Australian Retirees Face Rising Costs and Complex Superannuation Planning Decisions

"Retirement costs are rising, and the old rules no longer apply. Understanding the new benchmarks and complex trade-offs is critical for securing your future."

Rising Retirement Cost Benchmarks

The Association of Superannuation Funds of Australia (ASFA) reported that the ideal superannuation balance for a comfortable retirement has increased. For the three months to March 2026, comfortable retirement budgets rose 1.5% for couples and 2% for singles, matching the general Consumer Price Index (CPI) inflation rate of 1.5%.

A comfortable retirement now requires an annual income of $55,932 for a single person or $78,566 for a couple. Assuming home ownership at age 67 (the Age Pension qualification age), a single person requires a superannuation balance of $630,000, while a couple requires $730,000. These figures represent an increase of $3,530 for singles and $4,691 for couples compared to the same period 12 months ago.

Key cost drivers over the year to March 2026 included electricity (+25.4%), automotive fuel (+24.2%), beef (+11.8%), and coffee/tea (+10.7%). ASFA CEO Mary Delahunty stated that retirement generally costs less than working life due to factors such as home ownership, reduced work-related costs, and concessions.

Housing Insecurity and Retirement Planning

More than half of Australians aged 25-34 expect to need more retirement savings because they will still be renting or paying a mortgage.

ASFA data indicates that 51% of Australians aged 25-34 expect to need more retirement savings as they anticipate renting or paying a mortgage in retirement. Homeownership rates have declined generationally; millennials own homes at a lower rate than baby boomers at the same age. According to ASFA, house prices in 1984 were 3.3 times the average income; by 2025, they had grown to 10 times the average salary.

Savings Benchmarks and Public Perception

To reach a superannuation balance of $630,000 at age 67, ASFA recommends the following benchmarks for an individual with a pre-tax income of $100,000 per year and no career breaks:

• $98,000 at age 40
• $248,000 at age 50
• $342,000 at age 55
• $449,500 at age 60

Public perception of required savings varies. ASFA reported that 40% of Australians overestimate the amount needed for a comfortable retirement. Among those aged 25-34, 51% believe they will need over $1 million, and 23% believe they will need over $2 million. Among those aged 50-64, 40% believe more than $1 million is required, a figure that falls to 29% among those aged 65 and older.

Expert Analysis on Specific Planning Scenarios

In a financial advice column, Certified Financial Planner Paul Benson addressed several reader inquiries.

A reader considering an SMSF due to perceived tax advantages and a desire for control expressed concerns about costs and workload. Benson estimated setup costs at approximately $4,000, with similar annual costs for tax returns and audits. For a fund balance of $1 million, total annual costs including financial planning were estimated at $7,000–$10,000, which he described as comparable to using an industry or retail fund with an advisor. He noted that managing a fund independently could be cheaper but requires significant time and carries risks.

A couple with a mortgage-free superannuation balance of $1.2 million, aged 67 (working full-time) and 56 (working part-time), sought advice on adjusting assets to qualify for a part Age Pension. The expert advised that there is an opportunity due to the 11-year age gap: superannuation in the 56-year-old spouse's name would not count towards the Age Pension assets test for the 67-year-old's application until the younger spouse reaches pension age, potentially improving means testing.

However, a significant transfer of superannuation to the younger spouse for pension maximization could result in the transferred portion remaining subject to a 15 percent earnings tax, as it would not be converted to a tax-free pension upon the older spouse's retirement. The advice noted that equalizing superannuation balances between partners is generally recommended for equity and transfer balance cap considerations, rather than solely for Age Pension benefits.

An SMSF receiving over $80,000 in compensation from the Compensation Scheme of Last Resort (CSLR) for past poor advice will have this payment taxed as income when received by the fund, incurring a 15 percent tax rate. The advice recommended confirming this with the SMSF's accountant, especially when winding up the fund.

For those earning under $45,000, the tax saving from salary sacrificing is minimal—only 1%—while you lose access to your money until retirement.

For an individual earning $43,000 per year and approximately 10 years from retirement, the expert advised that salary sacrificing to superannuation offers minimal tax savings. Income between $18,201 and $45,000 is taxed at 16 percent, while superannuation contributions are taxed at 15 percent, resulting in a 1 percent tax saving at the cost of losing access to the money until at least age 60. A suggested alternative was making an after-tax contribution to super to qualify for the government's co-contribution payment, which can be up to $500.

A second reader, with a disabled son and low income, asked how to best use a $10,000 inheritance. Benson advised putting the money toward a mortgage, with redraw for emergencies, rather than spending it on a holiday.