In this guide
- Breaking down the ASFA Retirement Standard
- Super Consumers Australia’s retiree spending guide
- Don’t rely solely on projections
- What areas will most impact my cost of living in retirement?
- Track all your areas of spending
- Checklist to manage your spending
- How much super will I need to boost my retirement income?
As you approach retirement, one of the challenges is to work out your likely spending habits once you stop work and start living off your savings.
To make your job easier, we have reviewed some industry reports to see how much retirees are spending. This can be a springboard to help you assess what your own needs and preferences might be.
Breaking down the ASFA Retirement Standard
Since 2004, super industry body ASFA has been producing an online Retirement Standard and budget analysis to identify the likely spending items and costs for retirees.
The Standard uses common terms to present two broad categories: a comfortable retirement and a modest retirement.
- A comfortable retirement involves enough money to pay for house repairs, occasional holidays including overseas trips, a good car, regular leisure and lifestyle activities, and many other discretionary items that contribute to a good life. For couples aged 65 to 84, a comfortable lifestyle is estimated to cost around $73,031 per year. Singles might expect to spend $51,814 per year.
- A modest retirement necessitates cutbacks in many of these areas, with less discretionary spending but still with the ability to afford a car and enjoy most leisure activities and some travel. For couples aged 65 to 84, a modest lifestyle is estimated to cost around $47,475 per year. Singles might expect to spend $32,930 per year.
By comparison, a retirement based on the Age Pension generally provides a frugal lifestyle on a tight budget, with most spending at a basic level limited to essential items only. An Age Pension will pay approximately $44,855 per year for couples combined, and $29,754 for singles. As you can see, this is below even the modest retirement standard, except for 85-year-old couples, where the pension covers basic needs.
The ASFA budget estimates for retirees aged 85 and over are slightly less but not hugely different. The main differences are:
- More money needed for health, in-home cleaning and care services as people become more frail
- Less money for transport and leisure, as older retirees are less likely to own a car, are less mobile and less inclined to join out-of-home activities.
| Budget/lifestyle for couples | Aged 67 | Aged 85 |
|---|---|---|
| Age Pension | $44,855 | $44,855 |
| Modest | $47,475 | $44,105 |
| Comfortable | $73,031 | $67,419 |
| Budget/lifestyle for singles | Aged 67 | Aged 85 |
|---|---|---|
| Age Pension | $29,754 | $29,754 |
| Modest | $32,930 | $30,828 |
| Comfortable | $51,814 | $48,716 |
Sources: Centrelink, ASFA
Super Consumers Australia’s retiree spending guide
Super Consumers Australia (SCA) has also started estimating retiree spending patterns. Unlike ASFA’s Retirement Standard, which is based on the cost of a basket of goods and services, SCA’s targets are based on surveys of retirees’ actual spending. And where ASFA provides sample budgets for two levels of spending (modest and comfortable), SCA has three levels of spending (low, medium and high). The medium and high spending categories, bookend ASFA’s comfortable budget.
Retirement budget estimates (aged 65)
| Situation | Spending level | Per fortnight | Per year |
|---|---|---|---|
| By yourself | Low | $1,190 | $31,000 |
| Medium | $1,650 | $43,000 | |
| High | $2,270 | $59,000 | |
| In a couple (combined spending) | Low | $1,770 | $46,000 |
| Medium | $2,380 | $62,000 | |
| High | $3,350 | $87,000 |
*Spending levels in today’s dollars adjusted for inflation, as at January 2025, based on historic ABS data about retirees’ spending.
Source: Super Consumers Australia
The budget estimates in the table above assume retirees own their home outright.
Don’t rely solely on projections
On the face of it, the figures suggest there is not much difference between a modest/low-spending lifestyle and one based on the Age Pension. It’s worth noting that the ASFA and SCA budgets assume that retirees own their own home outright and are relatively healthy.
Age pensioners who rent privately will struggle financially. So even a few extra dollars a week from supe or a part-time job can make a big difference to the lifestyle of low-income earners.
However, the Age Pension does come with supplements and rent assistance (if you are renting) for eligible retirees, albeit inadequate amounts in the current rental market, which may further cloud any projections or assumptions. The Age Pension also comes with discounts on a range of costs, such as council rates and car registration, while self-funded retirees may also be eligible for more limited concessions on goods and services.
While the ASFA and SCA budgets provide food for thought, it’s best not to take them as the final word. Budget projections can be highly variable and dependent on individual preferences.
The issue with all categories is that we all have our own views on what would be a modest or comfortable retirement.
Some are content to live a simple life and have no desire for luxuries or even regular social outings, such as restaurants or live entertainment. Others may reach retirement after having spent years raising kids and working and want to tick off a lengthy bucket list of travel and other activities. You may also want to help your children or grandchildren with a home deposit or school fees.
Perhaps a more useful guide to retirement spending is your spending patterns and lifestyle preferences pre-retirement. A common rule of thumb is that you will need 70% of your pre-retirement income to enjoy your current standard of living into retirement.
What areas will most impact my cost of living in retirement?
The big question then is: What type of retirement do you want and what might that cost? Should I track spending or just do a budget?
We will assume you are in reasonable health and don’t need to provide funds for major surgeries or treatments caused by injuries or disease, although that can become an issue at any time in later life.
Below we cover some major areas that could impact most on your spending.
1. Owning a home
Australia’s retirement income system is based on three sources of income, or three pillars: a means-tested Age Pension, compulsory super, and voluntary savings both in and out of super. It could also be argued that home ownership is the solid foundation supporting all three.
Not only is your home exempt from the pension assets test, it’s also a store of wealth that can be used to supplement your retirement income.
Using relatively small portions of home equity through the government’s Home Equity Access Scheme or similar equity release products can substantially improve retirement incomes for many people.
Downsizing to a smaller home can also release funds to provide additional retirement income. Part of the sale proceeds can go into your super fund where it will be taxed at concessional rates or tax free once you turn 60 and retire, or 65 and start a super pension even if you keep working.
Around 75% of Australian retirees own their own home (rising to 82% for those aged 70–74), but for the remaining 25% the outlook is not so great. With housing affordability and rental affordability declining, the situation for retirees who rent is becoming even more precarious.
What’s more, the rate of home ownership is falling. According to the latest government figures (based on the 2021 census), homeownership among pre-retirees aged 50–54 dropped 7.9% in the 25 years to 2021 from 80% to 72% and more Australians are retiring with mortgage debt.
2. Where you live
Location is also an important consideration in retirement and can have a big impact on your cost of living. Cost of living is generally higher in capital cities than regional areas. According to Finder, in January 2025 the most expensive capital city is Sydney, which is 43% more expensive than Australia’s cheapest city, Townsville.
Not everyone wants a sea or tree change but moving can be attractive if there are amenities and services that fit your needs. It’s important to think about the suitability of a location if your health declines in future and you need access to health services or assistance around the home, so factor these extra costs into your retirement spending estimates.
Type of housing is also an important consideration. Home modifications as your health and mobility decline can be costly, as can home and garden maintenance in a large family home. Retirement villages can offer a pleasant lifestyle but look closely at their fees and charges to see if this arrangement suits you.
Government support is available to allow elderly Australians to remain living in their own home for longer, and to reduce the cost of residential aged care for those who need it.
3. Your age and lifestyle
Decide what activities and services are important to your overall happiness. Can you cut back on subscriptions, alcohol, restaurants and holidays, for example? For many retirees, this happens naturally.
Successive waves of the Household Expenditure Survey conducted by the ABS have found that spending drops off during retirement, especially from the age of 75. During the more active early phase of retirement, more is spent on wants rather than needs; in the ‘passive’ phase of retirement, after age 75, even wealthy households tend to spend less on eating out, alcohol, travel and leisure, which more than compensates for higher spending on essentials like healthcare.
ASFA assumes a drop-off in spending of about 9% for couples with a comfortable lifestyle, before and after age 85 (see table earlier in this article).
4. Couple or single, male or female
It costs more to live as a single retiree than it does if you live with a partner, as the cost of housing, power and running a vehicle, for example, is similar for singles and couples. This is reflected in Age Pension rates where the rate for a single retiree (currently $29,754) is more than half the couples’ rate ($44,855).
This puts single retirees at greater risk of financial hardship, especially those who pay rent. As you can see in the table earlier in this article, the gap between the Age Pension and ASFA’s ‘modest’ budget is greater for a single person than it is for members of a couple.
Gender is also an important factor when it comes to retirement income planning. While there is little difference in the income needs of men and women, women typically have less money to spend.
Older single women are the fastest growing group of homeless people in Australia, often because of divorce and low levels of super due to the gender pay gap and time out of the workforce.
According to the Women’s Budget Statement in the 2024–25 Federal Budget, women approaching retirement at age 64–69 have a median super balance of $158,000, compared with $212,000 for men, a gap of $53,200.
5. How long will you live?
When working out how much income you are likely to need in retirement, knowing how long your money needs to last is the big unknown.
Today’s 65-year-old male can expect to live to 85 on average, and women to almost 88, but half will live even longer. One way to deal with this uncertainty is to purchase an annuity-style product, perhaps in conjunction with an account-based pension from your super fund, that will pay regular income until you die.
6. Estate planning – leaving money once you are gone
Research shows many retirees do not spend big (particularly in later years). Some may worry about preserving capital so their money doesn’t run out, some may be keeping money aside in case they need aged care late in life, but it’s also possible that some have estate planning in mind. This means leaving behind the family home and other assets (including super) to children and other dependants.
Even though super is intended to provide retirement income, the reality is most people still have unspent savings in super when they die.
As super does not automatically form part of your estate, it’s important to nominate your super beneficiaries and consider getting legal and financial advice. Estate planning can be complex from a tax, legal and financial perspective.
Work out how much you would like to leave behind to your spouse or children. You will need to be clear about who your beneficiaries are and how any proceeds are to be distributed.
Track all your areas of spending
Have you promised your adult children you will help them with a home deposit? Do you regularly donate to charities or have subscriptions and streaming services you have forgotten about that appear in your bank statement every month? These are just some of the areas that can be overlooked when you plan your retirement budget, and the costs can mount up.
To keep track of these and other items, do an audit every year, including things that may need regular updating such as clothes or club memberships. Creating an expenses budget is relatively simple and there are templates available online.
Next work out how much money you are willing or able to spend on discretionary or luxury items, such as holidays, a camper van, replacing your car and electronic devices every few years, restaurants, household items, renovations and repairs, gifts and so on.
Finally, it’s essential these days to compare prices for utilities, insurance and loan products when they are due for renewal. There’s also no shame in finding bargains or switching to lower-cost generic products, all of which may save thousands of dollars each year. And don’t forget to check the many government and other concessions and discounts available to retirees.
Checklist to manage your spending
- Set your goals for the standard of living you want in retirement and discuss with your spouse or partner.
- Track expenses using a monthly budget or another means.
- Find cheaper alternatives across the spectrum, whether it be shopping at discount supermarkets or comparing prices for utilities and insurances.
- Delay purchases if cheaper versions of a product or service will be released at a later date.
- Spend wisely on discretionary or luxury items if their cost is beyond your budget.
- Seek multiple quotes for professional services, whether they be advisers, tradies or medical specialists, and ensure they hold the relevant qualifications and licences.
- Shop around for the best interest rates for your savings and allocate some of your super to higher return growth assets to generate the returns you need in retirement.
- Consider how much money or assets you want to leave behind to your spouse, children or dependants.
How much super will I need to boost my retirement income?
Once you have a better idea of what your retirement cost of living could be, the next step is to work out how much super you will need to finance that lifestyle.
As you can see, there are plenty of resources available when you start planning your retirement income needs, but most people would benefit from professional financial advice in the lead-up to retirement.
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