How much money do you really need to retire?

Top tips on how to prepare for retirement from financial experts.

The retired life may feel like a dream – getting off the treadmill of the daily grind, having the time to pursue your passions, travel and relax… Whether it is decades away, or you are actively preparing for it, the key to living that dream is to ensure you have enough money to retire with, once the regular paycheque stops coming into the bank.

Considering how much money you need to retire in Australia, the earlier you start to save money, the better. But whatever career stage you are at, it’s never too late to start retirement planning.

Here are the most important things to keep in mind as you look ahead to clocking off for the last time.

Three colleagues sit outside on a sunny day and enjoy a takeaway lunch and some hot drinks. They are comfortable with each other, having a light hearted discussion.

How much money do I need to retire comfortably?

Financial experts agree that how much money you need for retirement is dependent on many factors.

“Some people can retire on as little as $300,000-$400,000, while others need a bare minimum of $1.5m,” says Brenton Tong, financial advisor and managing director at Financial Spectrum.

“We find that the target number for most people that want the ultimate retirement starts at around $1.7m. This will give a very healthy income stream and enough capital to draw down so you can live off around $10,000 per month and still have the ability to upgrade a car, travel and help kids if there’s a need.”

Happy senior man and woman old retired couple walking and holding hands on a beach at sunset.

What do I need to know about superannuation?

Most of us know the basics when it comes to super: part of our wage is placed into an investment fund for us to access upon retirement. But what do the experts say?

Depending on when you choose to retire, your retirement is likely to last decades,” explains Christine Lusher, financial planner and advisor at Lush Wealth. “This means that how your money in super is invested will also directly impact how much you need to have saved up before retirement.”

How much super should I have saved by my 30s?


How much super should I have saved by my 40s?


How much super should I have saved by my 50s?


How much super should I have saved by my 60s?


Figures estimated by Brenton Tong.

kid helps woman load boxes into a truck to move house.
Are voluntary superannuation contributions worth it?

While your employer automatically puts super aside for you throughout your working life, there is the option to make additional – voluntary – contributions to your superannuation fund. But is this worth it?

If you can afford it, yes. It will be better in the long run and it can help reduce your tax and increase your tax rebate.

“Most people will not save as well in their 20s and 30s and only start on extra contributions in their 40s and 50s, but you don’t get the full impact of compounding,” Brenton explains.

“For someone in their 20s, just an additional 3 per cent into your super may be sufficient over the next 40 years to get you close to your retirement goals. That’s not much in the grand scheme of things. “

Is my superannuation safe in a recession?

In an economic recession, there is usually a downturn in shares and the housing market; these are both assets that superannuation funds typically invest a lot of money in. Changing investment performance can lead to dips in your balance.

“Every investment has a bad day, so it’s best to ride through it if you can,” Brenton says. “If you’re well off retirement age, don’t worry too much about the ups and downs of your super fund. Don’t panic when it goes down. 

“If you’re getting closer to retirement age, you don’t have to invest all your money into something conservative. However, it’s important to ensure that you have sufficient safe, liquid money in your super to take care of your income when you draw on it, and any reasonably expected expenditure. That way, you’re still invested – and if your super fund falls, you won’t have to sell anything when the market is low.”

Woman holding paper various expense bills and plans for personal finances at her home.

What factors can affect my retirement?

The numbers depend on various factors, including inflation, homeownership, location, cashflow, health and family circumstance, and relationship status.

How does inflation affect retirement?

Inflation measures how prices rise over time. As the cost of living increases, your retirement plan needs to account for these future costs. 

“Inflation is a hot topic right now; however, it’s not as bad for retirement as it would seem,” Brenton says.

“Wages tend to follow inflation so it just sets the bar higher.  It’s important to think of retirement in percentages and multiples rather than actuals as inflation makes all the numbers different.”

Christine suggests investing any “spare” change to keep up with inflation and avoid “losing” money.

How does homeownership affect retirement?

Homeowners face lower housing costs. According to Retirement Essentials, housing costs are just over five per cent of disposable income for couple homeowners, vs a quarter of disposable income for renter couples. 

“One of the most effective strategies to give you peace of mind in retirement and maximise your cash flow, is to own your home by the time you retire,” Christine affirms. 

“If you manage to pay your mortgage off before then, you will be in an even stronger position as you can redirect some extra cash towards your retirement savings. Another benefit to owning your home is that you can use it as security if you wish to borrow money to invest and boost your saving efforts.

“If you prefer to rent rather than own your home, you can still achieve security in retirement by investing in property and other asset classes outside of super. This way, when you are ready to settle down, you have the resources at hand to help you purchase something suitable, or to use as an income stream to cover the rent payments.

“Just make sure that you do your research and are well informed of the risks of any investments you make.”

How does location affect retirement?

The cost of living varies between countries, states and cities.

“There is a big difference between wanting to retire in Sydney, wanting a quiet country lifestyle or wanting to move overseas,” Christine explains.

“Before you tackle the question of how much you need to retire, give some serious thought to where you are likely to want to live when you reach retirement age.”

Loving senior couple dancing in balcony. Happy man and woman are spending leisure time together. They are at home.
How does cashflow affect retirement?

Everyone has different cashflow requirements in their later years, so it’s important to work out a budget for retirement.

“An easy starting point is to start with your current living expenses and to adjust them accordingly,” Christine suggests.

“Consider what expenses can be removed from your current budget – for example children’s school fees, rent or mortgage repayments (if you plan on owning your home outright when you retire). Consider also what expenses need to be factored in – for example medical bills and home maintenance.” 

How do health and family circumstances affect retirement?

Things like life expectancy and inheritance affect how much money you will need to have when you stop working.

Planning for retirement is a good time to talk to your doctor about your health and consider your heritage,” Christine says. “How long did your parents, grandparents, aunts and uncles live? Are there any medical conditions that run in the family?

“Although unpleasant to think about, there is no escaping the fact that as we get older our health requires more ongoing attention, so the best thing you can do for your physical and mental health is to plan for these expenses as best as you can.”

Making sure you aren’t paying too much for private health insurance is a good place to start to try and save, and comparison companies like iSelect can try and help Australians find a suitable level of cover at a price they can afford. Paying less for health insurance means more spare cash to boost your retirement savings. 

How does relationship status affect retirement?

It’s one source of income vs two sources of income.

“If you’re in a relationship with a working partner, then you don’t need to save as much individually as you have shared expenses,” Brenton explains.

“Dual income families have the highest chance of achieving retirement goals as it’s possible to live off one income and save the other. However, for each additional child you have, expenses mount through things like maternity leave and day care, to higher running costs as your children eat through your nest egg!”

If you are single, Christine emphasises the importance of “taking ownership of your retirement numbers.”

“Not having a partner to bounce ideas off and provide a second income can be tough,” the financial advisor says, adding that women are often especially disadvantaged due to lower wages, time out of the workforce for child rearing, and caring for older relatives.

university student works on assignment in her dorm room.She is smiling and in the background there is a big blackboard

How can younger people prepare for retirement?

You can never start too early when it comes to retirement planning. While it may not seem exciting to think about retirement when it’s in the distant future, preparing ahead can save you a lot of stress as you get older. Here are some ways you can do that:

  • Invest young.
  • Save money and create a budget.
  • Avoid consumer debt where possible (credit cards, and car or student loans) because of high interest rates.
  • Utilise your employee benefits.
  • Compare health insurance*.
  • Ensure you are paid competitively for your work.
  • Seek professional financial advice before major life events.

Senior couple embracing in kitchen of suburban home.

What is the biggest mistake people make when planning for retirement?

Leaving it too late.

“The number one best decision to make retiring easier is to start early,” Brenton stresses. “The impacts of compounding will have a massive effect.”

Christine also suggests to get financial advice “sooner rather than later,” adding that women especially often feel as though they “are not well enough informed to make confident decisions.”

“They seek more information from books, podcasts, online courses, unqualified money coaches, friends and social media. But nothing real happens for years, which means a worse outcome and fewer choices in retirement.

“Often women simply pay off their mortgage and leave their superannuation in the default option chosen by an employer. This blind faith in the system and inaction leaves women worse off.”

And according to Brenton, the marketing efforts of super companies have made retiring look “more complicated than it really is.”

“Always seek the advice of an independent financial adviser that doesn’t take a percentage of your super or have any ties with the super industry to get a genuine overview of what you need.”

Overall, the amount of money needed to retire depends on individual circumstances. To be prepared, it pays to know how personal, social and economical factors will play into your life after work. Don’t wait until your 60s, start planning early!

This article takes general advice from financial advisors Christine Lusher from Lush Wealth and Brenton Tong from Financial Spectrum. Make sure you seek financial advice appropriate to your individual circumstances before making decisions.

Related stories