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Uncomfortable truths: The real cost of living in retirement

The more I write about retirement, the more I learn. And the more aware I become of what seems to be an alternate reality or parallel universe when it comes to how much money Australian retirees will actually need.

On the one side is the rather chirpy spin which paints a vision of an ideal retirement, presumably available to most, underpinned by secure funding for life.

Who wouldn’t want that?

And then on the other side of the divide is a much messier affair, fraught with doubt and concerns and the ever-present FORO – the fear of running out.

The ‘securely funded’ camp tends to assume that everyone agrees that the regularly updated Cost of Living in retirement tables offer reliable targets for ‘most’ retirees. But that is a stretch at best. And potentially dangerous at worst.

The problems with retirement spending targets

This too-easy acceptance of retirement spending targets troubles me greatly.

Here’s why I believe the cost-of-living assumptions and generalisations are reducing the ability of ordinary retirees to fully understand their retirement income options.

Let’s start with one of the ‘sunny-side up’ indices – the ASFA Retirement Standard.

It’s been around for decades and is continually quoted as the ‘rolled gold’ standard. As such, it is rarely questioned. But it should be. Many industry insiders are in agreement that these numbers are unrealistic. There are two key problems with them, which are widely recognised, but rarely challenged. The standard offers targets for those aged 65-84 and 85+.  Let’s limit this discussion to the amount needed for 65-84-year-olds.

The current ASFA amounts (published March 2024) are:

The modest lifestyle targets are more than modest, they are frugal. They do not allow for emergencies or expensive health care. There is another assumption, and that is that an Age Pension will be available to all above categories.

Separate to the Retirement Standard, ASFA publishes regular updates on the super account levels for various ages. [Most recently, An update on superannuation account balances November 2023]. Eschewing the average amounts as they can be skewed by a handful of people with very high balances (one unnamed soul has more than $500 million in his/her account!), the mean amounts tell us quite a lot.

For those in early retirement, aged 65-70, the median amount is $213,986 for males and $201,233 for females. If we add these amounts together for couples ($415,000) we can see that at least half Australian retirees will struggle currently to have anywhere near the $690,000 for couples or $595,000 for singles deemed necessary for ‘comfortable’ by ASFA.

The savings targets for modest lifestyles of $100,000 (both single and couple) also carry the assumption that all retirees own their own home with no debt, that they will receive a part-Age Pension and that they will spend all their capital.

There are a few problems here.

Firstly if more than half Australians (i.e. the median) have a super balance  which, for couples is 415/690 or barely 60% of that needed for this comfortable goal, maybe comfortable is actually more accurately described as affluent?

It’s worse for singles, with say $207,000 the median balance (for males or females) which is 207/595 means just 37% have the amount required to be ‘comfortable’.

In plain language, most Australians will NOT be anywhere near ‘comfortable’ based upon these numbers which are called a ‘standard’.

The second problem and perhaps the more important one is the assumption of home ownership. Only 82% of retirees owned their own home, according to the Retirement Income Review, 2020). This will now have decreased even further. So there are a group of retirees who are simply not taken into account with these calculations – the ‘others’ – the renters and those who live with family. Where is the standard for them?

And then of course we have a third problem; the real elephant in the room. Homeownership is automatically assuming no mortgage. How far out of date is this notion? Recent research from Professor Rachel ViforJ indicates that more than 50% of homeowners aged 55 and over have a mortgage. Many may expect to reduce this or pay it off when they reach preservation age. But that will only further reduce their super so that the median savings amount quoted above may actually decrease, rather than increase. Yes, the Super Guarantee will increase to 11.5% on July 1 this year, but that is not going to solve the problem of a $50,000, $100,000 or higher mortgage debt.

More recently, advocacy group Super Consumers Australia (SCA) decided to publish targets that it believed to be more realistic than the ASFA targets. Here are the SCA spending and super balance goals for current retirees (aged 65-69):

Yes, there are three levels in these targets, rather than two, which offer more nuance.

But guess what? Yes. Again, the assumption has been made that all retirees live in a home they fully own.

Why aren't mortgages factored in?

Now of course the smart brains at ASFA and SCA will know the degree of indebtedness of Australian retirees as much as anyone else. So why do they not factor a mortgage into the suggested cost of living in retirement tables? Is it too difficult to do so?

This was the question I asked Ross Clare, Director of Research, at ASFA and Xavier O'Halloran, Founding Director at SCA.

The ‘short’ answer from both organisations was that it is difficult to allow for very different levels of retiree indebtedness.

Xavier O'Halloran said it was something that SCA had considered addressing, but they felt a broad rule of thumb would be for retirees to look at suggested savings targets and add on the amount of the mortgage, so that individuals could better understand their income prospects. This simple calculation doesn’t of course allow for interest on repayments, as O'Halloran acknowledged. He did suggest, however, that using the Moneysmart calculators would be useful for those with mortgages.

ASFA responded with a statement attributed to CEO, Mary Delahunty, which said:

“The ASFA Retirement Standard budgets focus on the housing status relevant to the great bulk of current Australian retirees and those approaching retirement.

Unlike other housing costs which continue throughout retirement, mortgage payments are highly variable, depending on both the amount still outstanding on the mortgage and the remaining term of the mortgage. For most individuals aged 65 plus who still have a mortgage, repayments are typically at a modest level.

A better approach for those approaching retirement who still have a mortgage is to add the mortgage balance to the required lump sum for outright homeowners and to compare that with their superannuation and other retirement savings and/or to have an exit strategy involving downsizing or the like.”

ASFA also shared a table showing low numbers of homeowners aged 65+ with a mortgage. But as we have seen, the trend is for this ratio to change, rapidly.

Greater scrutiny of retirement targets needed

Which takes us back to the starting question, ‘How useful are these retirement savings and spending targets in the real world?’

Not very, I suspect.

And why do financial journalists continue to report such standards as the norm?

I guess it’s because no one can be bothered to do the hard yards and come up with something more useful. Which means the growing number of retirees who need support to manage mortgages will continue to go under the radar – and remain highly stressed about how they will cope.


Kaye Fallick is Founder of STAYINGconnected website and SuperConnected enews. She has been a commentator on retirement income and ageing demographics since 1999. This article is general information and does not consider the circumstances of any person.


May 05, 2024

Government could claw back pension payments from the deceased estate after the passing of the surviving spouse. Does that seem fair?

May 05, 2024

Why stop there then! Job keeper payments, disability support payments, single parent payments, NDIS...........claw them all back? Maybe, bravely, float the idea at bingo at you local RSL and see what the response is. I suggest you wear armour!

May 06, 2024

Age pensions are different. The taxpayer ends up funding the inheritance of the pensioners’ kids. People who really need the pension won’t have much leftover in their estate so not an issue for them.

May 14, 2024

@Trevor. That's subjective & selective. Consider a young person who inherits a house and has no desire to work and so gets Jobseeker/Disability support for decades before even qualifying for the aged pension. Should they too not have to pay back this amount, that would probably far exceed a single age pensioner over their likely remaining years 10,15 perhaps 20 years? Think it unlikely? Be surprised I know of several!

Geoff R
May 23, 2024

"Government could claw back pension payments from the deceased estate after the passing of the surviving spouse. Does that seem fair?"

yes that seems very fair. Either that or get rid of means testing and give it equally to everyone (thereby removing all the perverse incentives). The current system is truly woeful in so many regards.

May 23, 2024

"claw back pension payments from the deceased estate after the passing of the surviving spouse":

Which one? The task for each Age Pensioner survivor would then be to find another spouse who will live longer. An Age Pensioner marriage market, complete with dowries?

Pradeep Agrawal
April 29, 2024

Interesting discussions and ideas raised.

If restriction on tax free withdrawals from super after pension age is implemented without other permissive and generous changes to super, any confidence or trust I have in Australian government fairness would be gone.

While examples are given of Multi-million $ homes or $500M in super balance as an excuse to limit concessions, when new rules are imposed, the thresholds are too restrictive (in my view). The new large super balance tax should not apply below 2 times the transfer balance cap (i.e $1.9M times 2 = $3.8M).

Similarly, if the home has to be included in Age pension calculations, owner occupied house to the tune of 1.5 times median value of house in the capital city should still be excluded, and only excess market value should be included in asset value.

April 30, 2024

I disagree, Super should be capped at $3M. It is to help fund or fund ones retirement, not a wealth creation tool.

If you have more wealth, all good. It doesn't need to be in Superannuation.

April 30, 2024

"new large super balance tax should not apply below"
"to help fund or fund ones retirement, not a wealth creation tool":

Arguing over the colour of the rope by which to hang.

All Super does is reduce the tax rate payable on investment returns, implying the tax rates outside Super are too large to result in accumulating retirement capital.

Abolish Super and Age Pension Asset and Income Tests and tax on imaginary [ 'inflationary' ] gains.
Those who prefer accumulating capital and assets will; the rest will receive the Age Pension.

April 30, 2024

"Abolish Super and Age Pension Asset and Income Tests and tax on imaginary [ 'inflationary' ] gains."

Wake up Dudley you're dreaming! Government still pretends to give us a tax cut when they periodically rejig bracket creep!

May 01, 2024

"you're dreaming":

Mostly helpfully inflammatory.

Some might usefully re-examine their assumptions.

May 01, 2024

Abolishing Super now is not possible. $3.5Trillion in the system.

Even if only a 1/3 is pulled from the system, there will be too much money chasing too few goods.

That inflation spike is beyond your comprehension

May 01, 2024

"Abolishing Super now is not possible" ... "inflation spike":

Before 'Super' money existed. Portion of incomes invested.

Instant abolition of 'Super' would allow the obsessive-compulsive wasters to indulge a brief splurge like winning at a scratchy lottery. They will find a way to empty their 'Super' early illegally or come 'Condition of Release'.

The unafflicted will mature younger and capture the waster's 'waste'.

The modest amount of money wasted would be quickly vacuumed up and tidily tucked out of harm's way; particularly where real interest rates were healthily positive.

May 01, 2024

You're combining two separate issues.

I was speaking specifically about your suggestion of abolishing super and how it would be bad. Illegal access and preservation age, conditions of release are the irrelevant.

It wouldn't be a trickle of funds outward.

Large amounts of funds being withdrawn post preservation age that are coming will be addressed with limits on lump sum withdrawals. Chess pieces are already being moved by the government. Media is getting fuller and fuller with l, we've concentrated on the accumulation phase we need to work on the retirement phase articles. Articles about Super Pensions, making money last (even worded as such in the new, Objective of Superannuation spiel by the government.

May 01, 2024

"Illegal access and preservation age, conditions of release are the irrelevant.":

They indicate what the OCD spenders would do. Most don't waste their capital except where rational to claim more Age Pension or reduce debt.
Abolishing 'Super' would abolish government tax 'concessions' ( which concede that tax rates are too large ) and freeing the populace to save or not.

"Large amounts of funds being withdrawn post preservation age that are coming will be addressed with limits on lump sum withdrawals.":

Threats like that would be a dyke buster.

Manoj Abichandani
April 29, 2024

I think for comfortable living - you need $80K After Tax - I am not sure if capital required has been adjusted to paying this tax. My calculations show a higher capital base.

Since I migrated from a country where there is no aged pension, I started planning early and me and my wife will have more than the new limit TSB and likely to pay higher tax soon

In this country, your employer pays your income tax (PAYG) and pays for your retirement (compulsory super) and when you retire the government pays you aged pension

You just have to pay off your home and it is amazing that many have such a pubby lifestyle - that many are not even able to pay a mortgage in lifetime of earning - they spend!

They spend everything whilst working and then when they retire - use employers super contributions to pay off the home loan - then government has to tax us more to fund their age pension - just does not make sense!

The new tax is a joke and age pension is a joke. You can live in a house of over $5 M but still be on government funded pension - which is collected from people who live in $1M houses with $4M in

My financial planner calls me stupid and I am starting to agree with him

April 29, 2024

How many retirees living or travelling O/S and have empty homes back in Aus unable to rent them as they then become assets and the rent received would be less than the aged pension.

Harold Hare
April 28, 2024

More consideration needs to be given to the staggered nature of expenditure during retirement. It is inaccurate and misleading to always use a flat rate to life expectancy

Ron Bird
April 28, 2024

The one thing we repeatedly ignore when discussing our retirement income system is that it comes at a cost and that it is entirely different for people depending on their income/wealth. It is just meaningless to discuss what people need to fund their retirement without taking into account the lifestyle that they have enjoyed during their working life. People in their 60s and beyond just do not change their consumption needs and wants because they happen to find themselves with a bit more money. The important consequence of this is that people do not use a significant portion of the balances that they accumulate.. This is an indication of another significant fault with our retirement income system - the contribution rates are much higher than what they should be which really is not a huge concern for the wealthy but results in results in a completely inappropriate allocation of lifetime consumption opportunities for the poorer amongst us (and hence the under-utilised retirement balances for this group). Indeed, this is only one of many other significant failings of our retirement income system which will show up in future years but will unfortunately not all be seen by those who pat themselves on the back for the fantastic job they did in establishing it over 30 years ago.

April 28, 2024

"contribution rates are much higher than what they should be which really is not a huge concern for the wealthy but results in results in a completely inappropriate allocation of lifetime consumption opportunities for the poorer amongst us":

What contribution rate would provide cashflow in retirement equal to disposable income before retirement?

Contribution tax 15%, earnings tax 15%, real return rate 4.45% to 65, from 25, initial $0, real return rate 4.54%, to 85, from 65, disposable income normalised to 1:
= 1 / (1 - 15%) * PMT((1 - 15%) * 4.54%, (65 - 25), 0, -PV(4.54%, (85 - 65), 1, 0))
= -16.59% / y (- = into fund)

More realistic but achieved by few?:
= 1 / (1 - 15%) * PMT((1 - 15%) * 4%, (65 - 25), 0, -PV(2%, (85 - 65), 1, 0))
= -23.28% / y

The Age Pension awaits for most, especially those to survive the longevity cliff around age 86.

Peter D
April 28, 2024

These figures are probably only valid within a short window if time, too. As cost of living is through the roof. Good luck!

April 28, 2024

Gratitude to Firstlinks for both the educational, informative articles and the opportunity to both comment and read comments that further educate, cause one to ponder different viewpoints and lifestyles, amuse, and remind one that human needs and understanding are diverse and the lens though which we view the world is but one of many. Oh and a special thanks to one contributor for improving my excel and mathematical skills!

April 27, 2024

Just let them draw a pension against the equity in their home, repayable upon death, interest free. And include value of their home in asset test for pension. The welfare system should not be there to enhance inheritance. Paying for the day to day expenses of the elderly so that inheritance can be preserved is ridiculous!!!

April 27, 2024

"include value of their home in asset test for pension":

Abolish Asset and Income tests for Age Pension would result in those who paid for all the welfare getting a bit of it while eliminating the Taper Troubles.

April 27, 2024

We need to get rid of the stupid idea that life is somehow cheaper for a single person. It isn't. I take my car to the mechanic - he isn't going to charge half the cost because I am single. I call the plumber - he isn't going to charge half the fee because i am single. Single person households are now a large percentage of the population but we may as well be invisible as we are never considered. Apparently surviving on the single pension is no joke once a spouse dies , according to friends.

April 27, 2024

It gets worse than that.Holidays become no go areas. A cruise that is advertised as $800 looks great.A quick cruise to Singapore,5 or 6 days,1 or 2 nights in Singapore,fly back.Sorry price is based on per person for 2 people.

Before COVID a ship would leave to go back to Europe.Summer cruising here,return to Europe for summer cruising there.The ship left mid or end March to get back to Europe. $4 or $5K for 53 nights,just to cover the costs to get it back to Europe,and perhaps a small profit.

One of the ladies in the cycle group was determined to do it,she was divorced and retired. On her bucket list,a cruise to Europe.Sorry price is per person for a couple.She thought for a few days and decided to hire the room and pay for two people,but go on her own. Sorry you can't do that,you will need to pay for the room for 2,and a single supplement.This is a strict two person cruise,based on 2 people per room.

Flying holidays are the same,ridiculous.

April 30, 2024

Then don't go with them. If enough people spent their money with companies that didn't do dumb things such as the (very Continental European) "single supplement", they would learn. And someone enterprising enough out there reading this will understand there is a gap in the market for this.

No different to "no kids cruises", "no casinos on board" etc., just catering to a demographic and I'm surprised no one has claimed "discrimination" for it.

peter c
April 26, 2024

Those ASFA retirement standards are NOT frugal, they are modest. The real issue is baby boomers who are the ones retiring who cannot live as modestly as previous generations.

My parents who are part of the forgotten generation have the aged pension and a tiny super pension for my father enough money to pay for their funerals and to pay for emergency repairs or purchases. They also own their own home. They save money on the aged pension, because they know how to live on a modest (not frugal) budget. Most baby-boomers waste money compared to previous generations.
My parents don’t skimp on important stuff like food, and clothing but don’t waste money going out for breakfast or coffee, which can be done at home. They cook almost all their own meals and don’t buy pre-prepared meals of junk food and don’t use delivery services. They even pay for a cheap subscription TV service.

How do they do it? Like previous generations they know the difference between needs and wants and don’t overspend, unlike the baby-boomer generation.

It’s time baby-boomers took the example of their parents or grand parents and stop overspending.

April 26, 2024

"Those ASFA retirement standards are NOT frugal, they are modest.":

They are Shockingly Profligate. If only we could wangle the Age Pension, think of the money we could avoid spending.

Graham Wright
April 26, 2024

Peter C, there is the silent majority of boomers who are not overly endowed financially and spend wisely and frugally within their means. Meantime there is a noisy minority who are overly endowed and talk loudly about taxation and estate issues, Govt interference in their lives etc while they pursue a luxurious lifestyle and an estate passing to their loved ones. The noisy wheel gets the most attention.
But as time goes on and age and health issues impact each of us more and more, wealth becomes less and less significant and the great leveller weaves his magic to make us all equal where wealth means nothing.

April 27, 2024

Peter C,
You may call them the “Forgotten generation” but GW is right to call them the “Silent generation” they just suck it up, how frugal would your spending habits be to actually save money on the OAP.
No whopping it up eating breakfast out or coffee with friends, don’t you think it’s sad they have to embrace such frugality?
There are no pockets in a shroud.

April 27, 2024

"whopping it up eating breakfast out or coffee with friends":

Moderate intensity fasting combined with moderate intensity exercise means a two hour walk topping a prominent rise before returning home at luncheon for a moderate carb break-fast of 4 bean or pumpkin soup with black tea.

"sad they have to embrace such frugality":

Sad that the alternative is weight gain and ill health.

April 27, 2024

Dudley, you’re just teasing.
I presume you do all this healthy activity via a Utube channel, as you’ve advocated in previous posts, I never realised socialising with friends was not just bad for the bank balance but deleterious to your health.

April 27, 2024

@Darmah. Dudley doesn't have friends, having friends means he might have to leave the house and spend money. ??

Horses for courses, we only have a limited number of trips around the sun. The last of those might be in the confines of a nursing home.

Most of us appreciate you have to live a little.

April 27, 2024

"I never realised socialising with friends was not just bad for the bank balance but deleterious to your health":

Fondness for foody friends = a sickeningly sugared food = short life = less retirement savings required.

April 28, 2024

"leave the house and spend money":

Err, the objective is to be able to leave home and not obsessively or compulsively spend money, especially on that waiting at home such as water.

Graham Wright
April 29, 2024

Darmah, My observation is that most retirees adapt to their circumstances and learn to be happy there. The unhappiest are those who lose their spouse or partner. Socialising eases their pains by day but nights remain long and lonely. In more than half of instances, females outlive males to suddenly inherit loneliness and wealth, wanting neither. Many cannot change lifestyle to spend more, because they can, after their frugality in trying make the shared wealth and shared lifestyle last longer.
So retirement is much more complex than just a wealth accumulation and management problem. If you have not experienced it and closely observed a substantial population of retirees, it is hard to understand the complexity and evolution that accompanies living in retirement. How many of those who would advise us, have that lived experience.

May 03, 2024

GW, I agree with your sentiments.
I live in a small town with an older demographic, when I’m out and about, I see many people, mostly couples, still engaging with life, playing golf, baby sitting grandkids or just having coffee with friends.
I also know quite a few single or widowed people living on the OAP, little or no super and in the private rental market. Their opportunities for interaction and a meaningful life are seriously curtailed, I'm sure it must impact their health.
This demographic is set to explode in the near future and we as a society must find a way to help.

Sue R
April 28, 2024

How lucky that your parents are still alive and together. They can enjoy their time at home sharing meals and watching tv. Consider how this would change if one of them were to die. Then perhaps the surviving spouse would realise that a lifestyle together is a very different one to that of being single. Home alone becomes incredibly isolating and lonely, so in order to avoid this singles need to be out and about to avoid this, and this often incurs having coffee with friends, having the occasional meal in a restaurant, joining groups etc. not to mention paying off the mortgage or finding someone to go on holidays with. The single supplement is a gruesome reminder that singles are not on the radar. As another reader pointed out, the plumber doesn’t charge you less if you are single!

April 28, 2024

My step father died 8 years ago. My mum has been single ever since, she's now in her 80's and struggling with loneliness.

My father died just before Easter at the age of 87 and now my Step Mother faces the single life.

My parents made it to the 80' as too their parents so all things being equal, I should be around the same.

I have no intention of sitting around watching YouTube videos of different countries when I retire at 60. I'm going to those places. 60 to 65 I will travel a lot, internationally and domestically before I kill the travel bug. Even then I'm likely to still go to New Zealand, Japan, Bangkok and those sort of what I call easy flight times.

April 29, 2024

"no intention of sitting around watching YouTube videos of different countries when I retire at 60. I'm going to those places. 60 to 65":

Now ca try b4 buying:

And reminisce on what u missed.

No money spent.

May 14, 2024

SR Well said, losing a partner & being alone is the worst thing ever,
As baby boomers we worked & saved I have assets, I do not get any gov assistance other than pay huge land tax, annual tax & try to cope with all alone. Going out for a coffee, playing golf or occasional meal out helps to keep your sanity Dudley needs to experience some of this.

May 14, 2024

"Going out for a coffee, playing golf or occasional meal out helps to keep your sanity Dudley needs to experience some of this.":

Coffee has no significant medicinal effects. Golf is an alternative walk. Occasional meal out: Dingo's breakfast?

Rather than counting losses, count money?

April 26, 2024

James: "For those in-between ($450K and $1.3M) you're actually worse off if you don't burn your capital".

OR convert it into a non-assessable asset like a better home or major renovation of your current home.

April 26, 2024

Ah, the Dudley school of thought! Horses for courses I guess. Making one perhaps asset rich and cash poor (accessible capital). Fine if your lifestyle is not too expensive, but not so good if you value experiences over increased home value. Sure you can access your capital......if you sell your home or mortgage it.

Life is short and you're a long time dead. Dying with an expensive house is not my goal! Dying with zero would be the perfect solution, but admitedly with an extremely high degree of difficulty and an outsize penalty for mistiming!

April 26, 2024

"Dying with zero would be the perfect solution":

Destitution before death provides more vivid, novel experiences than wealth (and, possibly, the afterlife).

Risk and spend it all until slow decay limits classes of experiences:
= PMT((1 + 10%) / (1 + 3%) - 1, (85 - 65), -3000000, 0)
= $278,707.15 / y

Then throw one's mortal remains on the mercy of the State:
= 26 * 1682.8
= $43,752.8 / y

A cut above a remainder of life in a cabin in the sun:

April 27, 2024

C,mon James,are you not jealous of Dudley. While we are enjoying a world cruise and wasting that money just think,this could be spent on a new kitchen,or bathroom,a few $$ extra pension would be much better.

Planning all these things and the wonderful memories they will produce,people met and places visited,how could that replace a few extra $$ in pension.

Then we die,the memories are gone The people that inherit that house my be thinking,sell it.We can create wonderful memories by going on holiday,or something as simple as just working part time we sold the house,we don't need to work full time.

Funny old life

April 27, 2024

"While we are enjoying a world cruise and wasting that money just think,this could be spent on a new kitchen,or bathroom,a few $$ extra pension would be much better.":

Those home owner couples with Age Pension Assessable Assets greater than $1,012,500 can qualify for the full Age pension by wasting (1012500 - 451500) = $561,000.

Two ways for cruisers are:
A. spend $561,000 on a world cruises, then claim the full Age Pension, or,
B. invest $561,000 in home improvements, then spend the full Age Pension on a world cruises.

A. results in a 20 year blur of memories.
B. results in 20 y * 26 f / y * 1682.8 / f = $875,056 spent on world cruises and an increase in assets of 20 y * 6% / y * 561,000 = $673,200; with bonus blurred memories.

April 26, 2024

I planned my retirement assuming that any income from super was a bonus, and after paying off the mortgage on my home, made efforts to be fully self sufficient even without super drawdown. Some may say it was unwise from a tax point of view, but my real estate and stock investments have beaten my super even with tax disadvantage. I understand that not everyone will be in a position to do this. No general calculator can give an estimate for how much "you" need. A simple solution as to how much you need in retirement is to keep track of annual expenditure and total annual income (incl salary, interest, dividends etc). Then set the salary income to zero. The expenditure minus the remainder income is what you need. Make sure you compound the expenditure with 5% inflation for a conservative estimate. Only your individual situation tells you how much aged pension you can expect.

April 26, 2024

My takeaway from this is to be grateful that I have a partner and own our own home.
I have several older friends, single and live in the private rental market with little or no super.
Trying to survive with little savings on a single persons OAP and half your income going on rent is the stuff of nightmares.
It’s no good saying it serves them right, not everyone wins the genetic lottery and earns a six figure salary.
As a couple, we have around $700,000 in assets and a part pension, it seems to be the sweet spot to afford a very comfortable lifestyle with a large buffer for emergencies.
To do better than this would entail a lot more savings, probably an extra million or so, it was never going to happen as a self employed tradesmen.
I found the figures in the article a good rough guide, just need to tweak them a bit for personal Preference.

Taxed to death
April 26, 2024

Age difference between partners is never considered in retirement calculations either….. which makes a huge difference, especially if a couple with a 10 year age gap want to enjoy some time together once the elder has reached retirement age!

April 27, 2024

Those with an age gap can benefit from the current system by moving assets from the older partner in to the younger partner's Super until they turn 67. That way the older partner can receive some or all of the Age Pension which is a great way to preserve capital for later. The downside is moving some of the older person's tax exempt pension or non-super in to the younger person's superannuation where there is a maximum 15% earnings tax. However the extra Age Pension and ancillary benefits usually far outweighs that earnings tax.

Still taxed to death!
April 28, 2024

Aged pension for a couple in this situation is not possible if the had planned on being self funded!

April 28, 2024

Yes! Not to mention if the younger partner is still working, the retirement age partner may not be eligible for any pension until the younger partner reaches retirement age.

April 26, 2024

My parents in Sydney have a $2.5m family home. My wife’s parents in a large regional centre have a $500k family home.
The equity for a reverse mortgage if either live longer than expected or need significant funding for health is a massive difference. This should be analysed aswell. And also addressed by Government.
Wages differ based on geography aswell resulting in less super.
Our care for equity issues ironically treats some differently to others.

April 28, 2024

My late mother had a small $25k defined benefit pension, approximately $350k savings and lived in a small semi worth $2.5 mil (paid $16k in about 1970). She got about 70% of the age pension.

My late in-laws lived in a house worth maybe $500k and had $2.5 mil in other assets (mostly real estate). They got no age pension and spent an awful lot on home care in their later years.

It doesn’t seem equitable but I’m not sure what the answer is.

April 26, 2024

Before I retired I tracked our family expenditure for a few years and assumed I’d spend the same in retirement and indexed from my retirement date. It was a fair bit more than the amounts specified by the ASFA then. I made allowances for some one offs, eg new car, some home maintenance and improvement and adjusted for not needing to pay education expenses. So am I on target? Life is what happens when you make other plans. I retired just before Covid happened so that was the end of planned travel (less expense) and pushed my spouse’s retirement out (more income) but inflation happened and the home works blew out.
Anyway I’d suggest anyone thinking of retiring should understand and categorise their pre retirement spend for a few years, decide their retirement aspirations and set their retirement targets accordingly. No one else can tell you.

April 28, 2024

Franz: We have being doing the same, tracking expenses for many years and making allowances for major future expenses. As you say, there will always be unexpected events and expenses, so having a safety margin is a good idea. One thing that many of us may underestimate is the cost of health care later when we become "high maintenance". The costs you need to cover yourself (either Medicare and health fund gaps or items not covered by either) can be significant.
You are also correct in calculating your own numbers. Your numbers can be totally different from the average and it is your number that counts to you.

Graham Wright
April 25, 2024

Almost all the writings on retirement funding are in my opinion predicated on totally inappropriate data and expectations. I believe the following will be the reality no matter what you plan or expect:
1. The funding you will have will be limited by your total savings accummulated in various sources before you retire, supplemented by any other income including investment returns post retirement. You may or may not (which is more likely) achieve any target you may set yourself.
2. Your lifestyle post retirement is in no way related to your pre-retirement lifestyle. It will evolve as age, health and personal expectations change with time and such changes could be quite radical and certainly unpredictable. You cannot prepare for the unexpected except to accept that the unexpected is more likely to happen while you hope and strive to avoid it.
3. When your own resources expire as they may well do, there is the age pension underpinning our fundability to eat and be healthy and a little merry so long as we moderate our expectations to suit.
4. Believe it or not, most of us adapt our lifestyle and it's costs so that the resources we have stretch further than anticipated. Maybe we subconsciously adopt the ideal principle to "spend my last dollar as I take my last breath". As age and health take their toll, we spend less, have fewer needs, often accepting low cost activities (like social, sports. entertainment via community services) because they fulfill our needs and where necessary we can utilise Govt support services to sustain our reducing lifestyle demands and capabilities.

In other words, we adapt as our needs, costs and support mechanisms change. Our need for survival kicks in and keeps us on the best pathway.

However, the whole system falls apart when we get lazy and do not monitor and manage our environment to keep the costs and the available funding balanced. It is further unbalanced when we prioritise our estate residues and the interests of our children, grandchildren etc, higher than our own needs. My children are welcome to my estate but only after my wife and I have finished using it for our lifestyle. I don't begrudge the Govt getting a share after I have finished with it so long as they are underpinning my lifestyle and health needs when I need them.

I have been retired almost 13 years now, my retirement funds have never met the settings set by experts as quoted in this article yet I have had a great retirement and I am working towards getting a letter from the King? in another 22 years as I march further forward. In retirement so far, we have lived as well as we want to, we have a good cruise portfolio behind us (covid killed any further plans) and we have a great enough social life. Good health, good diet, good friends, what else do we want? And all despite, not because of the the professionals who would guide us elsewise.

April 26, 2024

I recall the Gratton Institute looked into this a few years back and found that most retirees were largely living ‘well’ on incomes much less than the ASFA standards; spending less than many could actually otherwise do safely and many remaining net savers their entire post-retirement life.

Of course, the question is whether that level of spending was largely a lifestyle choice, or simply people living within their ( oldest) means.

Given the wealth of consumer spending data now available via the e-banking system, it would be a an interesting and worthwhile exercise to look at this again marry it up with qualitative research to answer this.

Graham W
April 25, 2024

It seems to me the tables are there to scare people to put more into their super. The majority of Australians have no idea what is in their super fund, let alone how it is invested. Most do not have a budget and also do not have a will.
So it is not going to be a matter given much thought to by the actual folk who need to do this.
The somewhat silent, financially astute folk will make their own plans regarding what they may need for retirement. The cost of living varies widely across Australia, so picking a figure seems to be only appropriate to those living in the big cities.

April 25, 2024

Why has this analyst not done the “hard yards” she is critical of others not doing?

April 26, 2024

Hi Geoffrey, thanks for your thoughts. I don't presume to call myself an analyst, that's for sure. I am a writer and commentator on retirement income, and my hope is that I can highlight some anomalies or areas of interest, pose questions and spark debate. Which this article certainly seems to have done. I was involved in the establishment of the YourLifeChoices Retirement Affordability Index which measures actual spending by different retirement 'tribes' - I think this index is still helpful and it does take renting into account. But whilst it is really difficult to factor in different levels of debt in retirement, I don't believe it is impossible. There are some great spending projection calculators which combine Age Pension and Super, so to factor in different mortgage levels with assumed interest/principal repayments should be possible? I think we are at a tipping point, where super savings are growing (e.g. SG goes to 11.5%), but those heading into retirement with higher super will be constrained by lack of home ownership or mortgage debt. What do you think? warmest, Kaye

April 26, 2024

"so to factor in different mortgage levels with assumed interest/principal repayments should be possible?":

This calculator does not accumulate unspent super withdrawals or income nor mortgage payments.

Mercer's reason was:
'We have deliberately kept the treatment of non-super assets simple to this point. The main point of the simulator is to model retirement income from super and the Age Pension. Hence the main purpose of including other assets is for their impact on Age Pension entitlements.'

While possible to model non-super assets and liabilities, the interactions are complex even where investing, spending, saving choices are informed and rational.

April 25, 2024

There is increasing discussion now about retirement OUTCOMES, rather than just about retirement INCOME. Many young people, who cannot get into their own homes, are putting owning their own home by retirement as a far greater priority than worrying about retirement income. While this may horrify investment managers, the reality is that Senator Andrew Bragg's concept of the Super Home Mortgage Offset Scheme will be voted into legislation in a future term of Govt. The Millenials / Gen Z's will make sure of it. And we will be back to where we were 30 years ago, where few workers contributed into super before age 40, as they were paying off their mortgages first. The solution is to increase the contribution age for super from 75 to age 100, and to increase the Super Home Downsizer from the (non-indexed) $300,000 to $1.7 million per person. Problem solved.

April 25, 2024

Sounds like something straight from the coalition’s “super sux” playbook. A house and your super aren’t mutually exclusive propositions.

The major problem now - and the long term need and fix that no party seems to be appropriately leaning into is, and always will largely be, supply side.

April 25, 2024

What you need in retirement is totally dependent on your spending habits and how wasteful you are.

Much of the commentary above ignores the impact of the age pension which is, (and no doubt will continue to be) available to most retirees. It is also difficult to model the impact of home care packages as they can reduce household maintenance costs as well as pay for things like art classes and gym memberships.

Every one is different, but as averages go, the figures seem reasonable. If you haven't to paid off your mortgage by the time/when you retire, then maybe you need a smaller house (there is really no excuse).

As a couple we spend less than $80000 per couple per year and that includes an overseas trip of 6-8 weeks.

April 25, 2024

Broad based models are essentially useless. The "retirement mix" is yours and yours alone, you had best understand the variables and the "levers" that can influence the outcome. Superannuation in Australia currently is all about "saving" which is a good thing however there is a massive blackhole on the "retirement/draw down bit" where Government's and Provider's have been culpable in the education of prospective retirees. If you do not understand your personal options or don't care, nobody else will!

David Williams
April 25, 2024

Thanks Kaye. A really good insight. It just reinforces how dangerous averages can be in planning for individuals. It's not easy to find alternatives but important enough to warrant more effort, as we know from seeking to empower people to understand and plan for their own longevity, and not simply fall back on the Life Tables.

April 25, 2024

More are likely to pay off a mortgage with one lump sum withdrawal from super at the moment they become eligible for the Age Pension - so as to reduce Assets Test Assessable Assets to $415,500 [or less] - so as to receive full Age Pension plus returns from $415,500 [or less] plus returns from increased home equity - while avoiding marginal tax rates greater than 31.5% on individual income greater than $29,783 / y due to roll off from tax offsets with larger income:

April 28, 2024

How will they do that in future when the government limits lump-sum withdrawals from Superannuation to stop that very issue?

April 28, 2024

"How will they do that [pay off a mortgage with one lump sum withdrawal from super] in future when the government limits lump-sum withdrawals from Superannuation to stop that very issue?":

By saving up and buying home with cash on the knocker.
Not only avoid paying mortgage interest but also knock home prices on the head while reducing cost of living and increasing the value of cash.

April 25, 2024

These would be the same financial journalists who simply compare housing prices today and 30 years ago with no nuance on interest rates, after tax incomes etc, or who continue to quote "total" returns that ignore the value of franking credits. 

Trevor Coventry
April 25, 2024

I have looked at the ASFA and my comment is that some of these expense estimates are not realistic. There is o way for instance that we,as a couple, would spend anywhere near the amount stated for food. Also with a combination of party DVA pension ,superannuation, and personal investment portfolios our income is greater than that stated for a comfortable lifestyle and we don't have $690,000 in savings,thought we are well past the 67 age level.

April 25, 2024

"don't have $690,000 in savings":

Should have less than $415,500 Assessable Assets resulting in Full Age Pension
= 26 * 1682.8
= $43,752.8 / y

Dying Destitute:

Real rate of return must equal or exceed:
to age 87 (longevity cliff), from age 67, income $72,148 / y less Age Pension $43,752.8 / y, $415,500 initially, $0 at death;
= RATE((87 - 67), (72148 - 43752.8), -451500, 0)
= 2.3% / y.

April 25, 2024

I'd rather have $3M and the earnings it would give me (most tax free from the TBC provision) than have less just to get a stupid pension and be bound by the rules of getting a pension.

April 25, 2024

"rather have $3M and the earnings it would give me" ... "than have less just to get a stupid pension and be bound by the rules of getting a pension":

Have the same $3,000,000 and get more:

$3,000,000 returns - rent (3,000,000 - 451,500) house;
= (5% * 3000000) - (4% * (3000000 - 451500))
= $48,060 / y

$451,500 returns + Age Pension + capital gain $(3,000,000 - 451,500) house;
= (5% * 451500) + (26 * 1682.8) + (6% * (3000000 - 451500))
= $219,238 / y

Both all tax free.

April 25, 2024

@Disgruntled, agreed regarding preferring the $3M etc but I think Dudley is alluding to the "sweet spot" if one is not so fortunate to have so much capital.

Fo instance with $450k in super, 5 % mandated min drawdown ($22,500) plus a full couple's pension ($42,988) total income $65,488. To get the equivalent without the pension requires $1.3M capital( at 5%).

For those in-between ($450K and $1.3M) you're actually worse off if you don't burn your capital.

For some the full pension and some capital is a lifesaver!

April 25, 2024

"worse off if you don't burn your capital":

Better to convert it from Age Pension Assessable Assets to a non-Assessable Asset (home).

Difficulty can be home improvements which can "burn" enough capital but with costs that do not 'burn' a too large hole in the income.

Tony Stevenson
April 25, 2024

There are so many variables at play it’s impossible to model. People retiring with a mortgage have many options including downsizing, relocating to cheaper areas, subdividing (in some cases) etc. Really unreasonable to expect modeling to cover off all those possibilities.

April 25, 2024

Unfortunately some of those will be living in properties which are entry level with no downsizing potential. From what I can see, it is those who have lived a lifestyle greater than their income (and haven't saved/paid off a home) who are in for a big reality check. Once the employment income is gone and if there is no paid off home or big superannuation balance they are going to experience a major lifestyle crash. Bad financial habits will catch up with them in a big way.


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