How much super do I need if I don’t own a home?

The evidence clearly indicates that renting can make life in retirement very difficult if you haven’t accumulated significant savings.

What assistance is available?

In an attempt to level the playing field for renters, the Age Pension assets test is adjusted for non-homeowners – allowing a higher value of assets before the pension is reduced and before it cuts out entirely. The current gap between homeowner and non-homeowner thresholds is $242,000.

This still gives homeowners a significant advantage because the value of their home is not an assessable asset. The home is usually worth far more than the $242,000 reduction in assets test limits.

Rent assistance is payable to Age Pension recipients at maximum rates of $184.80 per fortnight for a single person and $174 per fortnight for a couple (combined). The Retirement Income Review found that for two-thirds of recipients in 2019 rent assistance covered less than a third of fortnightly rent.

Despite rent assistance being inadequate to even the playing field the review’s final report recommended against increasing it. This was largely because it does not target retirees specifically (it is paid to other recipients of income support), and even a 40% increase to the payment would have minimal impact on rates of financial stress.

Instead, the report suggests that a broader approach is needed to assist those who rent in retirement. This might include re-examining the operation of Age Pension means testing that currently significantly advantages homeowners.

Despite the findings of the review, the 2023 Federal Budget did increase rent assistance by 15% (in addition to the usual indexation) from September 2023. This increase is intended to reduce housing affordability pressures for all recipients of income support, not just retirees. The increase is welcome but still leaves rent assistance rates far below market rents.

Retirement income goals

You’ve probably seen numbers tossed around that predict the income you’ll need in retirement. These almost universally assume you will own a home.

There are two main methods for estimating required retirement income.

1. Calculating the dollar amount of income based on what current retirees spend or on what a reasonable range of items cost
2. Putting forward a percentage ‘replacement rate’ of a person’s pre-retirement income.

Both methods need adjustment to be applied to renters.

Popular dollar amount estimates of retirement needs include the retirement standard from the Association of Superannuation Funds of Australia (ASFA) and retirement savings targets from Super Consumers Australia (SCA). The SCA has based its advice on data from the ABS that reflects what retirees currently spend, splitting the results into low, medium and high spending thresholds, while ASFA calculates a ‘modest’ and ‘comfortable’ standard based on the real cost of a comprehensive list of budgeted items.

Keep in mind that the lower income levels are unlikely to be particularly comfortable. They reflect a level of income only slightly higher than the full rate of Age Pension.

The most recent published annual retirement income targets for current retirees aged around 65 are shown below.

Relationship status	Type of income goal	Required annual income
Single	SCA low income	$31,000
Single	SCA medium income	$41,000
Single	SCA high income	$55,000
Couple	SCA low income	$44,000
Couple	SCA medium income	$60,000
Couple	SCA high income	$80,000
Single	ASFA modest	$31,867
Single	ASFA comfortable	$50,207
Couple	ASFA modest	$45,946
Couple	ASFA comfortable	$70,806

These income targets assume you own your own home without a mortgage and receive a full or part Age Pension when eligible. 

Calculating your retirement income needs

A person renting in retirement has higher income needs. Data from the Australian Bureau of Statistics (ABS) Survey of Income and Housing shows that in 2019-20 the median single renter spent $14,508 more on housing than the median single mortgage-free homeowner. For a couple, the difference was $18,148.Remember these are median figures – that means 50% of people spent even more.

To adjust the ASFA and SCA standards to suit a renter you can add the median additional cost of renting the ABS found or make your own estimate of what is realistic in the market you would be renting in.

Alternatively, you might prefer to estimate your annual retirement income needs based on what you earn from work. The difficulty with fixed dollar estimates of retirement needs is that they are only marginally tailored to the individual. What a low, medium or high income, or a modest or comfortable retirement, means to you may be very different from the established standards. This is where a replacement rate of pre-retirement income can provide more context.

Most established standards for replacement rates indicate that around 65–75% of pre-retirement after tax income is sufficient for a comfortable life. For those who rent, the Retirement Income Review estimated a more suitable replacement rate is 90–100%. Yes, renting can mean you need to maintain the same take-home pay you were earning from work after you retire!

Will I have enough?

Now that you’ve estimated the income you will need in retirement, it’s critical to run your numbers to see if you’re on track.

A retirement calculator such as Moneysmart’s Retirement planner is a good place to start. The benefits of the Moneysmart tool are that it takes Age Pension into account, and you can edit the assumptions to reflect non-homeowner status as well as add any assets you hold outside super.

We’ve run a few scenarios through the calculator for you to estimate the final super balance required to provide the Super Consumers Australia low-, medium- and high-income levels plus estimated additional rent costs  and added the results to the table below. These scenarios can provide some helpful ballpark figures but are no substitute for using a calculator to model your personal situation or seeking personalised advice.  

Note: The result for couples is the combined super balance required (that is, the sum of your and your partner’s balances).

Relationship status	Type of income goal	Income goal including rent costs	Super balance needed
Single	Low income	$45,508	$230,000
Single	Medium income	$55,508	$410,000
Single	High income	$69,508	$710,000
Couple	Low income	$62,148	$235,000
Couple	Medium income	$78,148	$520,000
Couple	High income	$98,148	$945,000

Median additional rent costs are based on figures from the ABS Survey of Income and Housing 2019-20.

Source: Author using Moneysmart Retirement Planner, default assumptions, non-homeowner. Retirement at age 67. Results rounded to the nearest $5,000.

The table only accounts for income needs, includes Age Pension, and assumes you have only $25,000 in assets outside super. The higher your income and assets, the lower the Age Pension you receive.

In practice, you may also have additional lump sum expenses in retirement.

The bottom line

If it’s possible you’ll be paying rent in retirement, then you will need to adjust the popular estimates of retirement income to reflect your personal needs. The more realistic your retirement plan, the more likely you are to avoid nasty surprises.