How to Work Out Your Retirement Spending: A Practical Australian Guide
Spending is the most important input in any retirement plan — and the hardest to get right. Too low and you'll underspend for 30 years. Too high and your projections will look worse than reality. Here's how to arrive at a number you can actually rely on.
Updated May 2026 · 8 min read
Why this is harder than it looks
Most people, when asked what they spend, either don't know precisely or think in terms of their current costs — which include several items that will change significantly in retirement. Work expenses disappear. The mortgage may be paid off. Children's costs reduce. But travel, health, and leisure costs often increase, especially in the early years.
The goal is a figure that represents what you'll actually spend in retirement — not what you spend today, and not a number borrowed from a benchmark that doesn't reflect your specific lifestyle. There are three ways to arrive at it, used in combination:
- Start with your current spending and adjust for what will change
- Check against the ASFA benchmark as a sanity check
- Build a bottom-up budget from scratch for the most reliable result
Step 1: Start with today — then adjust
Your current take-home pay minus your current savings rate is a reasonable starting point. If you earn $130,000 gross, take home $100,000 after tax, and save $20,000 per year, your current spending is approximately $80,000. This is your baseline.
From there, apply adjustments for what will change. These typically fall into two directions:
↓ Usually decreases
- Work costs (commuting, clothes, lunches)
- Super contributions — no longer required
- Mortgage repayments (if paid off)
- Income tax — typically much lower
- Children's costs (if they've left home)
- Life & income protection insurance
- Dry cleaning, professional services
↑ Usually increases
- Private health insurance
- Healthcare, dental, optical, allied health
- Travel & holidays (especially early retirement)
- Hobbies, leisure, entertainment
- Home maintenance (more time at home)
- Utilities (more time at home)
- Dining out & café visits
For most people in professional roles, these two forces roughly cancel each other out — which is where the "70-80% of pre-retirement income" rule of thumb comes from. But it's a blunt instrument. High savers often find they only need 50-60% of income (because a large portion was always going to savings). Ambitious travellers often need 90%+.
Step 2: Check against the ASFA benchmark
The Association of Superannuation Funds of Australia (ASFA) publishes a quarterly Retirement Standard — an independent estimate of what different lifestyle levels actually cost in Australia. The February 2026 figures for homeowners aged 65:
| Lifestyle | Single | Couple |
|---|---|---|
| Comfortable Private health, a reasonable car, regular leisure, occasional overseas travel | $54,840/yr | $77,375/yr |
| Modest Basic private health, budget car, infrequent activities, one domestic holiday/year | $35,199/yr | $50,866/yr |
Source: ASFA Retirement Standard, February 2026. Annual income figures apply to homeowners aged 65+. The lump sum targets (not shown here) assume retirement at age 67.
Use these figures as a sanity check, not a target. If your bottom-up estimate is well above $77,375 for a couple, it's worth examining whether your spending assumptions are realistic. If it's well below $50,866, check whether you're underestimating healthcare, travel, or irregular costs.
Important caveat: ASFA figures assume you own your home outright. Renters face significantly higher retirement costs — ASFA estimates a modest retirement costs $67,125 for a couple and $49,676 for a single who rents. If you plan to rent in retirement, adjust accordingly.
Step 3: Build a bottom-up budget
The most reliable approach is to build a budget from scratch using realistic retirement-specific costs. Work through each category below, estimating your annual spend. Use your actual bank statements as a starting point for discretionary categories — most people significantly underestimate what they spend on food, leisure, and health.
Housing
- Council rates & water
- Home & contents insurance
- Maintenance & repairs
- Body corporate (if applicable)
- Utilities (electricity, gas, internet, phone)
If mortgage-free, housing costs drop significantly compared to working life.
Food & groceries
- Groceries
- Dining out & takeaway
- Coffee & cafés
Many retirees spend more on dining out — factor in your lifestyle honestly.
Transport
- Car registration, insurance, servicing
- Fuel or public transport
- New car (amortised annually)
Include the cost of eventual car replacement, not just running costs.
Health
- Private health insurance (hospital + extras)
- GP, specialist, dental, optical visits
- Medications & health products
- Gym, physio, allied health
Private health insurance is one of the largest and fastest-growing retirement costs.
Leisure & lifestyle
- Travel & holidays (averaged annually)
- Hobbies, sport, entertainment
- Streaming & subscriptions
- Clothing & personal care
- Gifts & family support
Be generous here — this is the category people most commonly underestimate.
Insurance & financial
- Life & income protection (often reduced in retirement)
- Contents insurance
- Financial advice fees
One-offs & irregular
- Home renovations (averaged over expected retirement)
- Holidays (if lumpy rather than annual)
- Technology replacements
- Emergency fund top-ups
Divide total expected cost by years of retirement to get an annual average.
The lumpy expenses people always miss
The biggest underestimation in retirement budgets comes from one-off or irregular costs that don't appear in any single year's spending but are real and unavoidable over a 20-30 year retirement. Common examples:
- New car: A $40,000 car every 10 years = $4,000/year in your budget
- Major home maintenance: Roof, hot water system, appliances — budget $3,000–$5,000/year on average
- International travel: Three overseas trips over 15 years at $15,000 each = $3,000/year averaged
- Technology: Phones, laptops, hearing aids — often overlooked
- Family support: Helping adult children with house deposits or other costs
A practical approach: add 10–15% to your base budget estimate to cover irregular costs unless you've explicitly budgeted each one above.
How spending changes over the retirement journey
Your retirement spending isn't a flat line. Research consistently shows three broad phases:
- Go-Go years (60s–early 70s): High activity, travel, and leisure. Often the highest-spending phase of retirement. This is also when spending capacity and desire are greatest — don't underweight it.
- Slow-Go years (mid 70s–early 80s): Gradual reduction in discretionary spending as energy and mobility change. Travel becomes less frequent; leisure becomes closer to home.
- No-Go years (80s+): Much lower discretionary spending, but potentially higher healthcare costs. Aged care may become relevant.
When entering a spending figure in a retirement calculator, enter your early-retirement spending— what you plan to spend in the first year. You can then choose whether the calculator holds that real spending level flat (CPI pattern) or models a gradual decline over time (JP Morgan curve). See our CPI vs JP Morgan spending curve article for guidance on which to choose.
Test your spending estimate in the calculator
Once you have a spending figure, enter it in the Retirement Calculator to see whether your super can sustain it — and at what confidence level across different market scenarios.
Use "Find Sustainable Spending" to let the calculator work backwards: tell it your target age and success probability, and it will find the maximum spending level your portfolio can support.
Frequently asked questions
How much does a comfortable retirement cost in Australia?+
According to the ASFA Retirement Standard (February 2026), a comfortable retirement costs approximately $77,375 per year for a couple who own their home, and $54,840 for a single homeowner. A modest retirement costs $50,866 for couples and $35,199 for singles. These figures assume retiring at age 67 and owning your home outright.
Should I use 70-80% of my current income as a retirement spending estimate?+
The "70-80% of pre-retirement income" rule of thumb is a starting point, not a reliable figure. It works reasonably well if your current spending is typical, but breaks down if you have an unusually high saving rate (your actual spending is much less than 70-80%), high mortgage costs that will end before retirement, or ambitious travel and leisure plans for your early retirement years. A bottom-up budget is more reliable.
What costs typically go down in retirement?+
Work-related costs (commuting, work clothing, lunches), mortgage repayments (if the home is paid off), superannuation contributions (no longer required), income tax (typically lower on retirement income), children's costs (if they've left home), and life insurance premiums (often reduced in retirement).
What costs typically go up in retirement?+
Healthcare and private health insurance, travel and leisure (especially in the early "Go-Go" years), home maintenance (more time at home means more wear), utilities, and potentially aged care or in-home support costs in later years.
Should I include holidays and one-off expenses in my retirement budget?+
Yes — and it's one of the most commonly missed items. Rather than treating holidays as extras, include an annual average. If you plan to take two overseas trips in a decade at $10,000 each, that's $2,000 per year averaged into your base spending. Similarly, home renovations, new cars, and other lumpy expenses should be included as an annual average or modelled as one-off costs in the calculator.