How much is enough?

The money you live on in retirement will likely come from various sources. How much money you might need to fund your retirement is different for everyone. Take steps now to know the main pillars of your retirement planning and what they mean for you.

Two young grandchildren sitting with grandpa reading

Calculate your potential income in retirement

To get a realistic view of your income in retirement, compare your current after-tax income with your potential income from super and Age Pension.

Learn more about Calculate your potential income in retirement PSSap Retirement Modeller

Replacement ratio made simple

Thinking about how much money you’ll need in years from now may seem complex. The replacement ratio method is a simplified approach to estimating how much income you’ll need to maintain your pre-retirement lifestyle.

The ratio most cited is 70% to 85% of your pre-retirement income1.

Influencing factors include:

  • reduced taxes due to extra deductions and tax-free amounts;
  • reduced payments due to whether you own, rent or downsize your home; and
  • reduced costs of clothing and commuting.

1How much super you need (Moneysmart)

Replacement ratio shortcomings

However, replacement ratios can be problematic because a one-size fits all approach doesn’t include your individual circumstances. Your situation may require a rate of 100% of your pre-retirement income—or more.

Replacement ratios ignore whether there is enough income to maintain that level of spending throughout retirement. Influencing factors include:

  • increased medical expenses;
  • increased travel or lifestyle expenses;
  • increased costs of supporting adult dependents or grandchildren; and
  • increased additional services to assist with at-home living.

To achieve a more personalised and confident estimate, consider in detail your health, lifestyle, goals, income and spending.

Changing needs and wants

Your needs and wants will change over time as you move from a more active phase to a passive phase and finally to a frail phase. These changes can impact the amount of money you might need.

  • The active phase: age 60 to 65

    You’ll spend more on your lifestyle, leisure and family activities. You’ll use your new free time to do the things you may have missed out on when you were in the workforce.

    Watch for ‘lifestyle creep’. It’s easy to spend more money when you have more free time. Check your retirement budget to make sure you’re sticking to your plan.

    Consider reviewing your investment options. If your balance is high and the market looks unstable, you could choose a lower-risk investment option to keep your income stable and avoid drops in your retirement money during occasional market downturns.

    If the market looks strong, you might take advantage and invest your higher balance on a higher risk, higher return investment option to grow your super while you’re accessing it.

  • The passive phase: age 65 to 75

    Even if you’re not able to journey far from home, you’ll still have lifestyle costs. These could include making your home more suitable for your health needs, engaging more paid services such as lawn mowing, or travelling short distances to visit family.

    You might give up paid work and take up volunteering. You’re more likely to monitor your retirement income balance and swap some nice-to-have spending with saving for emergencies or care in your later years.

    Consider downsizing your home. If you downsize, you could invest up to $300,000 in your retirement savings. If you’re a couple, you can each contribute $300,000 to your retirement income.

    Visit the ATO to find out more about downsizer contributions.

     

  • The frail phase: age 76+

    You may experience restricted mobility or need assistance with daily activities to live independently. This could reduce your appetite for travel and leisure activities.

    Most of your money will go towards essentials such as food and medical expenses. You might need to look at options for a nursing home or hospital care. You might take a lump sum from your retirement savings to modify your home or cover the cost of care.

    Review your estate plan so your family know your personal and financial intentions.

Ask yourself

When do you plan to retire? Using the average Australian life expectancy as a guide, how many years do you expect to be in retirement?

 

What kind of retirement lifestyle do you want to live? Do you want to maintain what you have now? Would you be okay with a little less? Do you want more?

 

What are your plans for retirement? Do you intend to travel a lot or purchase property? Do you want to keep some money as part of an inheritance?

Explore our Retirement guides and workbook

Our Retirement guides and workbook consider your retirement planning concerns and challenges. Take a look

Learn with our Retirement Ready online program

Work through our self-paced online program to discover practical and thoughtful decision-making steps. Each module takes about 15 minutes to complete and offers Australian case studies, scenarios and links to agency information. Get started with Retirement Ready

This section contains:

Step 1. Get to know the ASFA retirement standard

Every three months, the Association of Superannuation Funds of Australia (ASFA) estimates how much money a single person or couple will need to live a ‘modest’ or ‘comfortable’ lifestyle in retirement.

The ASFA Detailed budget breakdown assumes retirees own their primary home outright and are in relatively good health. If you don’t own your own home or are in poor health, your cost of living will be higher.

A modest lifestyle means there’s enough to cover the basics. This lifestyle is considered slightly better than living on Age Pension alone.

A comfortable lifestyle means there’s enough to cover running costs plus it funds your ability to:

  • buy good clothes
  • participate in a range of recreational activities
  • drive a reasonable car
  • own a range of electronic equipment
  • travel domestically and take an occasional overseas holiday
  • have private health cover
  • buy household goods.

ASFA estimates the amount of super needed to achieve each lifestyle for the average human lifespan. These are general estimates only and a comfortable retirement will look different for everyone. 

ASFA Retirement Standard
Single (per year)
Couple (per year)
Modest $32,915 $47,387
Comfortable $51,630 $72,663
ASFA Retirement Standard as at March 2024

 

Use the Super Guru Super Balance Detective to see how much super you might need today for your retirement.

Seek financial advice from an authorised Financial Planner to consider your options and your unique circumstances.

Step 2. Work out your retirement spending

  1. Create a budget

    You need a budget to work out how much your retirement lifestyle might cost. Try the ASFA Detailed budget breakdowns and remove expenses you won’t need when you retire. For example, you might remove your mortgage costs if you pay off your home at or before retirement.

    Expenses that could remain unchanged:
    • food and drink
    • rent or mortgage payments
    • rates, water and power bills
    • life, vehicle, house and contents insurances
    • private car expenses and fuel
    • home office costs, including internet.
    Expenses that could decrease or disappear:
    • car parking payments
    • tickets and costs of your normal daily commute
    • morning coffees and lunches out
    • staff club, team celebrations and gift contributions for workmates
    • income protection insurance
    • work uniforms.
    Other expenses:
    • entertainment costs
    • materials and equipment for that new hobby
    • day passes, green fees and annual passes for your sports and travel
    • membership fees for clubs and organisations
    • newspaper, magazine and online subscriptions
    • medical fees
    • travel costs.

  2. Compare your budget

    Use the Super Guru Retirement Tracker tool to see what kind of retirement you can afford.

    • Enter your gender, age and relationship status.
    • Select the Modest or Comfortable tab to see the ASFA results.

  3. Repeat this process cyclically

    Budgeting is a continuous process you’ll need to revisit as you age and inflation fluctuates. Your needs and wants will change as you move through the three phases of retirement (from active phase to passive phase and finally to the frail phase). These changes can impact the amount of money you might need.

If you’re renting:

  • Housing costs will be a significant part of your budget when you retire.
  • You can own a higher value of assets than a homeowner before your Age Pension is affected.
  • You may also be eligible for Centrelink rent assistance.

For more information visit Moneysmart.

How to work out what you currently spend

  1. Track what you spend:
    • Where does your money go each day, week, fortnight, year?
    • Record your expenses each day.
  2. Compare money in and money out:
    • What money comes in? Is there any extra from any other source?
    • Where does your money go?
    • When do your bills arrive? Do you have money set aside for them?
    • Your bank, apps, even a spreadsheet can help break down your spending.
  3. Prioritise where you want your money to go:
    • Cover your essential costs.
    • Pay down debt early to save on interest.
    • Save for renovations, a new car or holiday.
    • Consider investing any spare funds—maybe in your super.
  4. Take action:
    • Shop around to get good deals on your basic bills.
    • Simplify bill payments by using either direct debit or automatic scheduled payment options.
    • Take control and check your budget as often as you can, at least once a year.

Step 3. List your retirement income

To know if your current super arrangements will support your retirement goals, you need to estimate how much your super will contribute to your total retirement income.

And retirement planning is more than just super—it can also include insurance, other investments like property or shares, pensions, and retirement income products.

When you retire, you may qualify for a part Age Pension. To be eligible for Age Pension, you must meet age and residency conditions, and your income and assets must be below the limits set by Services Australia.

  • Do you have super you’ll convert to an income stream?
  • Will you apply for a CSC Retirement Profile that includes a Challenger annuity? (PSSap only)
  • Will you qualify for a part or full Age Pension?
  • Do you have savings you’ll use or investment earnings from shares?
  • Will you downsize your home and use some of that money to pay off your mortgage and fund your retirement?

Use the Moneysmart Retirement planner to estimate how much money you’ll have to spend each year when you retire.

To get a realistic view of your income in retirement, compare your current after-tax income with your potential income from super and Age Pension.

 

Estimate your net income in retirement

Use our Retirement Modeller to project your final super balance and how long it may last in retirement.

Estimate your overall income in retirement including income from super, Age Pension, and assets you hold outside of super such as an investment properties.

Model what your retirement income will be if you:

  • work part time for a period
  • add a one-off before-tax or after-tax contribution
  • add regular contributions
  • change your retirement age
  • change your investment options to more conservative or aggressive options.

If your numbers are looking low, take action to manage the risk of outliving your retirement income. For example, when considering a retirement income solution, you might look at a retirement income stream.

Government benefits

When you retire, you may qualify for a part Age Pension. To be eligible for Age Pension, you must meet age and residency conditions, and your income and assets must be below the limits set by Services Australia. You can apply when you are 67 or older.

On the day you claim Age Pension, you must be an Australian resident who lives in Australia and is physically in Australia.

You could be eligible for these benefits:

For more information about Age Pension and government benefits, visit Moneysmart.

Step 4. Understand life expectancy

Life expectancy is the average number of years a person can expect to live and is affected by health history, genetics, and lifestyle. At CSC we use average life expectancy ages in super modelling tools to calculate how long your super and Age Pension income are likely to last.

Research indicates that with life expectancy on the rise, many of us will spend more than a quarter of our life in retirement. Australians are living longer: if you turned 65 in 2021, you could expect to live to 85 (man) or 88 (woman)1.

Try the Lifetime estimate calculator to estimate how many years you might expect to live in retirement, and how long your retirement income may need to last. It relies on current Australian Bureau of Statistics (ABS) and Australian Government Actuary data.

When life expectancy numbers aren’t so important

If you have an exceptionally large super balance (approaching the top of the transfer balance cap) or a smaller balance that makes you eligible for more government support, life expectancy numbers don’t matter as much.

  • If your super balance is high: your investment returns are likely to keep your balance healthy without eroding too much of your capital.
  • If your super balance is low: your main source of income will probably be Age Pension. You’ll likely use your super for top ups and emergencies.

1AIHW, Deaths in Australia, Life expectancy (accessed 30 October 2023).

How can I maximise my super balance?

Change your investment strategy
Make a one-off personal (after-tax) contribution
Make a salary sacrifice (before-tax) contribution
Receive a spouse (after-tax) contribution
Find and combine your super
Save your small change

How should I retire?

Whether you’re thinking creatively about working longer or dipping in and out of the workforce, phasing your retirement gives you flexibility. You can adjust your work pattern to suit your lifestyle and ease into retirement on your terms.

When (or why) will I retire?

Deciding when to retire is a personal decision, however there are five factors that generally influence when or why people retire. They can trigger a decision to retire—sometimes earlier than expected.

  • Health: You may have a health scare or issue that means you can no longer do your job. You may also decide to retire to care for a loved one.
  • Work: The demands of work can become more tiring as you get older, or you may be out of work because of redundancy or the end of a work contract.
  • Friends and family: Retirement may be appealing if your friends or family are enjoying retirement.
  • Financial independence: You may reach pension age, receive a financial windfall, or find that you have more financial resources after children leave home.
  • The right time: It may simply feel like ‘the right time’.

Key tasks for my life stage

Fully imagine your life after work. Discuss these key tasks with your partner to see if you’re aligned.

  • You’re 10 or more years from retiring

    You want to track your super, set retirement goals and establish a timeline.

    Read Preparing for retirement

  • You’re not retired but will be soon

    You want to plan how to use your super to support your retirement. Includes choosing a retirement solution.

    Read Moving to retirement

    Complete the workbook

  • You’re retired

    You have a retirement income strategy in place and want to know more about the stages of retirement, how to manage your account and what to do if something changes.

    Read Living in retirement

Where to next?

  • Learn more about your retirement goals and the key tasks for your age and life stage. Read our Retirement guides and workbook.*

  • Expand and organise your thinking with our self-paced Retirement Ready online program and discover practical and thoughtful decision-making steps.
  • Attend a webinar and join the conversation with our experienced Member Education team.
  • Visit Services Australia and check out their financial webinars on offer through the Financial Information Service.
  • Join our 3rd Act community and receive smart, interesting quarterly newsletters straight to your inbox.

*CSCri and CSC Retirement Profiles are not currently available to ADF Super customers. CSC is working with relevant Australian Government departments to enable CSC to offer an account-based pension product such as CSCri to our ADF customers where possible. For more information read our CSC retirement income strategy.

We’re here to guide you

Meet with a CSC Financial Planner

Before you make any decisions about your super, consider your options and have a conversation with an authorised CSC Financial Planner. To book your appointment call 1300 277 777.

Financial planning