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Rival standard for savings and incomes in retirement

There's a new contender defining how much savings and income are needed in retirement. For many years, the 'standards' for both have come from the Association of Superannuation Funds of Australia (ASFA), and they are regularly used by policymakers and financial planners in setting goals. The new standards from Super Consumers Australia (SCA), now in partnership with CHOICE, aim "to counter the established industry lobby groups". They claim that ASFA numbers are too high due to a vested interest campaign for more super so it is no surprise the SCA numbers are smaller.

We'd better not let them know what Firstlinks readers expect because it's a heck of a lot more than either of them.

The ASFA and Firstlinks results

ASFA's latest lifestyle standards required for retirees aged 65 to 84 are shown below and defined in more detail on its website.

The corresponding amount of assets required for the above 'comfortable' lifestyle is as follows, allowing for qualification for some age pension.

In our recent retirement survey of Firstlinks readers, the income required showed 62% need around $75,000 or more.

Firstlinks readers are way above average, which I guess is why they are reading this publication.

The SCA results

SCA defines savings targets to sustain a desired standard of living for people without a mortgage. SCA consulted widely among consumers, academics, regulators, industry experts and superannuation funds, and recognises that most Australians will access at least a part age pension. SCA said:

“These savings targets are based on what people spend in retirement with a buffer built in to provide confidence that people’s savings can weather the type of market volatility we’re currently experiencing. Having credible targets, based on actual spending, means people can confidently spend and get on with enjoying their retirement.”

SCA has ambitious goals for its research, expecting the targets to be used by the superannuation industry as part of the Retirement Income Covenant obligations "to help members make sense of their retirement income needs”.

Whereas ASFA sets a 'comfortable' level of assets required for a couple at $640,000 to give an annual income of $65,000, SCA says only $352,000 is required for its medium spenders requiring $56,000 a year.

SCA taking on ASFA

SCA directly criticises ASFA for "representing the superannuation industry", quoting the Productivity Commission which said the retirement income standard is "more than many people spend before retirement" and "no more than an arbitrary benchmark that should be ignored in policymaking".

The result is that middle-income earners need to compromise their living standards before retirement to achieve the ASFA levels. SCA also quotes from the Household, Income and Labour Dynamics in Australia (HILDA) surveys that 88% of recent retirees are financially satisfied or neutral about their retirement spending. Hence SCA looks more at actual spending rather than something higher and aspirational.

SCA argues ASFA ‘comfortable’ levels were designed for the top 20% of retirees, and create unrealistic expectations for most people. Based on the table above, SCA says a single person retiring between age 65 to 69 today would need to have saved $258,000 in super to draw a 'medium' level of income in retirement of $38,000 a year, including income drawn from super and the age pension.

Reaction from other media

The well-known 'Barefoot Investor', Scott Pape, quoted the SCA numbers in a recent newsletter, and then reports this response:

Wow-wee! Last week’s column – on how much you need to retire –  triggered an avalanche of reader responses.

“That’s WAY TOO LOW!” “Are they eating baked beans in retirement?” “You need AT LEAST $1 million to do anything half decent in retirement!”

My view? The million dollar retirement number is a myth ... As long as you own your own home, you can live a meaningful, purposeful, retirement with much less money. After all, we have the amazingly good fortune to be living in the greatest country on earth, with a strong social safety net based on the aged pension plus subsidised medical and aged care."

Then Jessica Irvine, writing in The Sydney Morning Herald, said:

"If I were to cut out overseas holidays, eating out, gym fees and stop driving to work, I’m fairly confident I could get myself somewhere closer to the industry’s 'modest' standard. And that’s comforting, indeed. Learning how to live on less is definitely the most empowering thing you can do when it comes to setting yourself up for retirement. Don’t forget that once you’re retired, you’ll have more time to cook meals at home and less need to spend money to offset the stresses of work."

So how much do you need?

... is a different question to how much do you want? Our opinions must be influenced by our environment. Yes, a couple that own their home could live on the SCA 'low' spending level of $42,000 (which is remarkably close to ASFA's 'modest' of $43,000 despite the criticism), requiring only $95,000 of assets because the overwhelming majority comes from the age pension. 

But when a 50-year-old sees a financial adviser, few plan to live on less than $1,000 a week. They outline a strategy to reach goals that finance a rewarding retirement with annual holidays, a new car every five years, eating out regularly, helping the grandchildren, drinking good wine and private health insurance to stay well enough to enjoy it. 

Following the release of the SCA numbers, many in the media are accusing the superannuation industry of "fearmongering tactics" making Australians believe their retirement savings will be inadequate and they need to save more. Sure, in retirement, time with friends and family, walking on the beach and smelling the trees in the forests, are the greatest rewards, but it helps if you've got the money to do it in some style. Plan for it - it's amazing how much savings compound given enough time.


Graham Hand in Editor-At-Large for Firstlinks. This article is general information and does not consider the circumstances of any individual.


August 01, 2022

6 years into retirement and we "spend" about $250k p.a. Maybe 80% of that on ourselves, the rest on kids/grandkids. Sounds profligate, but investments have done very well until this year's 25% pullback. Provided you own your low maintenance home outright, have each hit TBC, have income/capital gains from rental property plus income/gains from global and local stock markets, you won't ever need the aged pension. Augment that with a few weeks work a year for the work test dodge and you can continue to build super until 74 while reducing CGT. No need for inheritances, just work your butts off to build assets for 40 years, consistently investing 10% of your gross income on top of SGC and you'll be sweet for 20+ years of lavish retirement with just enough left for RADs and funeral provisioning. Then you collect the pension for the average 2-3 years in a nursing home.

August 01, 2022

"investing 10% of your gross income on top of SGC":

= PMT((1 - 15%) * 3%, (65 - 25), 0, PV(3%, (85 - 65), -85%, 0)) / (1 - 15%)
= -22% (- = portion of gross contributed; PAYG tax simply ignored)).

"own your low maintenance home outright":
Best place to avoid PAYG, capital gains tax and Age Pension 'Asset Tax'.

Jeff 0
July 31, 2022

This debate amongst "rival" views of fund managers v consumer advocates remains fundamentally flawed.

80% of older Australians eligible to stop work and in turn become dependent on the govt aged pension and other care and/or drawdown their small to large amounts private savings in super have most of their private savings and potential retirement income locked up in their home. Any objective view means that such individuals have the savings to choose their standard of during retirement and or bequest for passing on.

Fix up the pension loan scheme and promote the benefits to older Australians; and then they will be informed to choose - albeit some will also benefit from financial advice to make and review their financial decisions

Of course, that still leaves many older Australians - "eating baked beans, renting ......" waiting for the govt to fix up residential aged care.....dependent on their families and/or not for profits and other social support

July 31, 2022

For a home owning couple to have a reasonable lifestyle they need a combined income of at least a $100k, indexed, meaning a sustainable capital base of a minimum of $1.3m, growing for inflation for at least 30 years. They will never qualify for govt pension or benefits granted by the asset/income test ( except perhaps CSHCard if the majority of their income comes from exempt super). Hence they must rely on private outside assets at least equal to super.
Overseas trips and good restaurants are not a luxury if you can afford them.
The last years health costs will replace these above expenditures so the income requirements may remain the same, and you cannot risk running down the capital too much. What would happen if you planned as if you would die at 90 or so and yet lived for another 5 or 10 years?

July 31, 2022

It is difficult to budget for retirement when taxes rise that you have no control over. In Canberra the ACT Government has just announced 2022 unimproved land value (UV) increases of 40-50-60% across suburbs. Rates are linked to average UVs, which means rates will also rise. Rates increases of this magnitude are hard to cover, particularly for retirees. Over the last 10 years Canberra land rates have risen by over 300%. But a 60% rise in UVs in a single year across a number of blocks and suburbs is unprecedented And alarming for anyone whose income is not also rising by the same % increase as their rates. Every house in some streets now pay $8-9k pa in rates, so a large % increase in future rates will hurt. Do these comfortable retirement income estimates account for extortionate local government rate increases?

Graham Wright
July 31, 2022

11 years into retirement. How much do you need to retire? Experts who have not retired have no idea. As in our working life, we cut our cloth to suit our income. If you fully depend on private resources, that can be quite variable. For most of us, as time in retirement passes, physical and mental health often diminishes, sometimes slowly, sometimes fast. Health issues keep intruding for most of us, robbing us of the ability to perform or enjoy the grand retirement we envisaged. Our ability to spend our retirement benefits diminishes and Health costs may well be the greatest cost. But it doesn't end there. Where and when we can, we find ways to enjoy life until we can't.
You cannot look forward to quantify all of that. Pre-retirement, save as best you can, prepare your entitlement to any Govt payments or support that you can expect to get. Expect retirement that starts with the good life and good intentions to later fade as time and tide take their toll on you. Manage your finances to suit your needs not the glorious retirement you expected but can no longer appreciate. Rich and poor become equal when they confront health issues like Alzheimers, Parkinsons disease, Diabetes and many other afflictions as we age.
A luxurious house is useless if you can't move around in it, climb the stairs or even clean it.

July 30, 2022

In the recent census, milennials were almost equal in number to Boomers. By the next census, more Boomers will have died off [ sorry ], leaving milennials accounting for more votes in future elections. Why would they want to fund someone else's retirement/ aged care/ knee replacement, etc ? At some point, it will become political poison to keep funding retirement at this level. So my philosophy is to squirrel away as much as I possibly can so that future change to government policy won't leave me high and dry. Those who wish to bet on this not happening - well, good luck - or be one of the group who die early. Call me a realist.

July 31, 2022

You have touched on the most important point in this whole debate Denise. Savings required for retirement will depend very much on the voters of the future. SCA blithely assumes that the current age pension framework will continue as is. But there is absolutely no guarantee of that. If a majority of voters in the future decide the age pension system is too generous, and/or too much of a tax impost on those still working, it will be curtailed.

One of the greatest retirement myths is that taxes paid during a person's working life will fund their pension in retirement. Wrong. The taxes paid while working fund the age pensions of those people already retired. When there was a lot of taxpayers and a much small number of retirees, many of whom passed away within 10 or so years of retirement, the burden on taxpayers was quite small. But once the proportion of retirees swells, and they live much longer therefore requiring pensions for longer, the amount that working people need to pay for retirees' age pensions becomes increasingly larger, and ultimately unsustainable.

There is actually a solution to this problem. It involves people putting sufficient money away for their own retirement while they are still working via a mix of compulsory contributions and tax incentives. It's called superannuation.

SCA is effectively saying that if we ignore the problem that superannuation was designed to solve, then we don't need as much superannuation. It seems a rather pointless suggestion to me.

It's a bit like saying if ignore the fact that people get sick, we don't need as many hospitals. Or if we ignore the fact that people commit crimes, we don't need as many police.

August 01, 2022

You might be missing some things. Your children and grandchildren pay for your retirement ( or part of ) now.
Super doesn't mature until 2050 approx,when people that started work in 2000 have the full benefit of 9% and up of super contributions.How old will you be in 2050?
The health expenses can be helped by steps taken now,try to keep reasonably fit.

When you retire I would expect your super to reduce slowly depending on growth and withdrawal rates.The same as mine does now.Super for me is an added extra income to investments outside of super.

The voters of the future will be voting on the retirement of parents/ grandparents,probably receiving a part pension at some stage.How would you expect them to vote?

July 29, 2022

Very interesting indeed. On the one side we have the retirement survey which tells us that people on the Age Pension and a median super balance leave 90% of their assets as bequest. The other side says they need $ 100,000.- p.a. (I would rather put this into the Want-Cathegory). And then there is ASFA telling us on the Age pension you can’t afford private health insurance, have only a limited budget to own maintain or repair a car, have limited budget for home heating and only can have local club special meals or inexpensive take away. My personal fact check says this is wrong. Digging through my records I find that the essential costs p.a. including food rates, insurance electricity water and gas and including a schedule maintained PHEV—SUV car, private health insurance and a toasty warm home in winter is about $8,000.- to 10,000.- less than the age pension would be for a home owner couple - OK I admit being bald saves me the costs for the hairdresser :-). The rest and above is simply enjoyment. Albeit I have to say after 300 odd business trips during my 40 years of working life travelling has lost a bit of its glory.

In the end I would think people need to get used to the fact that Superannuation is not an estate planning vehicle and they will have to spend their capital as well.

A good question to ask is always who benefits from a statistic and a statement.

July 30, 2022

Really? $10,000 a year? Ours are over $30,000 This covers health insurance ( over $6000), council rates ($2200), running 2 cars, food, eating out, home insurance, power, water, gas and some weekly pocket money for each of us ( clothes, make up etc ). Not to mention any home maintenance. ( the wall oven died, there goes another $1500 )

July 31, 2022

Yes, really!! After all I said the essential costs and going out is not essential and running two cars is also not essential. If you can afford it fine but don’t expect the government pension (meaning the rest of the tax paying community) to pay for it. And you should look for a better health insurer. Ours is just $5355.60 a year. The difference between $8000 and 10,000 a year is just whether one or two new phones were needed or two new non-specsaver spectacles were bought. The point I am making is that what ASFA suggests, that on the Age Pension you can’t properly heat your home, can’t have private health insurance and not really afford a good car is simply wrong. On the other side however, the $8000.- to $10,000 a year provide quite a good buffer for maintenance and/or dining out or even a holiday.

July 29, 2022

Similar to inflation (my inflation may not be the same as yours), the best number is the one you calculate from your own living costs. Remove those expenses you won't be having (commuting to work, income protection insurance, etc) and separate your budget into "must have" and "nice to have". Having safety margins is important. There will always be unexpected and unplanned expenses.

Former Treasury policy maker
July 29, 2022

Not an incorrect observation, Abel, but keep in mind that policy governing the tax rules, etc for super and retirement incomes can't factor individual circumstances in. They have to work with average figures that reflect the policy objectives.
So the question about which approach to use needs to take the policy goal into account. Is it aimed at encouraging enough saving in super to give someone the comfortable income level that ASFA has in mind or a more basic level, presumed by CHOICE Magazine?
It's actually got nothing to do with the super industry wanting more fees - that's a disgusting furry- and all about what's right.

July 29, 2022

More white noise. "The choices you make will dictate the life you live." Where and how you live are the true meanings behind all of these comments.

H Statice
July 28, 2022

Enough money is just right. Too little or too much are equal worries.
Spend only the minimum (for comfort & health). As soon as possible, own a property that you can comfortably live in/on. As long as possible, maintain this property yourself .
Avoid dependence on Government 'systems'. See Govt pensions only as safety nets, not entitlements.
Learn how to maintain excellent mental & physical health. Avoid doctors and hospitals, including dentists, unless you really can't manage the problem yourself.
Avoid the legal system, except to document your end-of-life wishes.
Reduce working hours and responsibility as desired. Don't retire unless you must.
Be kind (thoughtful) to everyone & everything.

Jim Hennington - Actuary
July 29, 2022

Super Consumers figures depend on the Age Pension level getting more and more generous in the future. Their original PDF says "Our assumptions for the savings targets imply real terms growth in the age pension".

I'm personally uncomfortable to plan my retirement to be heavily dependant on future taxpayer generosity. In our work for clients we regularly stress test their Safe Spending calcs should the Age Pension be less generous or even zero (e.g. through means test tinkering). What are others views?

There are likely to be demographic pressures as the number of retirees to workers goes up. For example the projected cost of Age Care is for it to blow out by over 500% during the lifespan of a current 60 year old.

July 30, 2022

"stress test their Safe Spending calcs should the Age Pension be less generous or even zero":

Plenty of instances in global history where State pensions have become near worthless. In which case what would happen to the value of savings and the cost of living?

Super Consumers: Couple 65 homeowner
$ / y $ saved Yield / $ Marginal Yield / $
40,000 88,000 45.45%
55,000 369,000 14.91% 5.34%
73,000 1,021,000 7.15% 2.76%

Financially might be better off to stuff the (1,021,000 - 369,000) = 652,000 into capital and running cost efficient home improvements.

July 28, 2022

I'm just going to leave this and duck for cover. Great, and scandalous reporting from Graham.

July 30, 2022

The truth is there is no right answer. Everyone’s case is different. Lots of assumptions go into these estimates. Longevity and investment risks, state of health, need for aged care all come into it.

July 30, 2022

What about the old 66% of pre retirement income…too many options and way too many assumptions. I think what ever we use if it starts a conversation about retirement, what Australians want/need and gets them activated thinking about it, then it has done a good job.

July 28, 2022

Hi Graham. Simply superb. Totally agree. SCA's 'comfortable' would be beans and cask wine. Where's the joy!!
Still, they got the publicity.

July 28, 2022

As you said vested interest.Two people in my cycle group,they have no super,male and female.Super was used to buy a house.They are not married just long term friends.They bought a 4 X 2 house. Both receive almost full pension ( 2 X 26K?).They get a part UK aged pension as they both contributed to National insurance .All costs are shared, they just had to prove to centrelink it was co habitation of one property. All up a household net income of $60 to $65K.They've never had as much money to spend in their lives.You would need to own a house though. The book title says " Where are the customers yachts"

July 28, 2022

I think that the thinking here is way off the mark. Places like Stanton Uni (US) and most probably others, are plotting 'The new map of life-100 years to Thrive' and other projects. Many of us baby boomers are living the dream of longer than expected lives and sciences are clearly going to offer possibilities where our 'retirement' years could be the largest proportion of our lives. To be thinking so narrowly that it is all about subsistence and not much more from age around 60 or so is simply tragic and narrow. SCA, AFSA and others of the same ilk should be ignored by any good financial advisor. They should tell their clients to deal with the reality on offer and plan for the long haul.

July 29, 2022

Couldn't agree more.

I worked in super for a decade and a half and was quietly horrified when the ASFA numbers (or Melbourne Institute/Westpac numbers as they were at the start) came out. The meagreness of even the comfy standard was anathema to the concept of retirement in my view. I did some detailed costings as part of a retirement conceptual project I was on and proposed a third band - aspirational - which was about half as high again as comfy, as a way to inspire people to think more of a post-work life that didn't involve a "reasonable" car and "occasional" overseas travel - occasional seeming to mean every decade or so and reasonable meaning a sturdy Corolla with an FM radio. No-one was interested, however. Shame.

The SCA numbers smack of "trust us, we know what's best for you" thinking - against a backdrop of galloping inflation and a debt-ridden economy, surely placing your trust in 20 or 30 years of old age pension payments, even partly, if you have the option to do otherwise, is madness.

My other pet peeve on the topic at the moment is finance opinion writers - one can't call them journalists - in the mainstream press dashing off articles that vaguely support the "you don't need to save as much as you thought" school, when said writers are yet to hit 40 themselves. Thanks for your opinion. I've done my own numbers if that's OK with everyone.

July 29, 2022

"you don't need to save as much as you thought" school:

Then there is the "you need much more than you are likely to have" school.

Useful to know the minimum necessary / likely. Some prefer their jollies before death / retirement and less after.

July 31, 2022

Very pleased that someone else is fed up with 20yr old female economics writers who regularly write such drivel!
ASFA is not much better. Unfortunately none of us will still be around when they get to where we are and realise what a huge mistake they have made. All very well to think we will be too old to walk, talk, see and think, so it does not matter if we have no resources to go cruising or flying or driving or whatever turns us on. And what about the aged care home accommodation deposit (or the daily interest to pay). My mum is 101 and in aged care and it costs a b......... fortune. Like others, I am just assuming that the aged pension and all the benefits will not be worth having when I get to the point of needing it.

July 28, 2022

Whatever you spend pre retirement times 20 has proven time and time again to be a very simple but accurate guide!

July 28, 2022

Do you mean what you spent per annum X 20?

Peter Vann
July 31, 2022


The “20 times” guideline says something like “ retirement spending can be adequately funded if your investments at retirement date are 20 times your pre-retirement spending”

And Rob is claiming that whatever your pre-retirement spending level, this very simple guide has been proven time and time again.

As one can see from the comments to this article, there are many nuances relating to how much one needs to fund retirement, but simple guides like “20 times” and the “ 4% rule” can be useful.

July 28, 2022

Age Pension Asset Test full pension couple home owners: $419,000

Savings rate:
= PMT((1 - 15%) * 3%, (67 - 25), 0, 419000) / (1 - 15%)
= -$6,688.40 / y (- = into fund)

July 27, 2022

Work from outcome to determine required income:

The minimum capital:
3% = real return / y,
95 = terminal age,
65 = retirement age,
70% = retirement income / pre-retirement income;
= PV(3%, (95 - 65), -70%, 0)
= 13.72 capital at retirement as multiple of annual pre-retirement income.

The minimum savings rate / pre-retirement income:
15% = super earning tax,
3% = real return,
65 - retirement age,
25 = start of accumulation age,
13.72 = capital at retirement as multiple of annual pre-retirement income,
15% = super contribution tax
= PMT((1 - 15%) * 3%, (65 - 25), 0, 13.72) / (1 - 15%)
= -20.13% (- = into fund)

As one function:
=PMT((1 - 15%) * 3%, (65 - 25), 0, PV(3%, (95 - 65), -70%, 0))

David Smith
July 28, 2022

As a planner working with retirees and pre-retirees for over two decades I feel equipped to pass informed comment on this. I have no doubt that most of us could get by on the incomes suggested by the SCA report, if we had to. The question is, do we want to? Our practice works with our clients to achieve a retirement that includes choices and dignity. If someone has confidence that our governments will keep paying adequate pensions, start funding adequate healthcare and start funding adequate aged care, the SCA figures may well appeal. If things don't pan out that way, I'm not sure what Plan B is. Vested interests? Yes - I have a vested interest in the long-term wellbeing of my clients. I plead guilty.

July 28, 2022

Age Pension Asset Test part pension couple home owner: between $419,000 and $915,500.

Each $1 reduction on assets results in $0.078 increase in pension payment - government guaranteed for life.

Some choose to blow the income spoiling assessable capital, some choose to invest it in gilding the Principal Place of Residence.

Some choose to consume less and save more before retiring so they might have more to spend or pass on in retirement.

Others find spending tiresome.

Eric Dillon
July 28, 2022

Well said David. I think a further point is that it depends on the lifestyle a person has been accustomed to before retirement. Getting by on $45k to $65k may provide for essentials but not much else and with limited buffer (if any) to deal with unforeseen issues including inflation and the almost certain future likelihood of governments needing to cut back on pensions and services. Many people unfortunately do not earn enough to save more but for those that are lucky enough to have a saveable amount left over, it’s about choice. If you spend it in the lead up to retirement you will likely have less choice later on and be much more dependent on the largesse of government.


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