in brief
- The cost of living crisis has driven up the amount of money Australians need to retire comfortably.
- New data shows that Australians still overestimate the amount they will need to have saved by retirement age.
The amount Australians will need to live a comfortable life after they stop working — whether they are single or partnered — continues to grow, with new figures revealing the impact of inflation on retirement.
Peak industry body the Association of Superannuation Funds of Australia (ASFA) has said cost of living pressures and housing insecurity have driven the ideal superannuation balance at retirement even higher.
Budgets for those reaching retirement today and hoping to live at a comfortable standard rose 1.5 per cent for couples and 2 per cent for singles over the three months to March this year. Consumer price index inflation increased by 1.5 per cent over the same period.
A comfortable retirement now requires access to an annual balance of $55,932 for a single person or $78,566 for a couple.
At 67 years old, the current Age Pension qualification age, Australians should aim to have a super balance of $630,000 for an individual, or $730,000 for a couple, assuming they own their own home and have a "comfortable" expenditure rate.
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That is an increase of $3,530 for a single person and $4,691 for a couple compared to figures from 12 months ago.
Inflation, which has grown substantially since the end of February when the war in Iran began to spike oil prices, tends to hit retirees harder because they typically spend more on essentials.
According to the Australian Bureau of Statistics (ABS), the biggest cost drivers over the year to the March quarter were electricity — up 25.4 per cent —, automotive fuel — up 24.2 per cent —, beef — up 11.8 per cent —, and coffee and tea — up 10.7 per cent.
Australians overestimate how much they will need at retirement
Despite the rising impact of inflation, four in ten Australians still overestimate how much they will need for a comfortable retirement, ASFA figures show.
ASFA CEO Mary Delahunty has said that when inflationary pressures bite, people naturally assume that retirement too will cost a fortune.
"I think people are feeling the cost-of-living pressures today and they're projecting that forward to what their retirement might look like," Delahunty told the SBS On the Money podcast.
"The reality is that retirement generally costs less than working life," she added in a statement.
Delahunty attributed this to many owning their home outright by this point, work-related costs disappearing, and concessions helping to reduce the price of bills and medicines.
Super pension income is generally tax-free after 60 for most Australians, Delahunty said. However, minimum withdrawal rules apply once super is moved into a retirement pension account.
Among 25 to 34-year-olds, 51 per cent believe they will need more than $1 million in today's dollars to retire comfortably, and 23 per cent believe they will need more than $2 million. The figures are similar for 35 to 49-year-olds, at 52 per cent and 22 per cent respectively.
Expectations of retirement budgets tend to soften with age. Among 50 to 64-year-olds, 40 per cent believe more than $1 million is required, falling to 29 per cent for those aged 65 and over. The share expecting to need more than $2 million drops to 11 per cent and 8 per cent, respectively, across these cohorts.
Housing crisis changes the equation
These inflated expectations are driven by cost of living pressure and housing insecurity, with 51 per cent of 25 to 34-year-olds surveyed expecting to need more money as many anticipate renting or paying a mortgage into retirement.
"For a long time, the assumption was that you would own your home by the time you retired. For many younger Australians, that feels like a much less attainable reality," Delahunty said.
The proportion of homeowners has fallen successively, generation on generation, with millennials owning their homes at a lower proportion than baby boomers at the same age.
ABS data from the end of last year shows that renting is rising across every age group and that the renting population is getting older.
House prices in 1984 were 3.3 times the average annual income, whereas they had grown to 10 times the average salary in 2025, the financial comparison group Finder revealed.
How are you tracking?
The $630,000 needed to reach a comfortable standard of retirement means Australians should aim for a balance of $574,000 by the time they turn 65.
This assumes that they have a pre-tax income of $100,000 a year, which keeps pace with inflation, and that they will maintain that income without any career breaks due to parenthood, illness, or similar.
ABS data released in February shows that the average full-time salary in Australia is approximately $106,657 before tax, while the median is around $88,400.
Between 2012 and 2020, wage growth slowed to historic lows, barely outpacing inflation. In the high-inflation post-COVID years, wages were broadly outstripped by inflation. That trend had stopped by 2023, but has returned this year.Under ASFA's assumptions, the recommended super balance is $98,000 at 40, and $248,000 at 50. At 55, Australians should have $342,00, and by 60 they should have $449,500.
The Australian government's Moneysmart website also features a retirement planner that can help people estimate how much money they may need in retirement and how long their savings could last.
What does a comfortable retirement look like?
The ASFA defines a "comfortable" retirement as having access to top-level private health insurance, the latest technology, a reasonable vehicle, and the ability to take a domestic holiday each year.
Comfortable retirees will also be able to update their wardrobes when needed, eat out at restaurants occasionally, use cooling and heating in their homes with confidence, undertake home repairs, and regularly enjoy leisure activities like visiting the cinema or going to exhibitions.
For those who do not manage to reach the latest $630,000 figure by age 67 for a single person, or $730,000 for a couple, a more modest retirement awaits.
While still better off than what the Age Pension alone provides, a modest retirement only really allows for the basics. That includes basic health insurance, more budget technology, a cheaper vehicle, and an annual domestic trip.
It also mandates a limited budget to replace clothing, a few cheaper meals out, keeping a close watch on utility costs, a limited home repairs budget, and an occasional trip to the cinema.
$110,000 in savings is required for a single person at this level, while $120,000 is required for a couple. The sizeable discrepancy is due to the fact that the base rate of the Age Pension plus various pension supplements is sufficient to meet much of the expenditure required.
However, both a moderate and comfortable retirement assume home-ownership. For renters to achieve even a moderate retirement, they will require $340,000 as a single person, or $385,000 in a couple.
Disclaimer: The information in this article is general in nature and is not intended as financial advice. You should consult with a licensed professional to make the decisions that are right for you.
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