Retiring soon? Here are 6 questions you need to answer first

Many pre-retirees worry about having enough super and other savings to retire comfortably. Vanguard’s How Australia Retires 2025 report found that a minority of Australians were confident about their ability to fund their desired retirement lifestyle.

However, the same report found people often overestimate how much retirement income they will need. People aged 65–74 estimated they would need $59,000 per year in retirement, whereas retired couples reported spending $55,000 on average in the previous 12 months. This is well below the Association of Superannuation Funds of Australia (ASFA) Retirement Standard’s estimated budget for a comfortable lifestyle of $77,375 per year for couples.

To replace guesswork and avoid unnecessary worry, if you haven’t already done so, tally up all your potential sources of retirement income. This will likely include super, a full or part Age Pension and any investments held outside super.

To find out how much income you can expect to generate from these sources, spend some time playing with ASIC’s Moneysmart retirement planner calculator. First, you might like to check out our video on how to use the calculator.

Also, don’t forget to include income you expect to receive from part-time work or a side hustle, such as renting out a room or granny flat or some consultancy work. If you expect you’ll be eligible for the Age Pension, under the Work Bonus, you may be able to earn some money on the side without affecting your entitlements.

3. How can I plan my spending?

Everyone’s idea of financial comfort is different, so the best place to start planning your retirement income needs is to look at your current spending patterns.

If you don’t already have a budget, do a quick reckoner to see where your money is going. There are plenty of budgeting apps and free online calculators to help you with this.

It’s generally suggested you will need around 70% of your pre-retirement income to fund a similar lifestyle in retirement. That figure assumes you will no longer pay tax, a mortgage or personal super contributions.

Then think about how you want to live in retirement and draw up a new budget. ASFA’s Retirement Standard sample budgets may be helpful.

It’s generally cheaper to live in retirement when you no longer have work-related expenses. But you may also want to spend more on things like travel, new hobbies and leisure pursuits, at least in the early active years.

Healthcare costs also tend to increase as you age. And don’t forget aged care. We all want to stay in our homes for as long as possible, but the reality is many of us can expect to need in-home or residential aged care at some point.

Finally, check your desired spending against retirement income from all sources. To paraphrase Charles Dickens’ character Mr Micawber: income exceeds spending, result happiness; spending exceeds income, result misery.

Money isn’t everything, but having enough to live the way you choose will make your retirement years much more comfortable, secure and enjoyable.

4. Where do I want to live?

Your home takes on added significance when you retire. In fact, owning a mortgage-free home is often referred to as the fourth pillar of our retirement income system, after the Age Pension, super and other investments.

Not only does the family home provide you with rent-free accommodation, but it’s also a potential store of wealth to be tapped into. For these reasons, it’s important to take some time to think about how and where you want to live in retirement.

Do you want to downsize to a smaller home or move to the country to free up capital? You could even use some of the sale proceeds to boost your super.

If you are thinking of downsizing, remember that your home is not assessable under the Age Pension assets test, whereas any sale proceeds you invest in or out of super are, so you may risk losing some of your pension entitlement.

Rather than sell your home, you could take out a reverse mortgage or use the government’s Home Equity Access Scheme to source some extra income.

Some people think of their home as an asset they can sell if they need to fund residential aged care. This is a popular strategy given the high cost of aged care, but there may be consequences in terms of your Age Pension entitlements. This is a complex area, so it’s wise to seek independent financial advice from an aged care specialist well before the situation arises.

5. Will I be debt free by the time I retire?

While owning your home debt free is still the basis of much retirement planning, this goal is out of reach for growing numbers of retirees.

The 2025 Household, Income and Labour Dynamics in Australia (HILDA) Survey found that the percentage of retirees who owned their home outright fell from 75% in 2003 to 66% in 2023. The percentage of those with a mortgage increased from 13% to 17% over the same period. All told, the percentage of retirees with and without a mortgage fell from 88% to 83%.

And it seems many retirees are using a sizeable chunk of their super to repay their mortgage and other debts such as car loans and business debt. A 2024 government inquiry heard the percentage of homeowners with a mortgage falls from 42% for those aged 65–69, to 15% for those 70 and older. The inference is that new retirees are using their super to pay down debt.

Paying off the mortgage can be a good strategy, especially where it increases the amount of Age Pension you’re entitled to. That’s because it turns an assessable asset (super) into a non-assessable asset (your family home).

Where it’s not so good is the loss of potential retirement income. Take the example of a single woman who plans to retire this financial year when she turns 67. She has $300,000 in super, which would give her an income of $51,813 per year, including the Age Pension until age 92. If she spends $100,000 of her super balance to repay her mortgage, she will end up with income of $46,163 per year until age 92, a difference of over $5,700 per year. You can do your own sums with the Moneysmart retirement planner.

Of course, your need for income will also be less if you no longer need to make mortgage repayments. So weigh up whether your super is likely to grow at a faster rate than the interest payments on your mortgage. It’s a complex equation, so financial advice may be helpful.

The emotional benefit of being debt free should also not be overlooked. But if the lost income would cause financial hardship, working a little longer to pay down your debts and grow your super may be worth considering.

If you are planning to retire shortly, spending the time to go through all of your finances and choices will help you relax and enjoy this new phase of your life.

6. How am I going to spend my time?

Finally, when you speak to recent retirees, their concerns are just as likely to be about the challenges of adjusting to their new lifestyle as their finances.

When you’re planning your retirement income, give some thought to the emotional and psychological aspects of what is a major life transition. How will you spend your time? What new activities would you like to explore? Do you need to make new social connections?

This is not as simple as it sounds and may require some soul searching to find what will give your life meaning and purpose. The rewards in terms of personal wellbeing and fulfilment will be worth it.