Are Australians overestimating their retirement nest egg needs?

There are few better ways to understand how Australians are feeling about their financial position than to gauge retirement sentiment.

Regardless of what number comes out as the amount needed to retire comfortably, it says more about the current economic landscape than it does the financial needs of a varied population decades in the future.

That’s what is particularly fascinating about the latest figures from Colonial First State’s Rethinking Retirement 2026 report.

According to its survey of around 2,000 people in December 2025, the average amount that Australians now believe is needed for a “comfortable” retirement has ticked past $1 million.

On its own, that’s a large number, however with the context of a $183,000 jump in the last year, it tells you that Australians are seriously lacking confidence in their ability to meet that comfortable standard of living in the post-working phase of their lives.

Sure, inflation has been rough over the past few years, but a year-on-year jump of 22% doesn’t seem to be in line with the reality of increasing costs.

CFS Superannuation chief executive officer Kelly Power says the research shows retirement is about much more than just a financial transition. 

“For many Australians, it brings a range of questions and considerations - from whether savings will be enough, to how to navigate an increasingly complex system,” Power adds.

“Retirement is not a universal or linear experience. It is deeply personal, and so are the questions people bring to it.”

In contrast to what Australians think they will need, peak superannuation association ASFA’s Retirement Standard puts the amount required for a comfortable retirement at $730,000 for a couple and $630,000 for an individual - assuming they own their own home.

Fear of running out

If you talk to a financial adviser about retirement for more than five minutes, you are almost guaranteed to hear about YOLO’s much less fun acronymical cousin FORO - fear of running out.

It’s something that plagues pre-retirees who aren’t feeling confident in their financial situation and permeates the mindset of almost every socio-economic strata. People get accustomed to a standard of living and fret about maintaining it no matter how much they earn.

According to Unite Wealth director and financial adviser Robert Rich, many clients consistently overestimate the amount that they need for a comfortable retirement.

“They will either assume they need to work longer or save up a larger nest-egg. I find that clients usually omit four major elements that play a significant role in funding their living expenses after work,” Rich says.

The first of these is that a lot of people forget that their money is still invested and growing when they work out how much they think is necessary in retirement.

“It's common to hear clients run the incorrect mental arithmetic - $1 million in super, spending $100,000 each year means their super will only last for 10 years,” he says.

“Clients often forget the impact that a future inheritance will have on their retirement. Receiving the proceeds from an estate can be truly life-changing and can often result in clients slowing down or stopping work five-10 years earlier than expected.”

Then there is the option of a reverse mortgage for people that either don’t have children or want to spend the inheritance instead of passing it on.

“They would require significantly less as a nest-egg if they are open to the idea of using the equity in their home to subsidise their living expenses.”

While Rich often cites the ASFA Retirement Standard for his clients as a reasonable figure, there is a “spectrum of correct amounts” depending on their specific circumstances, and it isn’t surprising that the figure has jumped by $183,000.

“My expectation is this would be driven by the war in Iran and rising interest rates creating a negative sentiment,” he says.

“It's a huge jump over a 12-month period, but the news cycle has been littered with bad news pretty consistently over recent months and this would lead to a lack of confidence in their savings lasting.”

Getting on the right track

Investors who are feeling the stress of trying to hit a specific number before entering retirement - be that the sentiment-driven $1 million or ASFA’s $730,000 - Rich says the first step is not to stress too much.

“Families would also need to take into account other investments or the value of their family businesses, which can play a big part in any retirement funding strategies,” he says.

“A share portfolio or an investment property is like having another employee in your family - working hard each year to grow and build your wealth. Many hands make light work and we know the positive effects of compound returns over a long period of time.”

They also have to understand the risks that they are facing, particularly the sequencing risk of seeing a market downturn early in retirement.

“Lots of families are unaware of the levels of risk they are taking with their superannuation and can become overly confident, especially seeing the last three years of fantastic returns in the share markets,” Rich explains.

“You should see the look on some of my client's faces when I tell them that they're in an aggressive strategy and if another GFC comes, then their $1 million super balance could be $650,000 relatively quickly.”

Depending on their risk appetite and life stage, the right course may be to dial things back and take a more conservative approach.

“Families would be encouraged to look at the investment options they are currently invested in and consider if they would feel comfortable during a market correction,” he says.

“If you have a significant balance and are close to retirement, perhaps now is an opportune time to build a moat around your retirement nest-egg and take the more conservative, safe or boring path moving forward.”

It might not be exciting, but “being boring with your investments can be a much more comfortable path to take”.