Is $1m enough to retire?

A million dollars is a figure that’s often cited as the amount you need to retire. But while $1 million doesn’t go as far as it used to – it only goes slightly above the median house price in Sydney¹ – for many people it still sounds like an impossibly large amount of money to save. 

In reality, there’s no set figure you need to have accumulated in savings, super, real estate or other investments before you can retire. Instead, the size of the retirement nest egg you’ll need will really be determined by your individual goals and circumstances.

Calculate how much you need to retire

A large part of working out how much money you’ll need to cover your retirement depends on the sort of lifestyle you’d like to enjoy. 

The Association of Superannuation Funds of Australia (ASFA) estimates that Australians aged around 65, who own their own home and are in relatively good health, will need the following amount of money each year in retirement, depending on whether they intend to live a modest lifestyle or a comfortable one²:

A modest retirement lifestyle is considered better than one solely dependent on the Age Pension but includes only basic activities. A comfortable retirement assumes you’ll be involved in a broad range of leisure and recreational activities, do some travelling, and have a good standard of living. 

If you own your own home, another useful measure is that you’ll typically need around two-thirds (67%) of your pre-retirement income to maintain the same standard of living in retirement³. 

Calculate your day-to-day expenses 

Your current monthly budget is a good place to start when trying to forecast your day-to-day living expenses in retirement, but don’t forget to factor in increases in the cost of living over time. 

Some costs may be removed – for example, if you own your home you might be planning to have your mortgage paid off before you retire and perhaps the education costs of any children will also be out of the way by then. Work-related expenses, such as petrol or public transport costs, takeaway lunches, work clothes and dry cleaning will probably also be a thing of the past. 

But you’ll still have ongoing costs such as utilities, food, healthcare and insurances to cover, along with the costs associated with owning a car, if you have one. And it’s likely that your spending on recreational activities could also increase once you have the time to enjoy them. 

The figures below, taken from the ASFA retirement standard⁴, give you some indication of the amount of money you might need to budget for each week in various areas: