How much do I need in retirement?

It’s the question on everybody’s lips – how much do you need to save for a comfortable retirement?

How much is enough

While we all hope for a simple answer, how much you need for retirement differs from one person to the next. Additionally, a comfortable retirement is based on a whole range of factors including:

When will you retire?

How long you’ll spend in retirement?

Whether you’ll sell assets in retirement to fund your lifestyle?

How long you’ll be able to maintain your health?

How are your assets invested?

And the most important question; how do you even know if you’re on track?

Thankfully, there are some elements of guidance you can refer to, but you do need to remember that they are for guidance only.

A modest or comfortable retirement

The first of these is the “ASFA Retirement Standard”, which is published each quarter.  The ASFA Retirement Standard is published by the Association of Superannuation Funds of Australia (ASFA), and provides figures to approximate the level of income required for a modest or comfortable lifestyle. 

The latest figures available state that a single person (aged 65) requires an annual income of $27,425 for a modest retirement lifestyle and $42,593 for a comfortable lifestyle. For a couple (around 65 years of age), the figures rise to $39,442 and $60,604 – approximately 42 per cent higher.[1]

A modest retirement lifestyle is considered better than the Age Pension, but where you are only able to afford fairly basic activities.  A comfortable retirement lifestyle enables an older, healthy retiree to be involved in a broad range of leisure and recreational activities and to have a good standard of living through the purchase of such things as household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, and domestic and occasionally international holiday travel. If either of these sound like you, then there is a starting point to reference. 

Determining what you need as a lump sum

What do these needs equate to as a lump sum at retirement, though? Again, ASFA have provided some estimates, and the numbers may surprise you. 

For a modest retirement lifestyle, the answer (whether a single or couple aged 65) is $70,000.  While this might sound a lot lower than expected (and based on the numbers quoted earlier would only cover a couple of retirement years), the main assumption here is that you would qualify for a full age pension in retirement, which would substantially meet the income requirements.

For a comfortable retirement, the lump sum estimates are much higher - $545,000 for a single person and $640,000 for a couple, although this again assumes a part age pension.

A different approach is to look at your pre-retirement income and consider how much of it you will need in retirement.  Assume, for example, you will need 65 per cent of your pre-retirement income, so if you earn $50,000 now, you might need $32,500 in retirement.[2]

Another method to calculate a lump sum

Another method is to take your current annual expenses (or estimated requirement) and then multiply this amount by varying factors depending on the age at which you plan to retire. Taking into account a set of assumptions, this method does provide you with a capital amount to aim for in order to generate the income you need.

Using the $32,500 figure earlier, and assuming retirement at age 65, this would equate to a lump sum target of $422,500. But you need to keep in mind that the investment returns you generate and your actual level of expenses in retirement, will have a notable impact on whether the capital amount you estimate ends up being suitable for you.

So, if you manage to guesstimate an amount needed for retirement, what can you do to get there?

Clearly, the longer you give yourself, the greater your chances of achieving your outcome, without the need for extra savings on an ongoing basis.

Have clarity in your own mind of your current financial position - your income and expenses, what you own and what you owe.  Get a clear snapshot of where you are today.

Proactively allocate free cash flow toward strengthening your financial position by repaying debt, building up your savings and investments or making additional contributions to super. Start considering how best to use your financial resources to support your income needs in retirement.  Make sure you monitor your plan on an ongoing basis and accept that changes may have to be made.

Making the most of the retirement planning opportunities available to you can be as much about what to do, as it is about what not to do, in order to avoid the pitfalls of an ever changing retirement landscape.

And remember that you don’t have to go it alone.  Financial advice can be useful if you plan to take a non-traditional approach to retirement such as progressively winding back your hours worked, moving to part-time employment, or perhaps, working your own hours by consulting to your industry or profession (joining the gig economy).

Next: How much will you need to enjoy your retirement?


A comfortable lifestyle means different things to different people. Use our calculator to work out what lifestyle you want in retirement. 

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The article was prepared by Bryan Ashenden, Head of financial literacy and advocacy at BT and is current as at 23 January 2019.

BT - Part of Westpac Banking Corporation.

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