Nearly half of Australians aged 50 to 66 worry they’ll run out of money in retirement. That’s not a vague fear — it’s a real cash problem. For a single homeowner, the comfortable retirement budget sits at $54,840 a year. For a couple, it’s $77,375. If your savings won’t cover that, the gap is a number you can calculate today.
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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
Around 2.5 million Australians are expected to retire over the next decade. Many will carry mortgages, support adult children, or rent later in life. The old idea that employer super contributions alone will see you through is being tested by rising costs and longer lifespans. If you’re one of the 58% who want to learn more about super and retirement but haven’t acted yet, you’re not alone — but the gap between intention and action is where the real cost lives. Here’s what you actually need to know.
Four Things to Know Before You Plan
Retirement planning isn’t just about how much super you have. It’s about converting that balance into a sustainable income that covers what you’ll actually spend. The research shows that people with large balances can still be unprepared if they haven’t thought about drawdown rates, health costs, or housing. The term you’ll hear most often is drawdown rate — the percentage of your super you withdraw each year in retirement. Get that wrong and your money could run out long before you do.
What I tend to notice is that people focus on the lump sum number and forget the monthly budget that number has to produce. A $630,000 balance sounds impressive. But at a 5% drawdown rate, it delivers $31,500 a year — less than the comfortable budget for a single person. That’s the gap that catches people off guard.
How Much You Actually Need to Retire
The ASFA Retirement Standard sets clear benchmarks. These aren’t rough guesses — they’re calculated budgets based on what people in retirement actually spend. The difference between a modest and comfortable retirement is roughly $520,000 in lump sum for a single homeowner. That’s not a small gap.
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| Category | Single Homeowner | Couple Homeowner |
|---|---|---|
| Comfortable lump sum | $630,000 | $730,000 |
| Comfortable annual budget | $54,840 | $77,375 |
| Modest lump sum | $110,000 | $120,000 |
| Modest annual budget | ~$32,000 | ~$47,000 |
Age Pension rates from March 2026 give a single $1,200.90 per fortnight — about $31,223 a year. Couples get $1,810.40 combined. But the deeming rates used by Centrelink mean any financial assets outside super can reduce your pension. At 1.25% on the first $64,200 and 3.25% above that, a single retiree with $100,000 in savings is deemed to earn $1,966 a year — which counts toward the income test. That’s a real-world example of how assets outside super can eat into your Age Pension dollar for dollar.
Living costs are the other side of the equation. The comfortable budget covers travel, dining, hobbies, gifts, and a buffer for unexpected costs. The modest budget covers essentials — groceries, utilities, insurance, basic health — with little left over. If you’re a single renter with $220,000 in super, you’re below the modest threshold and facing rent on top of that. The planning priority shifts to Age Pension eligibility, rent assistance, and housing strategy.
Where Retirement Planning Goes Wrong
Treating super as set-and-forget
Employer contributions alone won’t get most people to a comfortable retirement. The 10.5% Super Guarantee is a solid foundation, but it wasn’t designed to cover rising living costs, healthcare, and longer lifespans. The research shows that MLC’s Real Retirement Report found a gap between retirement intentions and actions — people want to plan but don’t engage with their super early enough. Checking your balance isn’t a plan. You need to know your investment mix, fees, and whether your insurance inside super still makes sense.
Underestimating what you’ll spend
Most people budget for groceries and utilities but forget the big-ticket items that hit in retirement. Replacing a car, dental work, helping adult children, home modifications, and aged care preparation all cost real money. The research suggests keeping a cash buffer of $15,000 to $30,000 specifically for these surprises. Without it, you’re forced to sell investments when markets are down or draw down super faster than planned.
Ignoring the Age Pension means test
Many people assume they won’t qualify for the Age Pension and don’t plan for it. But the deeming rates and asset tests mean partial eligibility is common. A couple with $760,000 in super and a home may still qualify for a part pension depending on their other assets and how they structure their drawdown. Not planning for it leaves money on the table. The Moneysmart retirement planning tools from ASIC can help you estimate your eligibility.
Not stress-testing for longevity
Retirement can last 30 years. A 67-year-old couple today has a good chance of one partner living into their 90s. If your drawdown rate is too high, your super runs out while you’re still alive. The bucket strategy — splitting your money into cash, defensive, and growth buckets — is one way to manage this. But you need to actually run the numbers, not just assume a 5% drawdown will work.
- Check your super balance and investment mix
- Estimate your retirement age and life expectancy
- Calculate your annual spending needs in retirement
- Check your Age Pension eligibility using the deeming rates
- Identify whether you’ll own your home or rent in retirement
- Build a $15,000–$30,000 cash buffer for unexpected costs
- Review your beneficiary nominations and estate plan
Building a Retirement Plan That Works
Set your goals and timeline
Before you touch the numbers, decide what you want retirement to look like. When do you want to stop working? What will you do with your time? Will you travel, volunteer, work part-time, or move closer to family? The Moneysmart guide to retirement planning suggests setting a rough retirement date, even if it changes. That gives you a target to work toward. If you’re planning with a partner, discuss it together — different expectations cause friction later.
Assess your financial position
This is where the numbers live. Start with your super balance — check it, consolidate old accounts, and review your investment mix. Then look at savings outside super, investment property, and any expected inheritance (but don’t count on it until it arrives). Use the Moneysmart net worth calculator to get a clear picture. The key question: what income will your assets produce, and does it cover your spending needs?
Build your income strategy
Most retirees will draw from three sources: super (via an account-based pension), the Age Pension (full or partial), and any other savings or investments. The order you draw from matters for tax efficiency. Super withdrawals are tax-free from age 60, but Age Pension means tests mean that drawing down super faster can increase your pension eligibility. It’s a balancing act that rewards a bit of planning. The MLC Retirement Projector tool can help you visualise different scenarios.
The bucket strategy for managing risk
The bucket approach splits your money into three time horizons so you’re not forced to sell growth assets when markets are down. It’s a simple framework that works for most people.
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| Bucket | Time Horizon | What Goes In It | Purpose |
|---|---|---|---|
| Spending bucket | 1–3 years | Cash, high-interest savings, short-term deposits | Day-to-day spending and emergencies |
| Stability bucket | 3–7 years | Bonds, defensive diversified options | Protect capital and generate modest income |
| Growth bucket | 7+ years | Australian shares, international shares, growth funds | Long-term growth to outpace inflation |
If you’re a single homeowner age 63 with $320,000 in super, the bucket strategy tells you to keep about $30,000 in cash for the next 1–3 years, put $60,000–$90,000 in bonds, and let the rest grow in shares. That gives you time to ride out market downturns without selling low. If you’re a couple both age 67 with $760,000 combined, you’re at the ASFA comfortable benchmark — but your drawdown rate and health costs will determine whether that lasts.
Frequently Asked Questions About Retirement Planning
Can I still get the Age Pension if I have super? ▾
What happens if I miss the Age Pension age? ▾
How much can I withdraw from my super each year? ▾
Should I pay off my mortgage before I retire? ▾
What if I don’t own my home when I retire? ▾
Can I still make catch-up super contributions close to retirement? ▾
Starting Now Is What Counts
The 2.5 million Australians expected to retire over the next decade will face a different landscape than their parents did. Higher living costs, longer lifespans, and less housing security mean that relying on super alone is no longer enough. But the research also shows that small steps — catch-up contributions, a cash buffer, a sensible drawdown rate — can shift the outcome meaningfully. The question isn’t whether you’re behind. It’s whether you’re willing to take one step today.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read the Aussie guide to early retirement.
Sources and Further Reading
The Aussie retirement crisis: are we all doomed to working forever? — A deeper look at the structural challenges facing Australian retirees and what they mean for your planning.
Investing in yourself: the Aussie path to career and financial growth — How building skills and income now can boost your retirement position later.
Wealth Works (2026). Retirement Planning Gap Australia 2026. 🔗
MLC (2026). Real Retirement Report 2026. 🔗
ASIC Moneysmart (2026). Make a Retirement Plan. 🔗
The Senior (2026). Is the way Aussies plan for retirement in need of reform? 🔗
