How Much Money Do You Need To Retire In Australia?

People want to know how much you need to retire comfortably in Australia.

 

Better nutrition, medical advances, and public health make Aussies live longer. However, the growing average life expectancy leads to the need for more funds for a financially comfortable retirement.

 

Besides pension, you may require taking more steps to support yourself for tomorrow when you leave the workforce.

 

This guide will help you calculate how much funds you need to retire in Australia and ways to get there.

 

 

1. What Is The Average Retirement Age In Australia?

 

There is no definitive retirement age in Australia. It means you can keep working till you find yourself fit to work.

 

According to the Retirement statistics by the ABS in 2020, the average retirement age for Aussies is 55.4 years, yet most intend to retire at age 65.5 years.

 

 

2. When To Start Thinking About Retirement?

 

'Too late' retirement can be the difference between comfortable and modest retirement. As people are living longer, they are delaying their retirement to earn a little more or take benefit of tax concessions to put more into their super before they retire.

 

The right time to retire depends on your circumstances and how you want to retire, i.e., comfortably or modestly. You can find plenty of free-to-use online retirement planner calculators to determine what you need and whether you are on the right track to achieve it.

 

Australians should consider saving for retirement as soon as they start working. The earlier they start saving, the more advantage they can get from the magic of compound interest over time.

 

 

3. What Are The Different Ways To Retire?

 

The type of lifestyle you desire in retirement largely determines how much money you need for life after work. There are three main ways to retire:

 

 

Age Pension

 

It is a budget lifestyle where you are on the Government Age Pension. You don't have super contributions and adequate funds to repair your car or home and may require government assistance to pay utility bills.

 

The Age Pension is a suitable option for those who lack adequate funds like super to fund their retirement. Around 62% of Aussies over 65 receive a partial or full government pension.

 

This government-based grant serves as a 'safety net' for people to meet the residency and age requirements. You can check your eligibility for the Age Pension here.

 

 

Modest Retirement

 

This retirement lifestyle is better than the Age Pension, where you can fund basic activities such as repairing your car or home, excluding renovations. You get the primary form of private health insurance and can indulge in one holiday trip in Australia annually.

 

 

Comfortable Retirement

 

It is a retirement lifestyle wherein you live with the same level of comfort as you did during work. It could mean enjoying more time with loved ones, engaging in hobbies, travelling overseas, and more.

 

Thus, this is the lifestyle where you get the time to do all the big-ticket things you couldn't spare time for, such as:

 

  • Restaurant Dining

  • Kitchen and bathroom renovation

  • Decent car

  • Air conditioner, to name a few

 

 

4. What Type Of Savings Would You Have In Retirement?

 

The money to fund your retirement life may come from a range of sources, such as:

 

  • Superannuation

  • Age pension

  • Investments (savings account or term deposit)

  • Inheritance, or the sale proceeds from your family's property

  • Downsize your house

  • Selling shares or an investment property

 

 

5. How Much Money Do You Need To Retire Comfortably In Australia?

 

The amount of savings you need for a comfortable retirement depends on the following:

 

  • How long do you expect to live

  • The kind of lifestyle you want

  • Your financial situation - current salary, assets, and expenses

  • The area where you live

  • Aged care

  • You and your family's health

  • Future medical costs 

  • Super balance

 

Major expenditure:

 

  • Repaying mortgage

  • Rental payments

  • Home Renovation 

  • Travel

  • Medical costs

 

Based on a survey on how big one's nest egg should be for the golden years ahead.

 

  • 42% of people answered they need between $75000 and $100,000 a year

  • 20% of respondents answered they need more than $100,000 a year.

  • 6% were OK with their age pension of around $40,000 a year to fund their retirement needs.

  • 33% said the AFSA's comfortable retirement standard of $65,000 a year was adequate.

 

The average comfortable retirement income for couples in Australia is around $85,000 a year combined.

 

The full-age pension provides approx. $25k for a single pensioner and $37.5k for a couple. They will receive this income if they retire with no money.

 

 

6. How Much Super Do I Need To Retire At 65 In Australia?

 

The amount of super you will need depends mainly on the following:

 

  • Your current lifestyle and expenses, 

  • The type of lifestyle you desire in retirement and 

  • The number of retirement years

 

 

The greater the retirement years, the more super you will need:

 

Age Average Balance (Men) Average Balance (Women)
15 to 24 years $6,318 $6,100
25 to 34 years $41,661 $31,618
35 to 44 years $100,323 $69,252
45 to 54 years $196,407 $129,086
55 to 64 years $332,662 $245,126
65 to 74 years $404,458 $378,600
75 years and over $366,200 $270,300

 

 

The projected super balance you should have at each age to retire comfortably:

 

25 years old: $24,000
30 years old: $61,000
35 years old: $102,000
40 years old: $154,000
45 years old: $207,000
50 years old: $271,000
55 years old: $345,000
60 years old: $430,000
65 years old: $523,000

 

 

Projected Super balance based on retirement age, and annual income:

 

Annual Income Retirement Age
  60 67
$50,000 $831,748 $665,666
$70,000 $1,164,447 $931,932
$90,000 $1,497,146 $1,198,198
$100,000 $1,663,496 $1,331,331

 

 

Here is at what age can you access your Super balance:

 

Date of Birth Preservation Age
Before 1 July 1960 55
1 July 1960 – 30 June 1961 56
1 July 1961 – 30 June 1962 57
1 July 1962 – 30 June 1963 58
1 July 1963 – 30 June 1964 59
From 1 July 1964 60

 

You can use Australian Super's super projection calculator to estimate how much super you might need to retire, whether you have adequate income for your retirement goals, and how long your super will last.

 

 

7. How To Calculate How Much Do I Need To Retire In Australia Using A Calculator?

 

MoneySmart's Retirement Planner can help you calculate the following:

 

  • Total income you are likely to receive from super and the age pension

  • How your retirement age, investments, and contributions, impact your retirement income

  • How a change in work hours affects your super balance

 

This way, you can determine whether there is a shortfall between how much you will require in retirement and how much you are projected to have. You can design a plan to address the situation based on the calculation.

 

 

8. What Is Considered Wealthy In Retirement?

 

You don't necessarily have to be a millionaire to retire comfortably; however, you need to have a plan to achieve your retirement goals. To play it safe, you would need roughly $545,000 (if single) and $640,000 (if in a couple).

 

According to the 2021 Report, the Association of Superannuation Funds of Australia noted that the minimum cost of a comfortable retirement for singles who own their home is $45,239 yearly and $63,799 annually for couples.

 

However, to afford a modest retirement includes limited spending on leisure activities, housing goods, fashion, dining, and travel). ASFA estimates a balance of $70,000 is appropriate for couples and singles.

 

Not having sufficient money when nearing retirement, here are a few things that can help you:

 

  • Make additional contributions to your super (on top of what your employer pays) and save by reducing your weekly expenses. 

  • Cancel unused subscriptions and invest that money in long-term investments to grow your savings.

  • Holding equities for income is an excellent idea to gain a consistent income stream for the long haul.

  • Check your eligibility for the age pension. Most retirees depend on a part or full-age pension to fund their retirement.

  • Consider downsizing your home to generate additional cash.

 

 

9. How Much Do I Need To Retire On $80,000 A Year?

 

According to experts, your annual retirement income should be between 70% to 80% of your final pre-retirement salary. Suppose you make $80,000 when exiting the workforce; you will require at least $56,000 per year in retirement.

 

 

10. How Much Do I Need To Retire On $100,000 A Year?

 

In this case, you may need to withdraw $76,000 every year (the other $24,000 could be the Social Security income), then as per the 4% rule, you would require $1.9 million in savings.

 

 

11. How Much Do I Need To Retire On $150,000 A Year In Australia?

 

You need 10 to 12 times your yearly income at retirement age. For say, if you wish to retire at 67 years, and your income is $150,000 a year, you would need between $1.5 and $1.8 million for retirement.

 

 

12. At What Age Can You Retire With 1 Million Dollars?

 

Most people could retire with a nest egg of $1 million in savings that will serve them for around 20 years in retirement.

 

People who retire at 65 could comfortably live on $1 million until age 85. However, per the report, only one out of six retirees could build a corpus of $1 million.

 

 

13. What Does The Average Person Retire With?

 

Though it is recommended to have retirement plan savings of up to four times your yearly salary, it is only possible for some. While the median income for people in their 40s is around $50k, the average retirement savings for this age group is $63k.

 

 

14. How Much Do You Need To Retire At Age 60 In Australia?

 

To determine the amount you will need to retire at 60, multiply your post-tax retirement expenditure by 15.

 

For example, if you require $50,000 a year in retirement income, you need to save $750,000 to generate this income stream.

 

 

15. Can I Retire At 60 With 500k Australia?

 

Your lifestyle is a significant factor in determining how long your savings will last

 

Those content with a modest retirement and with no future primary fund requirements such as health expenses, travel, or setting up a business can easily spend their retirement with $500k.

 

This amount can easily last for 20 years or more. However, if you are looking for a lavish lifestyle or have plans to undergo significant medical treatments or extensive travel, then $500k may last for only a few years.

 

 

16. What Percentage Of Retirees Have A Million Dollars?

 

It is a significant financial goal to save $1 million or more for retirement. Putting aside that much money could allow you to live your preferred lifestyle when you retire without bothering about running short of cash.

 

However, only a few retirees end up building that much corpus. If we go by statistics, only 10% of retirees can save $1 million or more. Most retirees have held far less than this number.

 

 

17. How Long Will $3 Million Last In Retirement?

 

Three million dollars would last for about 14 years. It will be an ideal retirement corpus if you plan to retire at age 65 and expect to live till 79 years. You may need more funds if you want to retire early or expect to live longer than the average life expectancy.

 

 

18. Is $2 million Enough To Retire at 60 In Australia?

 

The only way to know how much funds you will need is by taking a closer look at your lifestyle and finances.

 

According to the 4% rule, with $2 million in savings, you can safely pay yourself a yearly retirement "salary" of $80,000, i.e., 4% of $2 million. It will cover your annual expenses, outpace inflation, and replenish more quickly than you spend.

 

19. Conclusion

 

Retirement is a significant milestone in life. With careful planning and following the above steps, you can ensure a comfortable living standard at this stage.

 

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