As people are increasingly urged to start saving for their retirement, the question crops up – how much exactly should one save for a financially secure retirement? What are the distinguishing features between a comfortable and modest retirement, and how much is required for both?

The Association of Superannuation Funds of Australia (ASFA) Retirement Standard is a useful resource to estimate how much individuals and couples will need to save to live either a comfortable or modest retirement. Updated quarterly, the Retirement Standard is based on figures from the Australian Bureau of Statistics (ABS).

The table below is collated from the ASFA Retirement Standard’s figures for the June quarter of 2014 and gives people a rough idea how much they will need for both a comfortable and modest retirement:

Modest lifestyle Comfortable lifestyle
Single Couple Single Couple
Total per week $448.06 $645.62 $813.78 $1,114.78
Total per year $23,363 $33,664 $42,433 $58,128

The figures assume that the retiree(s) own their own home outright, negating any mortgage or rental costs that have to be paid – although this may slowly be changing, with RaboDirect’s annual Savings and Debt Barometer showing that almost a third of the baby boomer generation expect to have a mortgage when they retire.


So, what factors differentiate a comfortable and modest lifestyle? According to ASFA, a modest retirement lifestyle is seen as slightly better off than a person being solely dependent on the Age Pension – which currently accords $21,913 a year to individuals and $33,063 a year to couples – but retirees will still only be able to afford fairly basic activities. They will be able to afford one or two short breaks near where they live each year, they can occasionally eat out at cheap restaurants and they can afford cask wine but there is no budget for home improvements and not much scope to run the air conditioner.

A comfortable retirement, on the other hand, enables an older, healthy retiree to be involved in a broad range of leisure and recreational living and to have a good standard of living. Retirees can take one annual holiday in Australia, regularly eat out at good restaurants, are able to own a reasonable car and good clothes as well as replace their kitchen and bathroom over 20 years.
ASFA chief executive Pauline Vamos says the Retirement Standard does not take into account unexpected events – such as medical emergencies or financial difficulties – and that the figures are really the “minimum costs” retirees need to save for.

“This is the minimum amount just to really cover your day-to-day costs,” Vamos says. “There are certainly some costs that the standard does not take into account – like the fact that you replace your car every few years, you replace your fridge, and things like that.”

According to Deloitte’s 2013 report Dynamics of the Australian Superannuation System (PDF, 2.31 MB), younger Australians will be the first generation that would have received compulsory superannuation guarantee (SG) contributions for a full lifetime.

“Consider a worker currently aged 30 with a salary of $60,000 (median earnings for full-time employees aged 25-34, ABS 6310.0) and a current balance of $27,000 (the average balance in the AMP Retirement Adequacy 2012 (PDF, 321 KB)). Our projection estimates that this person will have $1.1 million on reaching age 65 in 2048 (in future dollars),” the report said.

“Will this be enough? Our projection shows that an account balance of $1.1 million is expected to last until 94 under the modest retirement standard,” it added. With the average 30-year-old today expected to live until 100 however, this may not be enough, notwithstanding the fact that many people do not desire a modest retirement.

Deloitte estimated that to afford a comfortable retirement standard covering life expectancy, retirement benefits of $1,580,000 for a man and $1,760,000 for a woman are required – women are expected to live an extra three years. This would require an additional contribution rate of 5.4% and 7.5% respectively, on top of the SG rate.

Meanwhile, AMP says a widely accepted benchmark is that Australians will need approximately 65% of their pre-retirement income to maintain their current lifestyle in retirement – although this amount may need to be more if you have a large expense such as an overseas trip planned for your retirement.

Based on the 65% estimate, the table below provides an indication of how much money will be required to fund a retirement lifestyle:

Pre-retirement income 65% of pre-retirement income Lump sum required
$30,000 per annum $19,500 per annum $254,571
$50,000 per annum $32,500 per annum $423,721
$80,000 per annum $52,000 per annum $676,701

Collated by AMP, the table below shows the estimated additional superannuation contributions people should make to meet the benchmark target of between 60-65% of pre-retirement income – it is considerably more than Deloitte’s estimates.

Age band Men Women
25-29 10.2% 11.1%
30-34 11.2% 10.4%
35-39 10.9% 10.1%
40-44 11.3% 10.8%
45-49 12.4% 12.9%
50-54 12.2% 13.8%

Vamos says putting away something as miniscule as $50 every fortnight can make a huge difference.

“$50 makes a huge difference. It’s just like paying off your mortgage. A lot of new homeowners are advised to pay off their mortgage every week or every fortnight because you pay less in interest and that builds up over the life of the mortgage. It’s exactly the same with your super, but in reverse,” Vamos says.

Are you setting yourself up for a comfortable retirement? To help secure your financial future, consider talking to a financial professional.

This article looks at super in a general way; if you need specific advice regarding your situation, you should consult an appropriately qualified and registered professional.

Written by: Sonia Nair