Table of contents
 - featured image
By Brett Warren
A A A

How Much Money Do You Need to Retire In Australia?

No matter what age or stage of life you’re in, it's valuable to understand how much money is needed for retirement.

Because when the time does come, we all want to ensure we have the opportunity to live the best life possible.

Here’s a breakdown of the average retirement income in Australia, how much money you need to retire in Australia, and how to live the retirement life you’ve dreamed of.

Retirement in Australia

Average retirement income in Australia

When retirement comes around, a retiree’s income could come from a number of different sources.

  • Government age pension
  • Superannuation savings
  • Personal savings
  • Other investments
  • Any salary if you decide to continue working in retirement. =

While there are no definitive figures on average income earned by retirees via personal savings, investments or salary, the government-aged pension and superannuation savings are the two income streams for retirees in Australia that are quantifiable.

Here’s a breakdown of the average income retirees receive from each.

1. Government aged pension

Australians can retire at any age, but to qualify for an aged pension you need to be 67 years old (unless you’re born before 1957, in which case you can retire at 65.5-66 years old and still qualify). 

To qualify, a retiree needs to meet the income and assets test - these tests measure your income (how much money you get) and the value of your assets (what you own, for example, any investment properties).

pencil icon

Note: If your income or assets are above certain limits, your pension payment will be reduced, or you may not be eligible at all.

How much you get depends on your income and assets tests and whether you're single or in a couple.

Here’s a breakdown of the maximum age pension for:

Per fortnight Per year
Singles $1,002.50 $26,065
Couples $1,511.40 $39,296.40

Source: Moneysmart.Gov.Au

2. Superannuation savings

According to the latest ATO taxation statistics for the 2021 financial year, the average superannuation balance for an Australian aged 65-69 was $428,738.

When broken down by gender, the numbers differ again as we can see in the table below:

Age bracket Avg. account balance Male avg. account balance Female avg. account balance
60-64 $361,539 $402,838 $318,203
65-69 $428,738 $453,075 $403,038
70-74 $481,483 $509,059 $451,523
75+ $475,422 $507,556 $436,865

Source: ATO

You’ll notice that there is a different figure for men compared to women, which is due to women having to take time out of the workforce to have and raise children.

This pushes them back from reaching their comfortable retirement superannuation target. 

How much money do you really need to retire?

The problem is that the average retirement income falls far short of how much retirees actually need to retire.

And then there are certain figures for singles, but… how much does a couple need to retire in Australia?

bulb icon

Tips: To calculate what you need, you’ll need to look at your expenses and decide how long you’ll want to spend in retirement.

Again, the numbers differ depending on an individual’s (or couple’s) personal circumstances and whether they are aiming for a comfortable, modest or budget retirement.

According to the ASFA Retirement Standard and age pension standard, a ‘modest’, ‘comfortable’ and ‘age-pension’ would look something like this for both singles and couples.

Comfortable retirement Modest retirement Age pension-based retirement
  • Regular leisure activities
  • Occasional restaurant meals, home-delivery meals, take-away coffee
  • Own a reasonable car
  • Budget for home improvements
  • Domestic and occasional overseas trips
  • Premium private health insurance
  • Occasional leisure activities
  • Limited meals out at inexpensive restaurants, infrequent home-delivery or take-away
  • Own a basic car
  • Budget for small home repairs
  • One annual domestic holiday or a few short breaks
  • Basic private health insurance
  • No or low-cost leisure activities
  • Inexpensive takeaway or local club special meals
  • Limited budget to own, maintain or repair a car
  • No budget for home repairs
  • Very short breaks or day trips in your city
  • No private health insurance

Source: Australian Super

Comfortable retirement

According to ASFA,  in order to live a comfortable retirement at age 64-84, which means you’re financially able to take part in recreational activities and pay for reasonable bills and expenses, including some travel - a single person would need $51,278 per year and a couple would need $72,148.19 per year.

However, this also assumes that the retiree(s) own their own home mortgage-free and relate to expenditure by the household.

This means that the average single person will need $595,000 in their superannuation, and a couple needs $690,000 at the age of 67, ASFA figures show.

By the way… in my mind, this amount of money would not allow for a “comfortable” retirement for many people.

Modest retirement

For a modest retirement at age 64-84, which includes basic health cover, some occasional leisure and limited budget for expenses and travel, a single retiree needs $32,665.66 per year and a couple would need $46,994.28 per year.

pencil icon

Note: To achieve this, both couples and singles need a superannuation balance of $100,000 at age 67.

This assumes that the retirees are eligible for the base-rate government age pension and supplements.

Budget retirement (age pension-based retirement)

For 64-84 year old homeowners needing an age pension-based ‘budget’ retirement, which includes only basic lifestyle costs, a single person needs $26,689 per year while it would cost a couple $40,238 per year.

I don’t think I even need to say how difficult life would be within on $27,000 a year in retirement.

Retiring in comfort: what you'll spend

Here are typical costs retirees must consider:

Cost Single retiree Couple
Housing (ongoing only) $140.98 $147.18
Energy $50.66 $62.83
Food $143.05 $248.64
Clothing $27.95 $52.04
Household goods and services $85.87 $106.50
Health $115.84 $216.77
Transport $180.11 $195.08
Leisure $221.80 $333.27
Communications $22.82 $29.70
Total per week $989.07 $1,392.01
Total per year $51,630 $72,663

Source: ASFA Retirement Standard for March quarter 2024, Based on retirees aged 65

Top strategies for a more comfortable retirement

Strategies to help you achieve a more comfortable retirement mostly boil down to building up your superannuation savings or your investment income.

Here are a few tips to help:

1. Check for lost super

First, check for lost super from a previous job (you can contact the ATO if you have lost or unpaid super).

2. Make more payments into your super

Another way to boost your retirement income is to make additional payments through salary sacrificing or after-tax contributions. 

You can also ask your partner to boost your super through splitting or spouse contributions.

3. See if the government will help

If you're a low- or middle-income earner and make personal after-tax contributions to your super, the government may also make a co-contribution up to a maximum of $500.

4. Review your superannuation fund

Meanwhile, regularly giving your fund a "health check" to make sure you've got the right level of insurance and aren't paying too much in fees, is also beneficial for your balance. 

Looking at how your super is invested regularly can make a big difference to the final amount you have when you retire.

Does your super’s asset allocation still fit with your risk profile?

Even a small increase in super contributions can have a big impact on the lifestyle you will enjoy in retirement, so get some financial advice on making your super work harder for you.

5. Invest for the long term

While investing your money won’t help to turbocharge your super balance per se, it is another way to ensure you have ‘enough’ money to live a comfortable retirement when the time comes.

By building a cash machine of assets during your working life, it could help see you through the golden years.

For example, if you built a long-term investment strategy that accumulated a substantial portfolio of investment-grade properties throughout your working life, it could help to set you up for a lucrative retirement rather than a lacklustre one.

You wouldn’t need to live off your superannuation balance if your property investment portfolio is sufficient enough to give you a passive source of income.

It’s not easy though, which is why it's also vital to get professional advice here.

It's hard enough for experts to know which are the best investments, so why would you choose to wade through the maze of information (and misinformation) all on your own?

Having an objective and professional third-party review to help you formulate your retirement plan makes logical sense.

pencil icon

Note: When it comes to retirement, most of the money you have available will be a combination of what you have earned, saved and created.

If you’re able to keep on top of your superannuation balance, add additional money and reach that retirement goal sum then you can be happy your retirement will be well-funded.

The key is to get on top of it as soon as you can, and one of the best ways to build a (passive) income is to invest in property.

You see, most of the money you will have when you retire will be the capital growth of your assets - plain and simple. 

Because becoming wealthy happens slowly for the vast majority of people.

In fact, financial success is about getting rich slowly.

So, whether you want to have $1 million or $8 million in the bank when you stop working, you have to start investing today to give yourself the very best chance of achieving that goal.

Time is of the essence in successful property investment.

And that means investing for tomorrow, today – with or without children still under your roof.

About Brett Warren Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.
No comments

Guides

Copyright © 2024 Michael Yardney’s Property Investment Update Important Information
Content Marketing by GridConcepts