ASFA lifts comfortable retirement standard to $730k for couples

The benchmarks for a comfortable retirement have hit $730,000 for couples and $630,000 for singles, yet many Australians believe they will need more than $1 million to be financially at ease in their twilight years.

This is according to the Association of Superannuation Funds of Australia (ASFA), whose benchmarks have increased from prior estimates of $690,000 for couples and $595,000 for singles.

On an annual basis, ASFA calculates couples aged 65 and over now need $78,566 per year, while single homeowners require $55,923 to sustain their lifestyles.

However, ASFA's survey found 42% of Australians believe they will need more than $1 million in super to retire comfortably - well above the benchmark.

Expectations are particularly elevated among younger cohorts, with 51% of those aged 25 to 34 and 52% of 35 to 49-year-olds expecting to need at least $1 million.

ASFA chief executive Mary Delahunty said persistent inflation is impacting the cost of grocery, petrol, energy and other bills, reshaping perceptions of retirement adequacy.

"But the reality is that retirement generally costs less than working life. Retirees pay no tax on superannuation pension income after 60, most own their home outright, work-related costs disappear, and concessions reduce the price of energy, medicines, transport and council rates," she said.

Over the year to March, inflation rose 4.6% p.a. Electricity costs jumped 25.4% following the expiry of subsidies, while automotive fuel rose 24.2%. Food staples also climbed, with beef up 11.8%, and coffee and tea rising 10.7%.

Housing affordability continues to be a key factor driving higher perceived savings targets. Many younger Australians expect to carry housing costs into retirement, either through renting or mortgage repayments.

"Homeownership is an important aspect of dignity in retirement, alongside the financial security that comes from retirement savings. Addressing the housing affordability crisis, so that we start improving access to homeownership for younger generations of Australians, is a crucial public policy goal," Delahunty said.

Super Consumers Australia's (SCA) modelling found a financially comfortable retirement requires $432,000 in superannuation for couples and $322,000 for singles who are homeowners.

This was based on Australians owning their homes outright, and sought to determine how much Australians needed to sustain their desired standard of living until the age of 90, factoring in their entitlement to the Age Pension.

A single person homeowner will be able to save $322,000 by the age of 65 and ideally spend $1690 per fortnight or $44,000 per year during their retirement years. This also assumes that the Age Pension will fund about 67% of their retirement spending.

A couple, on the other hand, is forecast to spend about $2460 per fortnight or $64,000 annually during retirement and have $432,000 in their nest egg. Some 70% of expenses is assumed to be funded by the Age Pension.