Australian Retirement Costs Skyrocket to Record Highs
Retirement in Australia has become significantly more expensive, with new data showing that individuals now require up to $730,000 in superannuation savings to sustain a comfortable lifestyle. This marks the most substantial cost increase in years, highlighting growing financial pressures on retirees.
Record Superannuation Targets for Homeowners
According to the latest quarterly Retirement Standard from the Association of Superannuation Funds of Australia, the lump sums needed at age 67 for homeowners to fund a comfortable retirement have reached unprecedented levels. The updated figures now stand at $630,000 for singles, up from $595,000, and $730,000 for couples, up from $690,000. These calculations assume retirees own their homes outright and maintain an active lifestyle, including travel and discretionary spending.
Mary Delahunty, chief executive of ASFA, noted that this is the first increase in the benchmark in three years. She attributed the jump to the age pension failing to keep pace with rising living costs and recently announced hikes in deeming rates. 'Retirees' living costs have risen, and support from the age pension has not kept pace with the actual cost increases they face, particularly for essential goods and services,' Delahunty explained.
Inflationary Pressures Hit Retirees Harder
While the Consumer Price Index rose by 3.8 per cent in the 12 months to December 2025, retirees experienced far steeper price increases in key categories:
- Electricity surged by 21.5 per cent as energy bill relief subsidies expired.
- Coffee and tea prices increased by 15.3 per cent.
- Beef costs rose by 10.8 per cent.
- Domestic travel expenses grew by 9.6 per cent.
- Property rates climbed by 6.2 per cent.
- Medical and hospital services saw a 4.3 per cent rise.
Private rental costs, which impact retirees without home ownership, increased by 3.9 per cent, slightly above general inflation. Delahunty emphasised that 'costs in the categories retirees tend to spend most on have risen faster than general consumer price inflation. That means even though the pension is indexed, a greater burden is placed on retirees' personal super savings. Retirees now need higher balances to maintain a comfortable lifestyle.'
Deeming Rate Changes Add to Financial Strain
The financial squeeze is expected to intensify following recent announcements by Social Services Minister Tanya Plibersek regarding significant changes to deeming rates. These rates, used to assess age pension eligibility based on assumed returns from financial assets, will be adjusted from March 20. The lower deeming rate will increase to 1.25 per cent from 0.75 per cent for financial assets under $64,200 for singles and $106,200 for couples. The upper rate will climb from 2.75 per cent to 3.25 per cent for assets above those thresholds.
Financial adviser Nick Bruining warned that this change would result in a 'double whack' for age pension recipients. He noted that a single age pensioner could have held about $308,000 in financial assets last year without losing any pension, but from March, this figure drops to approximately $215,000, even with expected pension increases. Delahunty added that the adjustment would shift more of a retiree's budget towards reliance on superannuation rather than Centrelink support.
Long-Term Savings Prospects Remain Strong
Despite these cost pressures, long-term workers are still projected to retire with substantial savings due to robust super fund performance. A 30-year-old with $30,000 in super and earning $80,000 throughout their career is on track to accumulate $645,000 by retirement, supported by exceptional returns in recent years.
Delahunty highlighted that 'the average balanced fund returned 9.9 per cent in 2023, 11.4 per cent in 2024, and 9.3 per cent in 2025. That's cumulative growth of nearly 35 per cent over three years, well ahead of inflation.' Additionally, the Superannuation Guarantee has been steadily rising since 2020 and now sits at 12 per cent, further bolstering retirement savings for future retirees.
