A guide to income in retirement
This guide contains five key steps to building a comprehensive retirement income plan to provide you with a regular income for life.
How do you expect your lifestyle and spending habits to change in retirement? The way you spend your time and the standard of living you want to enjoy will both have a significant impact on how much income you’ll need.
Do you have a big bucket list of travel destinations and experiences you’re hoping to work your way through? Or are your plans more focused on staying close to home, spending time with family and friends? Perhaps full-time retirement isn’t something you’re ready for and you’ll keep working part-time instead.
Whatever retirement looks like for you, money is something that can either limit your plans or make them possible.
To give you a better chance of understanding just what level of income you might expect to live on in retirement, let’s put the ASFA’s Retirement Standard figures under the microscope. You’ll get to know what the different estimates include and use them as a basis for your own calculations for the sort of retirement you have in mind.
What is the Retirement Standard?
The Retirement Standard is calculated and published every quarter by ASFA to help people prepare themselves financially for retirement, and to budget for their future once retired. It estimates the total annual cost of living either a comfortable or modest lifestyle for retired singles and couples aged 65-84, and singles and couples around age 85.
Each quarterly release is updated in line with inflation and includes detailed budget breakdowns for all types of items and expenditure. This enables you to carry out a comparison with your current budget and calculate whether your overall spending in retirement is likely to be more or less than the retirement standard estimates.
ASFA Retirement Standard for couples aged 65-84 | |
|---|---|
Modest | Comfortable |
| $47,731 per year | $73,337 per year |
ASFA Retirement Standard for a single person aged 65-84 | |
|---|---|
Modest | Comfortable |
| $33,134 per year | $52,085 per year |
Source: Association of Superannuation Funds of Australia (ASFA) - Retirement Standards, June quarter 2024
What does it include?
Retirement Standard figures are fairly comprehensive and take into account occasional expenses such as holidays as well as day-to-day living costs like groceries, medicines, insurance premiums and household bills. What they don’t include is rent or mortgage payments. Each estimate assumes the individual or couple live in their own home that they own outright.
How does comfortable compare with modest?
A modest lifestyle is a step up from what you could likely afford if your only source of income is a full Age Pension. You can still take holidays within Australia and run a vehicle but could struggle to budget for travel overseas or a new car. You might also enjoy being more creative when it comes to ideas for leisure activities and spending time with friends and family. Regular barbecues at home will suit your budget better than going out for dinner every weekend.
If you were to be living on a comfortable lifestyle budget, you’d have more to spend on recreation and leisure, buying clothes and household goods as well as having private health insurance. You might be taking trips overseas now and then, as well as enjoying more time away travelling within Australia. Levels of comfort for the modest and comfortable estimates also come down to very practical things like having enough in your budget to afford running air conditioning in the summer and heating in the winter.
How much will I need to have saved by the time I retire?
ASFA also publishes the level of retirement savings it would take to fund a modest or comfortable lifestyle. It’s expected that a couple would need combined savings of $690,000 at the time they retire if they’re aiming to make ends meet for the ASFA definition of a comfortable lifestyle. A single person would need $595,000 in their super fund and other savings to achieve that same level of comfort. This assumes that the retiree/s will draw down all their capital and receive a part Age Pension.
A modest lifestyle, on the other hand, takes about $100,000 in savings, whether you’re single or in a couple. This is based on the assumption that the Age Pension and other Centrelink benefits will cover the majority of the costs laid out in the modest ASFA budget.
The lifestyle you’ll be budgeting for will be uniquely your own. Your ideal retirement and the things that make your life more comfortable could be quite different from the assumptions used to calculate the ASFA Retirement Standard. Although there is a significant difference between the annual living costs for a modest and comfortable retirement, chances are the budget that’s right for you is somewhere in between.