budget to own, maintain or repair a car Likely to own a cheap & older car, can afford basic level of repairs Able to afford / maintain a reasonable car and insurance
Home Improvements No budget for home maintenance and repairs Budget for home repairs but not improvements Can repair home including replace kitchen and bathroom over 20 years
Clothing Basic clothing Basic clothing Good clothing
Alcohol Limited Regular, mostly cheap cask wine or beer Regular good wine & beer
Personal Care Less frequent haircuts & discount personal care Regular haircuts at basic salon Afford regular haircuts
Home Appliances Less heating in winter / cooling in summer Not likely to be able to afford air conditioning A range of electronic appliances owned and used
Health Insurance No private health insurance. Public health system support only Basic private health insurance, limited gap payments Top level private health insurance, doctor/specialist visits, pharmacy needs


Know Where Your Money Goes Now

In setting your retirement lifestyle expectations, you should evaluate your current spending habits. Even if you don’t stick to a strict budget now, you should consider:

  • How much do you usually spend on everyday expenses such as groceries?
  • Will you still be paying your mortgage or renting when you’re retired?
  • Do you travel regularly and is travel important to you?
  • Are you maintaining a house or a car, and will those expenses continue?
  • Do you enjoy particular recreational activities?
  • Are you supporting any family members?

Starting with your existing expenses will help you identify your ‘minimum lifestyle requirements’, and can alert you to ways that you are spending that may not align with your goals. As Ramit Sethi advises in I Will Teach You To Be Rich<, “Spend extravagantly on the things you love, and cut costs mercilessly on the things you don’t.” This can apply in retirement, especially where you may have more limited funds.

Revisiting our earlier statement that suggests needing around 67% of your current annual income to maintain your lifestyle in retirement, we can see why it is important to know your specific number. For example, if your current income is $120,000, 67% is $80,400. In contrast, you’d only need $43,550 to maintain a lifestyle that you currently fund with $65,000 a year.  However, you should also factor in the rate of inflation, as your dollar’s purchasing power will decrease over time.

Keep reading to discover how to plan for unexpected costs, or large expenses that can occur in retirement (such as medical-costs or aged care).

Should You Maintain Your Current Lifestyle?

Retirement allows you to hone in on the things you really want to do. If you want to live the same way as you do now, and you can afford it, then you should. However, if you are maintaining your current lifestyle but that is not helping you live a life that you enjoy, then perhaps it’s time to re-evaluate your spending choices.

Use this planning phase as an opportunity to shake up your old ways of doing things. Many elderly people talk about regretting not living their own life, not enjoying the moment, or chasing the wrong things, according to Inc. Whether your current lifestyle includes gambling on the ponies, or buying a new couch every 2 years, reflecting on your retirement might make you realise that those things aren’t as important to you as you thought.

The freedom of not having to work means that you can focus on what really matters to you. Live at a slower pace, and find meaning and purpose in friendships and experiences that you might have forgotten to prioritise.

This is where boring finances and the meaning of life collide!

Why You Can Live on Less Income After Retirement

You might be wondering why you can maintain your current lifestyle on 33% less income once you’ve retired. This is because, by retirement age, most people will have paid off their mortgage or other debts, and no longer need to put money aside into superannuation.

Not to mention that seniors often enjoy discounts – a perk of being called a senior, after all! Additionally your income from super is tax-free. Many Australians are also eligible for the Age Pension, which can supplement your superannuation income. AFSA research has also found that as you age, your opportunities to spend diminish. You’re less likely to want, or need, to splurge on holidays, entertainment or home and car maintenance.

Now, the ability to live on less income in retirement depends on your personal wealth and choices, but for the majority of Australians, these figures hold true.

FAQ: How Does Inflation Impact My Retirement Savings?

Inflation can have a significant impact on your retirement savings by reducing the purchasing power of your money over time. When your money doesn’t stretch as far, you need to draw more out of your retirement savings each year.  If you rely on a fixed source of income, this can mean that you need to reduce your budget to accommodate for the rising cost of living.

In order to combat the effects of inflation, it’s recommended that you hold a diversified portfolio, for example equities, real estate investments such as REITs, or international bonds. These can mitigate the effects of inflation by continuing to provide returns. Talk to a professional retirement planner to help you create the right strategy for your situation.

How Much Super Is Enough to Retire?

As we’ve seen, that number depends on a few different factors, some of which you won’t be able to predict now. However, there are guidelines available that you can adapt to your situation.

The Two-Thirds Rule

A simple rule of thumb suggests aiming for around two-thirds of your current income annually to maintain your lifestyle in retirement. This aligns with the previously mentioned 67% figure.

ASFA estimates that a couple looking to lead a comfortable retirement from age 67 requires $690,000 in their superfund (or $595,000 for a single person), assuming they are also eligible for a partial Age Pension.

Moneysmart also provides super savings targets for singles and couples. For example, couples planning to retire between the ages of 55-59, with the goal of spending $87,000 a year will need to achieve a superannuation balance of $1,037,000.

This number might feel daunting to many people but don’t be alarmed. Those who are aiming for an annual retirement income of $69,000 as a couple, will need to save a much more achievable $425,000 in super. Keep in mind these figures assume you own your own home.

You can tailor your retirement savings target more closely to your unique situation or goals by using a super projection calculator or retirement calculator. These tools allow you to input your personal situation to generate an estimated balance based on your current situation. These are just estimates however, as many variables could impact your figures, such as:

  • Owning your own home
  • If you are single or in a couple
  • Having a holiday home
  • Medical expenses or carers
  • Leaving a legacy or inheritance


Planning for Retirement Expenses: What Are Your Big Costs?

Let’s have a closer look at some of these costs that might impact your overall budget and how long your superannuation might last.


Housing costs are one of the biggest factors that can impact your retirement budget. In particular, if you are still paying off your mortgage when you enter retirement, if you are paying rent during retirement, or if you are renovating or conducting significant maintenance on your property.

If you have a mortgage and are approaching retirement age, it might be helpful to seek strategies to pay off your mortgage faster to avoid the burden of paying off your home loan using your retirement savings.

If you are renting, you should plan what you aim to do during your retirement. Will you stay in the same location? Will you eventually move into a retirement village? Calculate your planned expenses into your retirement budget to make sure it’s an accurate picture.

There are also options to use housing to fund your retirement further. If you own a property, you could consider downsizing to a smaller home and using the proceeds from the sale to invest into super or other funds.
For something as significant as housing, a financial planner can be a life-saver. We work with many clients to pay off their mortgages faster or set up their housing expenses to create peace of mind.

Aged Care

Considering or going into aged care is a complex financial situation that many Australians have to navigate. Things like maximum daily rates, means testing, and refundable accommodation deposits can be confusing. The Federal Government provides a useful tool for calculating how much you would pay for Aged Care, based on your income, assets, and pension eligibility.

Medical Costs or Disability

Although we hope you stay in good health, it is smart to consider what medical expenses you may need to cover during your retirement years. AFSA has estimated that couples will spend between $5,500 and $11,000 a year on private health insurance, prescriptions, doctor visits, over the counter medications, and other items such as hearing aids. Without planning, these medical bills could leave a big hole in your annual retirement budget.

Another important reason for retirement is disability, injury, or carer responsibilities. Around 21% of Australians retire early due to illness or disability according to the Australian Bureau of Statistics. I recommend getting protected with the right insurance to prevent these changes in personal circumstances from being catastrophic to your finances.

FAQ: How to Handle Unexpected Expenses During Retirement?

Start now by reviewing your insurance. You want to make sure you are adequately protected in the event that something happens to your health, your car, your housing, or your ability to look after yourself. With the right insurance, you’ll be protected from spending a large chunk of your retirement savings on one situation.

Next, a diversified retirement income can also provide some level of protection. For example, you can continue to earn income from dividends in investments, while drawing from your superannuation nest egg to fund the unexpected expense. These are just a couple of simple examples. Ultimately the key is preparation. Preparation in setting up your finances now will give you a lot more capacity to handle any situation, both emotionally and financially.

Your Timeline To Retirement: When Can You Retire?

Your timeline to retirement – the time left between your current age and when you’d like to stop working – can greatly impact your retirement lifestyle.

Why? Because the earlier you start saving, the more you are able to maximise your money in retirement. And the earlier you leave the workforce, the longer the money in your superannuation will need to last.

For example, if you leave the workforce at 60, you will need about 15 times the amount you have calculated for your annual post-work budget (67% of your current budget). At $60,000 per year from 60-85 years of age, you will need a super balance of $900,000.  Past a certain age, the amount of money you need each year tends to reduce significantly; the older you plan to retire, the less money you need in your retirement savings.

However, no matter what age you are right now, you still have options in regard to wealth creation techniques and using the time you have effectively.

How Long Will You Work For?

Deciding how long you have left in the workforce can help you determine what strategies you should use to maximise the time you have. If you are not sure when you can stop working, you can use your savings goal to determine when you’ll be most comfortable retiring. If you have a date you’re working towards, double check your planning to make sure you’ll have the funds to meet your retirement objectives.

Transitioning to Retirement

For some, full retirement might not be the best immediate choice, both for financial or other reasons. From ‘preservation age’ (55-60), you can use a Transition to Retirement strategy to ease into retirement. This strategy involves reducing your working hours while supplementing your income with superannuation withdrawals.

How Long Will You Be Retired For?

With increased life expectancy, one of the biggest fears of retirees is that their funds won’t last. You are planning for a retirement that could last 25-35 years, so you’ll need to factor this into your retirement income needs.

How To Fund Your Retirement

Retirement isn’t just about accumulating enough money, it’s also about managing those resources effectively. You have several avenues to fund your retirement nest egg.


Superannuation is the cornerstone of retirement savings in Australia. This compulsory savings system is designed to provide for you throughout your working life. It’s helpful to understand how superannuation works, and how it can change year to year in order to know how to best optimise it for your planning. Strategies for optimising your superannuation can include increasing or making additional contributions, making choices in regards to where your money is invested within your superfund, and setting-up a Self Managed Super Fund.

Investments & Assets

Investments such as shares, bonds and mutual funds are an important building block in your portfolio. So are assets such as real estate and investment properties. They can provide additional income to fund your retirement, through income from dividends, selling shares for a lump sum, downsizing your home or selling an investment property, or perhaps using financial vehicles such as trusts and private pension funds.

Age Pension

The age pension is a valuable support for many retirees. This government benefit can provide a percentage of your income from retirement onwards, and eligibility is dependent on your age, income and assets. ASFA also estimates that a modest lifestyle can be mostly met by the Age Pension, if you have a lump sum to support it of around $100,000 in super. This is great news for many Australians who are nearing retirement age, without as much superannuation from their earlier years. If you are eligible for the pension, you can amend your retirement savings goal by subtracting how much you will receive in government support each year.

How to Spend Your Retirement Funds

For many retirees, their greatest fear is running out of retirement funds and having to give up their choice over their final years due to a lack of money. To make sure your retirement funds last as long as you need them to, you can adopt a sustainable withdrawal strategy. We’ll talk about several methods here.

Retirement fund withdrawal methods

Fixed Percentage Withdrawals

Given the federal government’s minimum drawdown requirements, this is often the default strategy for Australians. The minimum super drawdowns go from 4% at age 65, to 5% from 65 to 74 and so on, increasing by 1% every 5 years. For example, if you have $800,000 in savings and withdraw 5%, you’d take out $40,000 annually. This system naturally adjusts your withdrawals to the market, however you’ll need to monitor your balance as you get older to ensure sustainability.

The 4% Rule

The 4% Rule is the most well-known retirement withdrawal strategy. This rule was devised in 1994 by financial advisor William Bengen to answer the question – ‘how much can you spend per year in retirement to avoid running out of money?’. Bengen found that most portfolios would last at least 30 and some even up to 50 years using this technique.

Basically, the rule works by withdrawing 4% of your total investments in your first year, and then the same amount each year, while making adjustments for inflation rate or cost of living changes.

There are some drawbacks to the 4% rule: it’s not flexible to changes in market conditions or lifestyle changes, it is based on a specific investment portfolio which isn’t relevant to everyone, it may create a large end-of-life surplus, and minimum withdrawal amounts in Australia are over 4% if you are over 65.

Fixed Dollar Withdrawals

Fixed withdrawals provide a predictable income, and are usually determined by your annual budget. For instance, you might set your annual budget at 67% of your current income and stick to it. However, there are some downsides. If you set your withdrawal amount too high in early retirement, you risk running out of money, you may have to remember to increase your budget to account for inflation, and you’ll have to re-evaluate as you spend less money in later years.

Retirement Buckets

A bucket strategy usually includes a shorter-term savings account, and intermediate and long-term investment buckets. As you spend from your retirement savings account, you can sell your investments or use the earnings from your investments to refill this account. The drawback is that managing this system can take a lot of your time, and you’ll still need to calculate your budget separately.

The Market-Based Approach

A more complicated approach used by some financial advisors is to base the retirement withdrawal rate on both the level of stock market risk in the total portfolio and the overall valuation of the markets. In practice, it dictates a higher withdrawal rate—typically, the rate for moderate-risk retirees starts at around 4.4% and can go as high as 5.7%. For a more conservative investor, the rate starts at about 3.9% and goes as high as 5%.

The Custom Approach

Many of my clients prefer a tailored approach that factors in their portfolio style, their retirement goals, and their personal circumstances. I also consider risk tolerance, current market valuations, superannuation and income status, and the timeline to retirement.

Another benefit of customisation is the ability to work with other assets, such as property. Property is not really covered in superannuation withdrawal methods, and often has a big impact on finances throughout your life. Has your dream of owning your own home left you with a hole in your personal savings? Or is your property the ace in your pocket to help fund your retirement? Many Australians use property to finance half of their retirement!

As society and legislation changes, a tailored approach can offer more flexibility. For example, the Federal Government announced the minimum retirement age would increase to 70 by 2035, creating new challenges for retirees of the future.

What If I Don’t Have Enough To Retire?

If you’ve done your calculations and concluded that you won’t have enough to retire in the manner that you’d like to, consider how much time you have to bulk up your superannuation or savings.

  1. You can delay your retirement by a year or two, as this can significantly boost your savings and reduce the number of years you are drawing on your super.
  2. You can optimise your investments. Look at bulking up your superannuation with increased contributions, or adjust your investment strategy to achieve better growth

It’s also important to note that you can still have a great retirement, even if it’s not considered to be in the top range of ‘comfortable’. If you’re concerned about managing the process of budgeting and planning, we do recommend seeing a professional retirement advisor who can help you gain peace of mind and confidence in your retirement plan, both now and into the future.

If you have questions or want to discuss your retirement plan further, reach out to our retirement planners on  07 3852 4114. We’d love to help you navigate the path to a secure and fulfilling retirement.

Get Your Retirement Strategy

Guy Freeman - Managing Director

As a founding partner of My Wealth Solutions, Guy has a wide range of experience in all facets of finance and is passionate about providing practical advice, guidance and assistance. Guy has around 20 years of experience in holistic financial planning and wealth management, and has founded several of his own financial services businesses.

His qualifications include Diploma of Financial Planning, Advanced Diploma in Financial Planning, Self Managed Super Fund accreditation and a Bachelor of Biomedical Science.

Read more of Guy Freeman articles

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