Retirement – how much is enough?

One of the first questions people ask when discussing their retirement is "How much do I need to save to retire comfortably?" It's a good question; naturally, you want to be confident that your money will last as long as possible and allow you to maintain your chosen lifestyle.

That's why, when you retire, your superannuation and other assets become extremely important. There's no longer a regular salary coming in and, each year, inflation increases the cost of goods and services.

It's difficult to know exactly how much you'll need to fund your retirement but, the Association of Superannuation Funds of Australia (ASFA) attempts to provide a clearer picture of what this may look like.

How much are you likely to spend?

Retirement is your time, so it's worthwhile taking the time to think about what you want to do. To help you with this, the ASFA Retirement Standard provides a comprehensive picture of how a modest lifestyle compares to a comfortable lifestyle and how much you'll need, whether you're single or in a couple. It also reflects changes in Australia's living standards and evolving spending patterns and outlines particular budgets for
key areas such as:

  • communications
  • health
  • energy
  • clothing
  • household goods and services
  • recreation, and
  • transport.

The figures in table 1 estimate that, for a couple to maintain a modest lifestyle in retirement, they'll need $33,664pa compared to $58,128pa for a couple who wish to live a comfortable lifestyle. Importantly, both budgets assume that the home is owned outright so it does not include the cost of rent or mortgage repayments.

Table 1: Annual income – modest versus comfortable lifestyle 


Modest lifestyle in retirement Comfortable lifestyle in retirement

Single Couple Single Couple
Income pa $23,363 $33,664 $42,433 $58,128

Source: ASFA Retirement Standard, June 2014
Note: Single calculations are based on a female who is relatively healthy and owns her own home. 

The difference between these two budgets comes down to extra items that are considered to be 'comforts', such as updating the kitchen or bathroom, eating out from time-to-time, entertaining family or friends at home, having private health insurance at the top rate, enjoying an occasional overseas holiday and being able to afford to buy additional personal products and gifts.

But remember, a comfortable retirement isn't a luxurious retirement. You'll still need to budget for, and monitor, your expenses. For example, the comfortable retirement figures for a couple only allow an amount of $306.41 per week for leisure and that includes the allowance for holidays and entertainment.

How does the age pension stack up?

As shown in table 2, if you're relying on the age pension and planning on a comfortable lifestyle in retirement, you'll have a gap of over $20,000pa in funding.

Table 2: Current maximum Centrelink age pension amounts

Maximum age pension (pa)
Single Couple
$22,211.80 $33,488

Source: Centrelink September 2014 

How much do you need to save?

That's the all-important question. As you can see from table 3, the ASFA Retirement Standard suggests the lump sum amount required for a couple to support a comfortable lifestyle is $510,000. If you compare this to the superannuation lump sum amounts by salary in table 4,
you'll see that there's a gap. In fact, the average super balance held by 60-64 year olds is just $75,4571 so many retirees will need to rely on other sources of income to support their retirement.

Super just isn't enough.

1 The December 2011 AMP Retirement Adequacy Index

Table 3: Lump sums required

To support comfortable lifestyle for a: You'll likely need a lump sum of:
Couple $510,000
Single $430,000

Source: ASFA Retirement Standard
Note: assumes receipt of part age pension 

Table 4: Superannuation lump sums at rate of salary

Contribution levels Wage of $30,000 Wage of $50,000 Wage of $100,000
9% contributions $110,000 $183,000 $366,000
12% contributions $146,000 $244,000 $487,000

Note: Investment earnings taxed at current rates. Lump sum retirement benefits are estimates calculated after 30 years in a taxed fund. 

If you're worried about your retirement saving, you may want to consider contributing more to your super via a salary sacrifice strategy.