Why retirement planning matters

Retirement in Australia is funded through a combination of superannuation, personal savings, investments, and potentially the Age Pension. The decisions you make during your working years — how much you contribute to super, how you invest, and when you plan to stop working — have a profound impact on your quality of life in retirement. Starting early gives you the advantage of compound growth, but it is never too late to improve your position.

The Age Pension

The Age Pension provides a safety net for Australians who have reached the qualifying age (currently 67) and meet the means test. As of FY2024-25, the maximum fortnightly rate is approximately $1,116.30 for a single person and $841.40 each for members of a couple ($1,682.80 combined). However, the Age Pension is subject to both an income test and an assets test, and the lower of the two determines your payment.

For many high-income professionals, full reliance on the Age Pension is unlikely — and undesirable. At roughly $29,000 per year for a single person, the Age Pension alone does not support the lifestyle that most people earning $200,000 or more are accustomed to. This is why building your own retirement savings through super and personal investments is critical.

Even a partial Age Pension can be valuable, though. It comes with additional benefits such as the Pensioner Concession Card, which provides discounts on healthcare, utilities, and transport. Understanding where you sit relative to the means test thresholds can help you structure your assets and income to maximise your entitlements.

Super preservation ages

Your superannuation is generally preserved until you reach your preservation age and meet a condition of release (such as retiring from the workforce). Preservation ages range from 55 to 60 depending on your date of birth:

• Born before 1 July 1960: preservation age is 55
• Born 1 July 1960 – 30 June 1961: preservation age is 56
• Born 1 July 1961 – 30 June 1962: preservation age is 57
• Born 1 July 1962 – 30 June 1963: preservation age is 58
• Born 1 July 1963 – 30 June 1964: preservation age is 59
• Born from 1 July 1964: preservation age is 60

This is an important consideration if you are planning to retire before age 60. You will need sufficient assets outside of super to fund the gap between when you stop working and when you can access your super. Our FIRE projections model this gap explicitly, showing how your non-super investments bridge the period before super becomes accessible.

How much do you need to retire?

The Association of Superannuation Funds of Australia (ASFA) publishes retirement standard benchmarks. For a comfortable retirement, ASFA estimates that a single person needs approximately $595,000 in super at age 67 (assuming they also receive a part Age Pension), while a couple needs approximately $690,000. These figures assume you own your home outright.

However, these are generalised benchmarks. Your actual requirement depends on your expected lifestyle, whether you will have a mortgage, how much you spend on healthcare, and how long you expect to live. A more personalised approach is to estimate your annual retirement expenses and work backwards. If you expect to spend $80,000 per year and apply the 4% safe withdrawal rate, you would need $2,000,000 in investable assets.

The retirement income calculator helps you estimate the income your savings could generate under different scenarios. For a more comprehensive view, the FIRE calculator projects when you could reach financial independence based on your current savings rate, income, and expenses.

Retirement income streams

When you retire, you can choose to take your super as a lump sum, start an account-based pension, or a combination of both. An account-based pension allows your remaining super balance to continue earning investment returns (tax-free, subject to the transfer balance cap) while you draw a regular income.

The minimum drawdown rates for account-based pensions are set by the government and increase with age. For example, the standard minimum drawdown at age 65 is 5% of your account balance, rising to 7% at age 80 and 14% at age 95. These minimums ensure that super is used for its intended purpose — providing retirement income.

Other income sources in retirement might include rental income from investment properties, dividends from share portfolios (including franking credits), interest from fixed-income investments, or income from part-time work. Diversifying your retirement income sources reduces your dependence on any single stream and provides greater flexibility.

Budgeting for retirement

Many people assume that their expenses will drop significantly in retirement. While some costs do decrease (such as commuting and work-related expenses), others may increase. Travel, hobbies, home maintenance, and healthcare costs often rise in retirement, particularly as you age.

A realistic retirement budget should account for essential expenses (housing, food, utilities, insurance), discretionary spending (travel, entertainment, dining), and a buffer for unexpected costs. It is also wise to plan for inflation, which erodes your purchasing power over time. Even at a modest 3% annual inflation rate, your expenses will roughly double over 24 years.

Our superannuation feature helps you track your super balance and project its growth over time, while the FIRE projections incorporate inflation into year-by-year modelling to give you a realistic picture of your future purchasing power.

Healthcare in retirement

Healthcare is one of the most significant and often underestimated costs in retirement. While Medicare provides a baseline level of coverage, private health insurance becomes increasingly important as you age. Out- of-pocket costs for dental, optical, specialist consultations, and pharmaceuticals can add up quickly.

The lifetime health cover loading adds 2% to your private health insurance premium for each year you are aged over 30 without hospital cover. If you dropped your cover and are considering re-entering, this loading can make premiums substantially more expensive. Factoring healthcare costs into your retirement plan is essential for avoiding financial stress later in life.

Building your retirement plan

A solid retirement plan starts with understanding where you are today. Gather your current super balance, personal investments, property details, liabilities, and expected income sources. From there, you can project forward to estimate when you could retire and how much income your savings might generate.

The FIRE projections feature provides year-by-year modelling that accounts for super contributions, investment growth, inflation, and tax. You can set a target retirement age and see whether your current trajectory meets your goals — or adjust your savings rate, investment strategy, or target date to find a plan that works.

Remember that retirement planning is not a one-time exercise. Your circumstances, goals, and the economic environment will change over time. Reviewing your plan annually and adjusting as needed will keep you on track. Our tools are designed to make this ongoing review straightforward and informative.