The truth about retirement costs: What Australians really need

When it comes to retirement, Australians are dreaming bigger than most.

A new global survey has found that Aussies believe they’ll need at least $1.25 million to feel financially secure once they stop working. It’s a striking figure – and one that shows just how high the bar is being set compared to the rest of the world.

The findings come from the independent research company Dynata, commissioned by financial services giant AMP, with more than 7,000 people across 21 countries surveyed earlier this year. Of all those questioned, Australians ranked among the most ambitious when it came to retirement savings goals.

But ambition and reality don’t always go hand in hand. Is $1.25 million really the “magic number” that will guarantee peace of mind in retirement, or is it more of a dream figure than something everyday Australians can achieve?

To answer that question, we spoke with Certified Financial Planner Michael Sauer, who offered some candid insights on what retirees actually need, and what to do if you’re falling short.

Sauer says while the number isn’t impossible, for many it’s more aspiration than reality.

“It is common for couples to have this figure combined in super when they retire,” he explains.

“However, having these balances individually is rare unless they have been a high-income earner throughout their career or have been able to make a lot of extra contributions later in their career. For instance, after they pay off their mortgage or with funds they receive from inheritance.”

Based on his experience, Sauer says a very comfortable retirement is achievable without needing quite as much as the survey suggests – provided the mortgage is gone.

“I find most couples have a very comfortable retirement which includes an overseas trip each year on about $120,000 p.a. (assuming they have paid off their mortgage),” he says.

Of course, plenty of Australians won’t head into retirement with a million-dollar nest egg. The good news, according to Sauer, is that a secure and enjoyable retirement is still within reach.

He says there are several practical strategies people can use to stretch their savings further and still enjoy a good quality of life:

• Choose to work part-time later so that the initial drawdown from savings isn’t as large. People also often get good mental health benefits by staying in part-time work.
• Reduce spending. A $90,000 p.a. retirement is still pretty comfortable, likely an overseas trip every couple of years, but you probably just can’t have the extra niceties of the $120,000 a year scenario I said before. E.g. less restaurant meals, less expensive golf memberships etc.
• Save more in the lead-up to retirement.

For many, the idea of needing $1.25 million in superannuation may feel overwhelming. But as Sauer points out, comfort in retirement isn’t about chasing one magic figure – it’s about planning, prioritising, and being realistic about what matters most to you.

Even if you don’t quite reach the million-dollar mark, there are still plenty of ways to enjoy a retirement that balances security with the lifestyle you want.

-with AAP.

Read more: 5 simple tips to maximise your retirement savings

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.