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Answer the common question: ‘How much do I need to retire?’
Learn about retirement costs
There is no single answer to the question, ‘How much do I need to retire?’
The amount you’ll need depends on things like your spending habits, housing costs and the lifestyle you want.
Your retirement may look very different from someone else’s, so your costs may be different too. For example, you might prioritise travel while someone else may prefer to spend more time at home close to family and friends.
A good place to start is estimating the cost of a typical retirement.
- You could choose to use a rule of thumb that suggests you'll need around 70% of your working life income in retirement. This is based on the idea that some of the everyday costs you have when you’re working will fall in retirement.
- You could use the Association of Superannuation Funds of Australia (ASFA) Retirement Standard. The ASFA Retirement Standard estimates how much money it costs for different lifestyles in retirement. It can help you compare the estimated costs for a modest and comfortable lifestyle, based ASFA's definitions.
- You could also use the Super Consumers Australia's Retirement Savings Targets. This tool helps you estimate what level of savings you need to support your planned spending in retirement. It calculates savings targets based on your age and spending plans.
These estimates assume you own your home in retirement. If you rent, your retirement living costs are likely to be higher.
Use these estimates as a guide only. The amount of money you need to retire will depend on your own goals, circumstances and spending choices.
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How much super do you need to retire?
Consider if you'll retire with debt
Many people retire with money still owing on their mortgage, car loan or other assets.
If you're approaching retirement, you can take steps to get debt under control.
If you still have debts when you reach retirement age, you could choose to pay them off using:
- your superannuation
- other savings, such as proceeds from downsizing your home.
Before going ahead with either of these options, check the tax impact and whether it could affect your government benefits.
Consider getting financial advice to help you understand your options.
Bill pays off his home loan
Bill has a home worth $875,000 and still owes $200,000 on his home loan. He is 67, lives alone and has a super balance and other savings.
Currently, Bill is not eligible for the Age Pension because his assessable assets are above the cut-off point for a part pension.
If Bill takes $200,000 from his super and pays off his home loan, his assessable assets drop to $600,000, putting him below the cut-off point. He will also save on interest and principal repayments.
While Bill will have less super, he becomes eligible for the Age Pension and the associated concessions. He also likes being able to stay in his current home.
Plan your retirement goals and lifestyle
Retirement planning isn’t just about the numbers. It’s also about deciding how you want to spend your time, where you want to live and what matters most to you.
Think about the things you’d like your retirement to include.
- A modest lifestyle might include spending time with family and friends, enjoying local activities, pursuing hobbies and staying involved in your community.
- A more comfortable lifestyle may provide more opportunities to travel, eat out and make upgrades to your home.
Both approaches can support a rewarding retirement. The key is matching your plans to your income and savings.
To help you review your goals and priorities, see make a retirement plan.
Helen and Joe retire
Helen and Joe had both retired earlier in the year and were struggling to work out what to do with their super accounts.
They own their home, have retired debt free, and both receive a part Age Pension.
“We don’t have a lot of savings,” explained Joe. “We’ve both always worked, and we’ve raised 3 kids, and helped them out over the years. We have some super each. We didn’t put extra in, but we have what our employers paid. We wanted to use some of that money now that we’re retired, but we didn’t know the best way to do that.”
Work out your retirement living costs
Once you know how you want to live in retirement, you can estimate your living costs and create a budget.
Understanding your current spending habits can help estimate your future needs. Think about your main money categories:
- income
- home and utilities
- insurances
- groceries
- personal and medical expenses
- entertainment and eating out
- transport
- children and grandchildren.
Consider how your costs may change when you retire. For example, you may no longer pay for commuting, work clothes or professional memberships.
Renting in retirement
If you’re renting in retirement, make sure you include rent in your budget and allow for increases in rent over time. Also check if you’re eligible for government assistance.
Rent can be a significant ongoing expense and may create financial pressure. If you’re struggling to make ends meet, there are services that can help.
Find more resources for renting in retirement.
Steve is renting and has debt in retirement
Steve rents his unit, has a $10,000 car loan and is about to retire at age 67. He has $120,000 in super.
When he retires, Steve repays his loan, leaving $110,000 in super.
Before retiring, Steve checks with Services Australia and finds he is eligible for government rent assistance and will receive the full Age Pension.
Key actions you can take to work out how much you'll need
- Find out more about retirement income sources and watch a free online retirement webinar from Services Australia.
- Track your spending to estimate how much money you might need in retirement.
- Consider your goals for when you retire and if you can grow your super balance while you’re still working.
- Use the budget planner to calculate how much you will need in retirement, including costs if you have a mortgage, rent or debts.