How Much Do You Need to Live a Comfortable Retirement?

Written by Steve Landers & Shara Cox

Retirement is a milestone many of us look forward to. A time to relax, travel, pursue hobbies, and spend meaningful time with loved ones. But to truly enjoy this phase of life, good financial planning is essential. So how much do you really need to live a comfortable retirement? The answer depends on your lifestyle goals, anticipated expenses, expected income sources, and how early you start planning, especially with professional guidance.

Understanding Retirement Expenses

Your retirement budget should be tailored to your individual lifestyle. While costs vary widely, most retirees will need to plan for the following spending categories:

1. Essential Living Costs

These are non-negotiable expenses you’ll continue to pay in retirement, including:

  • Housing (mortgage/rent, maintenance, rates/taxes)

  • Utilities (electricity, water, internet)

  • Food and groceries

  • Healthcare and insurance

  • Transportation

Even on a modest retirement, these essentials can account for a significant portion of your income.

2. Lifestyle and Leisure

A comfortable retirement usually includes discretionary spending on:

  • Travel and holidays

  • Dining out and entertainment

  • Hobbies, clubs, and classes

  • Gifts

Depending on how active your retirement will be, these costs can vary dramatically. You should plan a budget in these areas. For example: if you plan to help out the kids with their house deposits or weddings, how much will you plan to gift and at what time?

3. Healthcare and Aged Care

Healthcare costs tend to rise with age. Even with public healthcare coverage, out-of-pocket costs for specialists, dental care, prescription medications, and aged-care products can be substantial. Accessing some Centrelink benefits can help with these costs.

4. Unexpected Costs

Emergencies happen. Whether it’s home repairs, vehicle maintenance, or a sudden medical need, having a buffer is crucial.

So, How Much Do You Need?

In general retirees will need around 100% of their pre-retirement after-tax income to maintain a similar standard of living - but this rule of thumb doesn’t fit everyone. The actual number depends on your lifestyle choices and spending patterns. In some cases this figure will increase initially in the period where overseas travel is prioritised but is likely to reduce when you reach 75/80 and generally do less.

Income Sources in Retirement

To determine how much you need to save, factor in all income sources you expect in retirement:

1. Government Pensions

Depending on your eligibility, you may receive a government age pension or similar benefit. While these can provide a safety net, they often won’t fully cover a comfortable lifestyle.

2. Superannuation / Pension Funds

Your private retirement savings (including employer contributions and personal savings) are typically your biggest retirement income source.

3. Investments and Passive Income

Rental properties, dividends, and other investments can supplement retirement income and help bridge gaps.

The Value of Planning Early

One of the most impactful decisions you can make for a secure retirement is starting early - especially with a financial adviser. Here’s why:

1. Clarity and Confidence

An adviser helps you estimate your future spending more accurately and creates a tailored retirement plan. They’ll consider your goals, current savings, expected income, and potential risks.

2. Better Goal Setting

Once you understand your retirement targets, you can set realistic savings goals and track progress over time.

3. Tax and Investment Optimisation

Professional advisers can recommend strategies to maximise tax benefits and grow your retirement savings more efficiently. Small changes today can translate into thousands of dollars more at retirement.

4. Risk Management

An adviser can help you balance your investments and protect your savings from unnecessary risk, especially as you approach retirement.

5. Adjusting to Life Changes

Life doesn’t always go to plan. Adviser guidance helps you adapt your retirement strategy in response to job changes, market shifts, health events, or family needs.

Ready to start planning your comfortable retirement? Speak with our team today to create a personalised retirement strategy.

Jenni Anderson