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Retirement income expectations hit new highs

Vanguard has just released its third annual How Australia Retires report which offers a deep dive into how Australians are planning for retirement and where they’re falling short. Here are extracts from that report.

 

The How Australia Retires 2025 report explores how Australians are preparing for and experiencing retirement.

Based on a nationally representative survey of over 1,800 Australians conducted in February 2025, the report examines financial and retirement literacy, expectations versus realities of retirement, the role of housing and overall retirement sentiment and confidence.

Retirement income expectations

This year’s survey found a gap between the amount of income working-age Australians expect they will need in retirement and the amount current retirees spend in retirement. We also found that all age groups in the 2025 survey had significantly higher estimates for minimum income required than those in 2023, the first year we collected this data.

Retirement income expectations for working-age Australians differ vastly from the reality for current retirees: Australians under 45 estimate their minimum retirement income to be double what current retired couples are spending.

Younger Australians anticipate needing significantly more income in retirement than current retirees or what common retirement income benchmarks suggest. On average, Australians under the age of 45 estimated they would need a minimum household income of $100,000 per year in retirement. Australians aged 25–34 estimated they would need a minimum household income in retirement of $106,000, the highest of any age group. This figure represents a 10% increase from 2024, when the same group estimated $96,000, and a 59% cumulative increase from 2023, when this age group estimated needing $66,000.

The survey asked for estimates in real terms — that is, today’s dollar value — to account for the impact of future inflation. However, some may have misunderstood the question and included future inflation in their responses, potentially inflating their estimates.

To put these figures in perspective, retired Australians with a partner reported spending an average of $55,000 in the last 12 months — almost half of what Australians aged under 45 believe they will need. As the figure below shows, those aged 65–74 estimated needing $59,000, while those 75 and older estimated $52,000 annually.

The Association of Superannuation Funds of Australia (ASFA) provides benchmarks for retirement income. ASFA estimates that for a comfortable lifestyle in retirement — which includes top level private health cover, regular leisure activities, annual holidays and the occasional overseas trip — couples aged 65–84 need $73,077 per year.1 This estimate is based on data from the December 2024 quarter, which was the most recent available at the time of the survey.

This is significantly more than the $55,000 Vanguard sees current retired couples spending, however still significantly below the income levels Australians aged under 45 are anticipating they will need. Notably, the ASFA benchmarks assume retirees own their own home outright and are relatively healthy.

There are several reasons why working Australians’ expectations may not align with the spending realities of today’s retirees. One possibility is that younger Australians are simply overestimating the income they will need in retirement. This could reflect lower levels of retirement planning among these age groups, as well as the inherent uncertainty in making financial projections for a life stage that may be decades away. Another explanation is that younger Australians may be factoring in continued increases in the cost of living. A representative basket of goods and services that cost $100 at the start of 2020 would cost $121.08 today, reflecting an effective annual inflation rate of 3.74% over the last 5 years.2

Having experienced recent inflationary pressures, younger Australians might be extrapolating those trends into the future, leading them to anticipate higher expenses to support their desired lifestyles and cover essential needs. This, of course, would be a misunderstanding of Vanguard’s survey question as they asked the survey participants to estimate future spending needs in today’s dollar value.

Of course, it could also be that younger Australians genuinely require a higher minimum household income in retirement. This may reflect rising expectations for lifestyle and living standards, or concerns about ongoing housing costs — such as rent or mortgage payments — extending into retirement. In recent years, rising interest rates have significantly increased mortgage repayments and rental prices, which are among the largest expenses for many Australian households.

Planning for retirement

Retirement planning plays an important role in helping Australians retire with confidence, yet many Australians are unprepared.

Concerningly, nearly half of working-age Australians said they had no plan for how they would financially support their desired lifestyle in retirement. One in four working-age Australians said they had a general idea of what they would need with “some details planned out,” while another one in four said they were well-planned. This is relatively consistent across age groups, with only 29% of Australians aged 55 to 64 who are still in the workforce describing themselves as well planned for retirement.

When looking at the level of planning retirees had when they retired:

  • 38% said they had no plan for how they would support their desired lifestyle.
  • 24% said they had a general idea of what they needed for retirement; and
  • 37% said they were well-planned.

Retirees who had a good idea or clear understanding of what actions they needed to take were three times more likely to feel highly confident in their ability to support their desired lifestyle in retirement. They were also 65% more likely to have a positive outlook on retirement.

Financial advisers can play an important role in helping Australians prepare for retirement, which in turn can boost their confidence. While many Australians are unwilling or unable to engage a financial adviser, those who do were more confident and positive towards retirement.

For example, 40% of Australians who had previously met with a financial adviser said they were very confident or extremely confident about their ability to fund their desired lifestyle in retirement. That compares with 22% of Australians who had never engaged with a financial adviser.

Vanguard found that both working age and retired Australians considered financial and lifestyle factors as being important parts of retirement plans, but they had different priorities.

When asked what their plans for retirement might include:

  • Working-age Australians focus on the financial aspects, like superannuation (70%) and personal savings outside super (56%).
  • Retirees focus on non-financial aspects, like how they will spend their time (60%) and how they will stay active and healthy (60%).

During our working lives, retirement is often viewed as a distant goal and there is a strong focus on financial preparation — for example, having enough superannuation. Because work plays such a central role in our daily routines and identity, the transition to retirement can feel abrupt and bring significant lifestyle changes.

The report’s findings suggest that good retirement planning goes beyond finances. Working-age Australians may benefit from looking ahead to their goals for lifestyle, health and social connection in retirement and factoring them into retirement planning.

Part-time work in retirement

Retirement doesn’t necessarily mean stopping work completely. For some Australians, retirement involves working reduced hours, participating in the “gig economy” or taking on a new role with flexible working conditions.

This year’s survey showed that more than two in three retirees expected to stop work completely when they retired. However, working-age Australians have significantly different expectations:

  • only 35% of working-age Australians expect to stop working entirely when they retire.
  • 36% of working-age Australians expect to be working in some capacity in retirement.
  • 29% said they were either unsure or would decide later.

Working-age Australians also have different expectations about the role of income from part-time employment in retirement.

  • One quarter of working-age Australians believe that part-time work will form a significant part of their retirement income.
  • Meanwhile, only 2% of current retirees report that part-time work contributes a significant portion of their retirement income.

The significant gap between how younger Australians and current retirees view the role of work in retirement may reflect evolving work patterns, shifting attitudes toward retirement, or rising expectations for income later in life.

While working-age Australians may be overestimating their likelihood of working part-time in retirement, ABS data shows that the proportion of the workforce aged over 65 has grown from around 1% to 5% over the past three decades.3 This trend suggests that part-time work in retirement is becoming more common, even if it may not always contribute significantly to retirement income.

 

1 Association of Superannuation Funds of Australia (2025), ASFA Retirement Standard, December quarter 2024, ASFA Website.
2 Australian Bureau of Statistics (Mar-quarter 2025), Consumer Price Index, Australia, ABS Website. National all-groups CPI change from quarter ending Dec-2019 to Mar-2025.
3 Australian Bureau of Statistics (April 2025), Labour Force, Australia, Detailed, ABS Website.

 

You can read the full report here.
Vanguard Australia is a sponsor of Firstlinks. This article is for general information purposes only and does not consider the circumstances of any individual.
For more articles and papers from Vanguard Investments Australia, please click here.

 

16 Comments
Francis H
October 01, 2025

I developed a savings habit when I was very young which has stood me well even though it was difficult at times. The benefits of compounding have provided me with a very comfortable retirement. I always kept a fixed amount in my wallet for personal spends and banked the rest of my pay. That habit has paid off in my retirement. Also preparing a budget and sticking to it. And getting serious at 45 about retirement by salary sacrificing into super and cutting back on big spends like overseas trips until retirement. Running a 20 year old car. Just being a typical thrifty early boomer, just like my parents.

Raymond
September 28, 2025

45 and 50yo currently travelling Australia. We've spent $80,000 with vehicle and caravan owned outright. Plan to retire early. Currently hold $300,000 cash/equities, $370,000 super and home equity. The Government will give us $40,000 a year ($800,000 over 20 years) on top of our share, which is something my father I think is missing out on by being a fully funded retiree.

We've come to the conclusion that none of us are getting out of here alive, we only have limited time to live a meaningful life before getting too sick to enjoy or passing away and can't take any physicalities with us. After a lifetime of working and saving, essentially retiring hasn't been as easy as I'd assumed. Spending money was (and still is, somewhat) a new concept to me and was really holding me back from enjoying life the first 3 months until I was forced to break. What's the point of having money if we're too thrifty to spend it?

I'm still learning to spend, and continually working on the sums moving forward but have mostly let go and stopped thinking I should be out earning money instead of living life.

Dudley
September 28, 2025


"What's the point of having money if we're too thrifty to spend it?":

. Having money for when you can not avoid spending it.
. Finding interesting ways of avoiding spending.

Pat
September 30, 2025

With your amount of assets being at the level where they call the sweet spot of having some assets and still be able to get a pension - if that is a level you are comfortable being - good on you. Personally only having saved that much would scare me.

Wildcat
September 28, 2025

Even if you lift the safe withdrawal rate to 5% which recent studies have shown to be ok $100k is still $2m excl personal residence and lifestyle assets. This is probably beyond reach of most.

The same group is also likely to think a portfolio of investment properties will fund their retirement. Yields vary a bit but at 3.5% net (which is generous) this is close to $2.9m in debt free investment property, in Sydney this will be closer to $4.5m. This is also allowing for zero capital injections for any material repairs and maintenance. Again not realistic.

One of the beautiful things about the young is their sense of idealism and hope. I suspect reality will bite at some stage unless mum and dad die before the current crop of youngsters hit their own 70’s.

Nevertheless they will succeed at nothing if they don’t try and work hard. The problem is as housing is getting v expensive they are giving up and not saving as hard. This only makes the retirement problem worse.

Edward
September 26, 2025

There may well be another reason why 25 - 34 year olds believe they need $102K in retirement: their current life style is way more affluent than that of today's retirees was at that age. Maintaining that life style in retirement will require a lot more than what rather patronising employees of super funds assume is 'comfortable' for oldies. For a change, I heartily agree with that generation.

DF
September 25, 2025

Retirement adviser here in southeast Queensland here. The amount spent in retirement varies widely by location. We find many homeowner couples living in regional areas (an hour or more inland from the coast) routinely get by, including some domestic travel, on $60k per year (which can be comfortably accomplished for a couple via $45k from the age pension + 5% drawdown from a $300k super pension). Those people were spending $52k/yr five to seven years ago. On average, the closer you get to the coast the more that income number needs to go up.

Some retired couples (living in the same area, with similar big-picture costs like housing) will swear black and blue that they simply cannot survive on less than $90k/yr. Often you find behind the scenes that they are financing a spendthrift child, a gambling/drinking/hoarding habit, or some other non-financial issue. To each their own, not our place to judge.

Younger people thinking they'll need more in retirement might be factoring in home ownership having passed them by (which is highly likely), so they also need to spend $25-35k annually on rent for their lifetimes (again, depending on location).

Rosemary
September 25, 2025

the minimum wage is $49,296!! minus tax.

Dudley
September 25, 2025


'The Age Pension alone provides home owners with a comfortable retirement.'

https://www.firstlinks.com.au/inflation-cruels-a-comfortable-retirement

Total real cashflow:
= $45,037.20 / y + $30,709.22 / y
= $75,746.42 / y

Beyond comfortable; 'Living It Up'.

Less LIVING expenses of $20,000 / y leaves $55,746.42 / y to save, fritter or waste.

SG
September 25, 2025

Would be interesting to see retirement spending estimates vs actual current spending. Are the younger people spending more now thus assuming that will continue

Dave
September 25, 2025

Same here. An o/s trip costs $30000 + (try doing 2-3 weeks in Europe or USA).
Travel in Australia means at least $200 a night.
Restaurants, films and the occasional theatre etc. all add up.
Include rates, utilities and vehicle costs,
et voila

Sam
September 25, 2025

This retiree travels for a lot less than that. Maybe change your destinations and mode of travel (try a cycling or hiking holiday). You can have just as much fun, more often, for significantly less money than $30,000 for three weeks in USA.

But otherwise I agree, 55k a year for retirees is not realistic.

Edward
September 26, 2025

For many retirees a cycling or hiking holiday is simply impossible, due to health /mobility issues. Are they doomed to stay home or play bingo? There is a reason cruising is getting more and more popular!

Dudley
September 26, 2025


"Let your fingers do the walking.":
https://www.youtube.com/watch?v=gwC2KpRaj40

Aussie HIFIRE
September 25, 2025

I am extremely skeptical about the self reported $55,000pa in annual spending from retirees. My experience with retirees is that they are usually spending a lot closer to the ASFA comfortable retirement standard of roughly $75,000 pa.

Geoff D
September 25, 2025

Spot on! $75K is a lot closer to the mark in our experience. A good balanced life, not too extravagant, but not wanting for anything either. But this is NOT including holidays (except camping perhaps) in our view.

 

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