By Philippa Billings, Chief Advice Officer, Otivo
The question almost everyone asks is "how much do I need to retire?" — and it's the wrong shape. A lump sum on its own says nothing, because $700,000 is comfortable for someone spending $50,000 a year and precarious for someone spending $95,000. The useful question is a duration one: how long does what I have last against what I spend, and what fills the gap when it runs low. Here are the three inputs that answer it, and the one that does more work than most people expect.
Affordability comes down to three inputs — annual spending, the income available to meet it, and the number of years to cover. As at August 2026, ASFA's benchmarks suggest $630,000 for a single homeowner and $730,000 for a couple support a comfortable retirement at 67, though the figure that matters is the gap between individual spending and income.
Why a lump sum on its own tells you nothing
Because the same balance produces completely different outcomes depending on what it has to support.
Take two 64-year-olds, each with $600,000 in super and each owning their home. One spends $48,000 a year; the other spends $88,000. The first has a balance that comfortably outlasts them once an Age Pension entitlement begins at 67. The second is drawing nearly $90,000 a year from a finite balance for three years before any Age Pension is possible, and the arithmetic looks entirely different. Identical balances, opposite situations.
This is why national benchmarks are a sense-check rather than an answer. ASFA's February 2026 Retirement Standard puts a comfortable retirement at $54,840 a year for a single homeowner and $77,375 for a couple, with corresponding lump sums at 67 of $630,000 and $730,000. Both assume outright home ownership, reasonable health, and a part Age Pension doing some of the work. Change any of those and the number moves.
The three inputs that decide it
Call them the three inputs, and they're worth establishing in this order.
Annual spending. What a year actually costs, after retirement changes the mix. Some costs fall — commuting, work clothes, and for many people the mortgage. Others rise — health cover, travel, time at home. Twelve months of actual bank statements is a better starting point than an estimate.
Income sources. Typically three. Super, which becomes accessible from 60 and can pay a regular income stream. Any Age Pension entitlement, which can't begin before 67 and is subject to income and assets tests administered by Services Australia. And savings or investments held outside super.
Years to cover. From the intended finish date to a realistic life expectancy, which for most planning purposes runs to the mid-to-late eighties or beyond. A 61-year-old is potentially funding 25 years, not 15 — and the years before 67 are the expensive ones, because they're funded entirely privately.
Why the Age Pension changes the maths more than people expect
Because it's income that arrives regardless of how the balance has performed, and it grows as a share of total income over time.
The structural point is that a retirement plan is rarely a case of a lump sum having to cover every year unaided. As a super balance is drawn down across two decades, any Age Pension entitlement tends to fill a larger share of spending. ASFA's lump sum benchmarks are modelled on exactly that pattern, which is why $630,000 can support $54,840 a year for a single homeowner rather than lasting only 11 years.
Two qualifications matter. Entitlement depends on the income and assets tests, so a higher balance reduces or removes it — the tests and current thresholds are published by Services Australia, and they change. And nothing is payable before 67, which is why the years between finishing work and 67 need their own answer.
What about the years before 67?
This is the part of the calculation people most often skip, and it's usually the binding constraint.
Someone finishing work at 61 has six years to fund with no Age Pension available at all. At $60,000 a year that's $360,000 drawn from super before any government support begins — from a balance that also needs to support the decades after. Retiring at 61 therefore requires meaningfully more than retiring at 67, not less, which runs against the intuition that stopping earlier simply means a smaller balance for longer.
Three levers change the picture, and they're worth naming as the three levers on the gap years.
- Finishing later, which shortens the privately funded stretch and adds contribution years.
- Winding down rather than stopping, so employment income covers part of the gap. Options are in winding down work instead of retiring all at once.
- Spending less in those specific years, front-loading frugality rather than spreading it.
How do you test whether the numbers work?
By modelling the drawdown rather than dividing the balance.
A single division — balance divided by annual spending — ignores investment returns, inflation, the Age Pension phasing in, and the fact that spending patterns change through retirement. It produces a number that's usually pessimistic in one direction and dangerously optimistic in another.
What a proper model does is run the balance year by year against spending, factor in when Age Pension entitlement might begin, and show where the trajectory ends up. Where projections appear, they depend on assumptions about returns, inflation and spending that may not hold, and no projection is a promise. Their value is in comparing scenarios — finish at 62 versus 65, spend $60,000 versus $70,000 — rather than in the precision of any single figure.
Frequently asked questions
How much super do you need to retire at 60 in Australia?
More than retiring at 67 requires, because seven years have to be funded before any Age Pension entitlement can begin, and there are fewer contribution years beforehand. The exact figure depends on annual spending and other assets rather than on a national benchmark.
Is $500,000 enough to retire on?
It depends entirely on annual spending, whether the home is owned outright, and the age at which work stops. Against ASFA's comfortable benchmark of $630,000 for a single homeowner it sits below, but many Australians retire with less and combine a smaller balance with an Age Pension entitlement.
Does owning your home change how much you need?
Substantially. ASFA's benchmarks assume outright home ownership, and rent or remaining mortgage payments are among the largest variables in any retirement budget. ASFA publishes separate figures for retirees who rent.
What is a realistic drawdown rate in retirement?
There's no single rate that suits every situation, since the right figure depends on balance, spending, other income and how many years need covering. Minimum drawdown rules apply to retirement phase income streams and step up with age.
Where this leaves you
Affordability isn't a threshold you cross, it's a relationship between three numbers — and the most useful thing anyone can do years out is nail down the first one. Once annual spending is known, the gap becomes calculable and the retirement date becomes a choice rather than a hope. Otivo, a digital financial advice platform licensed under AFSL and Australian Credit Licence No. 485665, has a retirement planning module that models age, salary, super balance, other investments, lifestyle goals and Age Pension eligibility together, which is what turns three inputs into a year-by-year picture.
Sources
- ASFA, Retirement Standard, February 2026 release. superannuation.asn.au
- ASIC MoneySmart, ASFA Retirement Standard. moneysmart.gov.au
- ATO, Retirement withdrawal — lump sum or income stream. ato.gov.au
Disclaimer
The information in this communication is current as at August 2026 and has been prepared by Otivo Pty Ltd ABN 47 602 457 732, AFSL and Australian Credit Licence No. 485665. This content is general information only and has been prepared without taking into account your objectives, financial situation or needs. It is not personal financial or taxation advice and should not be relied on as such. Before acting on any information, you should consider its appropriateness having regard to your personal circumstances. This material must not be reproduced in whole or in part, or posted on any social media platform, without the prior written consent of Otivo Pty Ltd.