How much do you need for retirement?

There are many figures thrown around when it comes to retirement savings. The $1 million myth comes to mind, but harder data in the form of recommendations or government data can paint a different picture. Is it any wonder that we find it hard to know what to aim for?

Of course, any target we set needs to consider the unique risks of retirement and the ever-present threat of inflation, so it needs to be dynamic. 

Added to this is that humans are wired to focus more on the present than the future, a psychological principle known as temporal discounting and present bias, which makes it hard to make sacrifices for a future we find hard to visualise.

In this article, I’ll consider government standards, the key risks of retirement and some of the significant costs to remember. I’ve also enlisted two experts to share the process they use to map out retirement goals and targets:

• Josef Jindra, Senior Financial Advisor for Viridian Advisory
• Roger Perrett, Partner and Founder, Executive Financial Advisor for Freshwater Wealth.

Retirement living recommendations

Before you even consider your own expectations for basic standards, it can help to look at two different things: the Age Pension and the ASFA Retirement Standards.

These paint an interesting picture for budgeting and costs in today’s world. They can also be a bit confronting when you compare them to your current spending habits.

The Age Pension is split into different brackets depending on whether you are a single, couple or a couple apart due to ill health. What someone will receive is also based on an income test and assets test. The Age Pension is regularly adjusted to consider inflation or wages growth, whichever is higher.

The current normal rates of Age Pension before tax are a total of $1,200.90 per fortnight for a single person and $1,810.40 per fortnight for a couple combined. (Converted to an annual amount, that looks like $31,223.40 for a single person and $47,070.40 for a couple).

The ASFA Retirement Standard considers comfortable and modest retirements with assumed home ownership. A new option was added last year to factor those who rent privately and don’t own their own home for a modest retirement. Each option assumes access to the Age Pension at some stage of retirement. It assumes that savings are invested with an earning rate of 6%.

Savings required for retirement at age 67

Source: ASFA Retirement Standard, December quarter 2025.

Taking the time to understand what options are involved in a comfortable v modest v Age Pension lifestyle based on ASFA standards can be eye-opening.

Consider that reliance purely on the Age Pension means you may be unable to afford to have a car or struggle to afford heating or cooling, a modest retirement might add the car into the budget but you might still be making sacrifices on heating or cooling. A comfortable retirement assumes you can afford a reasonable car and you can be more confident in using your utilities at home.

To make it feel more present, the standards also translate this into an annual budget – it’s easier to picture when you break things down after all.

• $77,375 for a couple
• $54,840 for a single

• $51,299 for a couple
• $35,503 for a single

• $50,055 for a couple
• $67,639 for a single

Translating some of the basics into today’s world

It’s one thing to read these annual numbers and imagine where you budget, another thing to consider general statistics on some basic expenses. One of the big things to note is that home ownership makes a big difference to the income you need.

Expatistan estimates the cost of living in Australia as being $4,964 a month – that’s a budget of $59,568 a year. Obviously, this varies depending on where you live – cities like Sydney and Melbourne being vastly more expensive when compared to regional areas.

The Cotality Property Market Indicator Summary for the week ended 31 May 2026 noted that the national median weekly rent was $702 (with Sydney at $835/week compared to lowest Hobart at $628 per week).

For those required to rent, that’s $36,504 a year – a decent chunk of that earlier mentioned annual retirement budget if you don’t own your own home.

Then there’s the part many people forget – the prospect of needing to access aged care and nursing facilities. Some people assume that they will sell their primary residence to cover these costs, while others may not have factored it. 

Costs can vary widely and there is also means testing, but if you look at the Australian Government’s myagedcare as a starting point, it notes the following:

• Basic daily fee of $24,382 per year (set at 85% of the Age Pension) – everyone pays this.
• Hotelling contribution of up to $22.15 per day or $8,084,75 a year (non-leap year) – means tested.
• Non-clinical care contribution up to $107.32 per day ($39,171.80 a year) and a lifetime cap of $137,917.01 in total contributions – means tested.
• Accommodation costs – this is the cost of your room as agreed between you and your provider. For lower income earners, the government may pay some of all of the cost of this.

The key risks to remember in retirement

When mapping out savings plans for retirement, it is also valuable to remember some of the key risks that can change your outcomes: longevity, sequencing risk, inflation and liquidity.

“Many Australians will spend 25-35 years in retirement which means their capital may need to last longer than they initially expect. 

Longevity risk is not only running out of money, but gradually losing financial confidence and lifestyle choice as the balance declines,” says Josef Jindra.

Roger Perrett adds that investors can be too conservative in their approach which can increase their longevity risk.

Sequencing risk relates to market risk and considers the possibility of when market losses are experienced. Big losses early in retirement when you are typically making bigger drawdowns from your savings can make it harder to participate in market recoveries – particularly if you are selling growth assets to make your regular pension payments.

This all ties in with liquidity and factoring sufficient defensive assets to manage down periods, along with needed pension payments to live on.

“Retirees need sufficient cash flow and access to capital to fund their lifestyle. Assets that are difficult to access or generate limited income can create challenges, even if they have strong long-term growth potential. 

For example, residential property may experience strong capital growth, but you cannot sell the bathroom to fund living expenses,” says Perrett.

Inflation is a particularly critical concern – and easy to appreciate in today’s more challenge economic climate.

“Retirement income needs to maintain purchasing power over time. A retiree who needs $80,000 a year today may need significantly more in 10 or 20 years to maintain the same lifestyle,” says Jindra.

Consider that between 2015 and 2025, inflation rose 32.5% or at an average rate of 2.9% (Source: Reserve Bank of Australia Inflation Calculator) - it certainly adjusts what annual expenditure looks like and putting a savings target in mind today will need to be regularly updated to factor inflation.

If you reconsider the $1 million retirement savings myth (which has been around for decades now, not just the last 10 years), then $1 million back in 2015 looks more like $1,324,573.72 now, adjusted for inflation.

Or even revisiting the ASFA standards.

If you assumed similar inflation in just the next 10 years of around 32.5% and relatively universal inflation gains across the underlying expenses, then that figure for a comfortable retirement for a couple of $730,000 suddenly jumps closer to the $1 million mark.

Inflation is also something that needs to be accounted for within how you invest to ensure you can maintain enough growth to combat inflation.

How to map out your retirement goals and savings target

“When I work with clients on retirement planning, the first step is to move the conversation away from a single headline balance and towards a detailed understanding of the lifestyle they want to fund,” says Jindra.

He reminds investors that their spending habits will change as they age – often more at the start while they are healthier, and less when they are older and less mobile.

Perrett takes a three-step approach, starting with their dreams for retirement living.

“We explore areas such as their career and whether they want to stop work completely or transition gradually, as well as their plans for their home, health, hobbies, travel aspirations, and time with family and friends,” Perrett says.

He then translates that to financial requirements, including when they want to retire, potential length of retirement, spending to achieve those retirement dreams.

“For many people, their current spending level is a good starting point, with additional allowances for goals such as travel, family support and other retirement aspirations,” he says.

The final step is financial modelling to determine the level of assets, income and investment returns required to fund that lifestyle in retirement.

Jindra follows a similar process, adding that as part of planning, it can be useful to break spending into categories like essential spending (food, utilities, council rates), lifestyle spending (holidays, dining out, hobbies) and aspirational spending (bigger overseas trips, helping children and grandchildren financially, renovations or buying a boat or caravan).

Jindra cautions that your age of retirement can produce very different outcomes and “housing security is one of the biggest factors in determining how much capital is needed in retirement.”

Investing in retirement

Putting a big number on retirement savings and hoping it will sustain you can feel intimidating. Don’t forget that remaining invested during retirement is an important part of your strategy and helps you to combat some of the significant risks in retirement, like longevity and inflation.

Jindra uses a bucket approach for retiree portfolios.

“The purpose is to ensure the client has enough liquidity and stability to fund near-term spending, while still maintaining enough growth exposure to protect against inflation and longevity risk,” he says.

The first bucket is cash and short-term liquidity to cover shorter term pension payments. The second bucket is defensive income, factoring investments like high-quality fixed interest, floating-rate credit and other defensive assets, while the third bucket is long-term growth factoring shares, listed infrastructure, property and other diversified growth assets.

Jindra cautions against becoming too yield-focused.

“Many retirees naturally focus on income, but chasing yield can lead to concentration risk, poor diversification, or exposure to assets that behave more like equities during periods of stress. A retirement portfolio should be built around total return, liquidity and sustainability, not just the headline income yield,” he says.

Perrett notes that retirees are often surprised to learn they need a meaningful exposure to growth assets, and a 70% growth/30% defensive allocation in a portfolio is common (though obviously depends on the individual investor).

“Retirement can last 25 to 35 years, so portfolios often need to continue growing to help maintain purchasing power over time,” Perrett says.

Setting your own retirement savings plan

While this all may sound a bit stressful, don’t forget your mandated (and easily forgotten) retirement savings plan – your superannuation, which your employer contributes to on your behalf. It’s not all about what is in your personal bank account.

A good place to get started when thinking about retirement can be using the range of free tools online – Moneysmart.gov.au has calculators and planning tools to help you estimate what you might need in retirement, and how to stay on track to reach your goals.

It’s never too late to start planning – but remember the earlier you do it, the more you benefit from compounding. Speaking to an expert can also make a world of difference in opening your eyes to the range of strategies available to you.

Some advice from the professionals?

“Australians should stop thinking about retirement as a single finish line. It is not just about reaching $1 million or meeting a benchmark. It is about building a structure that gives you confidence, choice and resilience,” Jindra says.

“The best retirement plans are not necessarily the ones with the largest balance: they are the ones where the capital, cash flow, investment strategy and lifestyle goals all work together.”

Perrett agrees, adding “Make it exciting – dream about all the bucket list items you would love to experience and achieve.”

After all, the better retirement sounds, the more incentive you have to put in the work to get there.