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Home / Plan your retirement / How much will I spend in retirement? / Retirement cost of living: How much does a comfortable lifestyle cost?

Retirement cost of living: How much does a comfortable lifestyle cost?

March 15, 2021 by Barbara Drury 1 Comment

Reading time: 9 minutes

On this page

  • Breaking down the ASFA Retirement Standard
  • 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 managing 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 for good.

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 three broad categories: a comfortable retirement, a modest retirement and one based solely on the Age Pension.

  • 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 form daily living. For couples aged 65 to 85, a comfortable lifestyle is estimated to cost around $62,562 a year. Singles might expect to spend $44,224 a 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. For couples aged 65 to 85, a modest lifestyle is estimated to cost around $40,739 a year. Singles might expect to spend $28,170 a year.
  • 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 $37,014 per year for couples combined, and $24,554 for singles. As you can see, this is below even the modest retirement standard.

The ASFA budget estimates for retirees aged over 85 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 couplesAged 65Aged 85
Age Pension$37,341$37,341
Modest $40,739$38,395
Comfortable $62,562$58,871
Budget / lifestyle for singlesAged 65Aged 85
Age Pension$24,770$24,770
Modest $28,179$26,844
Comfortable $44,224$42,484

Sources: Centrelink, ASFA

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Note: Age Pension rates as at March 2021. Couples rate based on living together. Modest and Comfortable lifestyles as at December 2020 quarter.

Don’t rely solely on projections

On the face of it, the figures suggest there is not much difference between a modest lifestyle and one based on the Age Pension. There is only around a 9% difference between the two budgets for couples, and 14% for singles. It’s worth noting that the ASFA budgets assume that retirees own their own home outright and are relatively healthy. Age pensioners who rent privately will struggle financially. Even a few extra dollars a week from superannuation 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 smallish amounts, which may further cloud any projections or assumptions.

While the ASFA 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. For example, updating a kitchen and bathroom can be quite expensive, depending on your tastes, more so than presented in the budgets discussed. ASFA suggests that under the comfortable lifestyle you have the budget to “replace kitchen and bathroom over 20 years” – yet there is just $6.81 per week to cover all home improvements – or $7,082 over 20 years. That may not be a realistic budget for many people when material and labour costs and personal tastes enter the equation.

Home improvement, repairs and maintenance are a big topic in their own right, often discretionary rather than fixed, and don’t fit neatly into weekly or monthly expense scenarios.

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 ‘splash out’ on travel and an active social life.

Perhaps a more useful guide to retirement spending is your spending patterns and lifestyle preference pre-retirement. A common rule of thumb is that you will need 66–80% 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 trauma or disease, although that can become an issue at any time, particularly for the very elderly.

Below we cover some major areas that could impact most on your spending.

Owning a home

The Centre of Excellence in Population Ageing Research (CEPAR) found that owning your home mortgage-free, instead of renting, is a significant factor in your ability to live a modest lifestyle, or better, in retirement.

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Around 75% of Australian retirees own their own home, but for the remaining 25% the outlook is not so great. CEPAR senior research fellow Rafal Chomik says while most Australians will enjoy their modest retirement lifestyle, the living standards of those who rent in retirement are very different; only around 15% of older renters can afford a lifestyle better than modest. Single renters are particularly at risk of living below a modest retirement.

Among all older people only about 10% fall below the poverty line set at half the median income. Among older Australians who rent, 40% fall below. Among older Australians who rent and live alone, it’s more than 60%.

What’s more, the rate of home ownership is falling. According to the latest government figures, homeownership among pre-retirees aged 50–54 has dropped 6.6% in the past 20 years from 80% to 74% and more Australians are retiring with mortgage debt.

Learn more in SuperGuide article Your home: The foundation of retirement planning.

Where you live

In some cities and regions in Australia, prices for common items such as petrol and food exceed the national average, not to mention other discretionary or leisure products. Research by HILDA from a few years ago found that the biggest difference in the level of spending was between households in Sydney where retiree spending was $44,672 on average compared to households in regional South Australia where household spending was $22,017 – less than half! Melbourne retirees were spending $34,000 and Tasmanians $25,000.

Not everyone wants a sea or tree change but moving can be attractive if there are amenities and services that fit your needs, whether they be health-related or reduce your overall weekly or monthly spend. Retirement villages can offer a pleasant lifestyle but look closely at their fees and charges to see if this arrangement suits you. Vertical retirement villages, or high-rise living, is a new trend for retirees who want to stay in the bustle of a city close to services and transport.

Learn more in SuperGuide article Location the missing ingredient in retirement planning.

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? A 2018 report from Challenger referencing the HILDA demographic survey reaffirmed that younger retirees generally spend more than older retirees. During the so-called active phase of retirement, more is spent on wants rather than needs; in the ‘passive’ phase of retirement, after age 75, more money is kept for essentials like healthcare.


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This is consistent with the Milliman Retirement Expectations and Spending Profiles study that shows a falling retirement spend in Australia is driven by behaviour, not income. This fall-off in spending may partially be a case of insuring against longevity risk (the risk that retirees run out of savings before they die), to leave a bequest to children, or for other reasons that are not clear.

The Milliman research, which tracked the spending of more than 300,000 older Australians, showed the average proportion of income spent on housing, food, energy, leisure, goods and services, travel and insurance either declines slightly or remains the same, regardless of income levels, through retirement. Only healthcare spending increases.

Couple or single – differences in spending

A report by the Australian Centre for Financial Studies delves deeper into the HILDA survey and provides a comprehensive overview of spending patterns. It found that single retirees were of greater risk of financial hardship, with spending actually exceeding income for those with the lowest 20% of income.

Retiree couples aged 65–74 spent just $33,200 a year on average, well below ASFA’s modest retirement budget of $40,380 and the Age Pension, currently $37,341. While single households of the same age spent an average of only $18,400, also well below the rate of the ASFA modest retirement budget ($27,902) and the Age Pension ($24,770).

Couple or single – differences in spending

A report by the Australian Centre for Financial Studies delves deeper into the HILDA survey and provides a comprehensive overview of spending patterns. It found that single retirees were of greater risk of financial hardship, with spending actually exceeding income for those with the lowest 20% of income.

Retiree couples aged 65–74 spent just $33,200 a year on average, well below ASFA’s modest retirement budget of $40,739 and the Age Pension, currently $37,331. While single households of the same age spent an average of only $18,400, also well below the rate of the ASFA modest retirement budget ($28,179) and the Age Pension ($24,554).

How long will you live?

SuperGuide has a suite of articles on life expectancy that show the most recent government figures (2016–2018) reporting life expectancy for a newborn male at 80.7 years and for a newborn female 84.9 years. If you have safely made it to retirement, you can expect to live even longer. Today’s 65-year-old men can expect to live to 84.9 while their female counterparts can expect to live to 87.6.

Many of us probably know people in their 80s who are in reasonable health. However, chronic disease is on the rise and it’s not uncommon for retirees to have non-life-threatening ailments and conditions that can put a dent in the pocket, requiring regular medications and trips to the doctor.

The vitamins, minerals and supplements industry has also grown exponentially in the past decade. Before spending your hard-earned on a swag of pills, powders and liquid, find out if you can get this nutrition naturally through an improved diet. Pathology or blood tests may indicate you have a deficiency in certain vitamins or minerals, in which case purchasing these may be warranted. Always seek your doctor’s advice.

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 (such as super) to children and other dependants. Super does not automatically form part of your estate, so always seek legal and financial planning 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 as to 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 stump up some cash to help them with a home deposit? Do you regularly donate to charities or have subscriptions you have forgotten about that appear in your online bank profile every month? These are just some of the areas that can be overlooked when you do your retirement budget plan and the costs can mount up.

To keep track of these and other items, perhaps do an audit every year, including things that may need regular updating such as clothes or club memberships. Other expenses may include the annual cost of having credit cards, loyalty scheme annual charges and so on.

Creating an expenses budget is relatively simple and there are templates available online. Perhaps prepare a monthly budget of all your fixed costs as an average, such as utilities, rates, internet, phone, transport, food and household items and insurances. Bills are often set monthly rather than weekly, so monthly may be the easier option.

Next work out how much money you are willing or able to spend on discretionary or luxury items, such as holidays, restaurants, subscriptions, extra household items, renovations and repairs, wedding or birthday presents and so on.

Also look at your debit and credit arrangements and adjust them so you can easily track spending on your statements.

Finally, there’s no shame in getting quotes to compare prices, finding bargains or switching to lower-cost generic brand 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.

SuperGuide has a round-up of retiree concessions available in your state or territory.

Checklist to managing 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 generic food products or lower-cost, environmentally-sound home renovations.
  • Delay purchases if cheaper versions of a product or service will be released at a later point and look at how innovative credit and debit arrangements can help.
  • 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.
  • 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.

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Learn more about how much super is enough in the following SuperGuide articles:

How much super do I need to retire?

April 13, 2021

How to use the MoneySmart Retirement Planner

January 21, 2021

How accurate are ‘retirement estimates’? 7 assumptions you need to understand

November 21, 2019

Falling behind with your super? How your super balance compares

October 2, 2019

Learn more about spending in retirement in the following SuperGuide articles:

How much can I afford to spend in retirement?

March 22, 2020

Worried about outliving your retirement savings? 9 steps that might help

March 3, 2020

How to plan your spending through the 3 stages of retirement

August 10, 2019

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