Your comfort with risk has changed

Super funds offer a range of investment options that generally vary in their levels of risk. Growth-focused options, for example, invest more heavily in shares and other growth assets, and while they have the potential to deliver stronger long-term returns, they can be particularly volatile in the short-term.

Meanwhile, more conservative options typically experience fewer or smaller ups and downs, but in exchange for that peace of mind you’ll generally be looking at lower returns over the long-term.

Your tolerance for those ups and downs can change over time. Market volatility that you shrugged off in your thirties might seem much more worrisome if your super balance has grown significantly or your retirement date is within sight. Asking yourself whether your current investment option still matches your comfort with risk can help ensure your super remains aligned with what you’re trying to achieve.

You’re still invested in the default option

Many Australians remain invested in their fund’s default investment option simply because they never made an active choice. Default options are designed to suit a broad range of members, which makes them a sensible starting point for many people. But because they’re built for the average member, they may not be the best fit for your individual circumstances.

For example, someone hoping to retire early, someone planning to keep working into their seventies, and someone with a particularly low tolerance for investment risk may all have very different needs.

If you’ve never reviewed your investment option, take some time to understand how your super is invested and whether that approach still suits your circumstances. Even if you ultimately decide to stay where you are, you’ll know it’s a conscious decision rather than one that was made for you.

You’re getting closer to retirement

As retirement draws nearer, you’ll naturally start paying closer attention to your super. It’s around this time that many people feel the urge to move everything into a more conservative investment option in an effort to protect everything they’ve built.

But that might not necessarily be the right move. After all, your super may need to support you for another 20 or 30 years, so it will still need to generate returns long after you’ve stopped working and started to draw down an income.

Moving into a lower-risk investment option too early could reduce the opportunity for your savings to continue growing and potentially increase the risk that your money won’t last as long as you need it to. So rather than focusing on your age alone, consider your broader retirement picture. Think about how long your savings may need to last, whether you’ll have other sources of income, and how comfortable you are with market fluctuations.

If you’re unsure whether your current investment option still suits your needs, speaking with a financial adviser can help you understand your choices and make decisions with greater confidence. A regular review every few years, or after a major life event, can help ensure your super continues working towards the retirement you have in mind.

But there’s no real reason $1 million is held up as the ideal benchmark. In fact, most Australians will reach retirement – and thrive, at that – with a much smaller sum.

So what’s a better way to think about how much money you should have once you retire?

Be realistic about your retirement goals

To start, make sure you’ve got a clear idea of the kind of lifestyle you want in retirement.

Take someone who’s perfectly content leading a quiet life, spending time with family, puttering about in the garden, and taking the occasional domestic trip when the fancy strikes them. They’re going to need a lot less money than someone whose bucket list includes regularly dining out and visiting a new country every year.

So what will those respective budgets look like? The Association of Superannuation Funds of Australia (ASFA) regularly crunches the numbers to find out how much the average retiree will need if they want to live a comfortable lifestyle or a modest one.

In its June 2025 release, it says a couple will need a combined balance of around $690,000 at age 67 to enjoy a comfortable retirement. That translates to an annual income of $75,319. Meanwhile, couples who intend to live modestly will need just $100,000, or around $49,992 per year.

Both scenarios make a few assumptions (such as that you’ll own your home outright and will be receiving the Age Pension), so don’t take those figures as gospel. Instead, treat them as a helpful starting point when drawing up your plan.

Think about how long your retirement will last

Remember that life expectancy statistics are just averages, meaning you may very well live beyond them. Ideally, your retirement budget will stretch far enough to cover 25 to 30 years of living expenses, and then some.

Keep in mind that retirement costs are often highest in the early years, when your health allows for travel and other expensive activities, before tapering down as you embrace a quieter lifestyle. Things might then jump up again as your healthcare needs increase.

Will you have any other sources of income?

Important as it is, your super is just one part of the retirement puzzle. To really get a sense of what’s in store for you in your post-work years, it might help to focus less on overall balances and more on income streams.

Once you turn 67, you might be able to supplement the money you get from super with the Age Pension. Your eligibility and the amount you receive will depend on your income and assets, but for many people the support provided is invaluable.

There’s also the option to continue working. Not everyone retires as soon as they can access their super – some people are too attached to their job to give it up, while others feel they’d be in a stronger position if they spent a few more years saving.

If you decide to postpone retirement for a few years (or even return to work part-time after a brief hiatus), this can help firm up your finances and give you more scope to live the kind of retirement you want.

All this isn’t to say that super isn’t important, or that you shouldn’t be proactive and make extra contributions when you can. But it does mean it’s not the end of the world if that fabled seven-figure sum proves to be elusive.

If you’d like help planning your retirement, consider speaking to a financial adviser. They can work with you to clarify your goals, work out how far your money will get you, and – if necessary – find ways to help you build up your savings.

Know how much you need to live on (and have a budget)

Tracking your spending gets a bad wrap sometimes for being dull, but when it comes to retirement planning it’s an essential. Unlike during your working years, your savings won’t be getting topped up regularly by an employer, so how long your money lasts largely depends on how well you manage it.

Start by categorising your spending into essential needs (think groceries, housing costs and utilities). From there, you can work out how much of your income is left over to spend on travel, dining out and any hobbies you might have. These are the things that add joy and variety to life, so you probably don’t want to skimp on them. But it’s all about striking a balance.

Be sure to account for inflation

Your retirement plan won’t be of much use if it assumes that today’s dollars will be worth the same in the future. To really be prepared, you need to take into account inflation and the effect it’s likely to have on your spending and saving.

One of the ways you can combat the effects of inflation is to diversify your investments. Here, it might be helpful to talk to a financial adviser about spreading your money across asset classes that serve different purposes. For example, growth assets have the potential to deliver above inflation returns, while more defensive assets can help preserve your shorter and medium term funds.

Beyond your investments, you might be able to weather any inflationary shocks by making tweaks to your lifestyle. That might mean trimming your discretionary spending, holding off on major purchases, or even re-entering the workforce on a part-time basis.

Know your Government entitlements  

Assuming you satisfy the income and assets tests, the Age Pension can be a much-needed supplement to the money you get from super. Just remember to apply as soon as you’re eligible so that any waiting times are kept to a minimum.

But there’s more on the table besides the fortnightly payments. If you qualify, Centrelink will automatically send you a Pensioner Concession Card. This can make life easier by getting you discounts on doctor visits, certain medications, energy bills, and public transport.

And if you’ve reached pension age but your income and assets are above the allowable limits, don’t worry – you might be eligible for a Commonwealth Seniors Health Card. This offers discounts on healthcare and other services, but unlike the Pensioner Concession Card, you’ll have to apply for one yourself.

Keep healthcare and aged care costs in mind

The fact we live longer than we used to might be a blessing, but it opens the door to a whole lot of logistical concerns. In particular, you’ll need to be prepared for your expenses to go up later in life as you become more dependent and require more care.

Fortunately, there are relatively low-cost residential aged care options out there, and depending on your assets and income, further government support might be available to help ease the burden. You can also choose to ‘age in place’ by accessing in-home care services, or even by fitting your home with features that make it a tad more safe.

But all the ups and downs you learned to live with throughout your working life become much more consequential as you approach retirement. Naturally, higher stakes call for careful planning and, as is often the case, good financial advice.

An important term here is what’s called the ‘retirement risk zone.’ This is the five to ten years on either side of your retirement date when your savings are particularly vulnerable to market downturns.

Whereas those who are still decades out from retirement are able to wait out any slumps long enough to see their investments recover, recent or soon-to-be retirees may not have that luxury.

Instead, they could find themselves dealing with an unfortunate one-two punch: not only is the value of their portfolio decreasing because of poor market conditions, the losses are being crystallised each time they draw down on their capital.

This is the basis for a concept known as sequence of returns risk, or sequencing risk for short. While it might sound a bit technical, it really just describes the bad luck of retiring in a down market and the future value that’s lost because of it.

That last bit is crucial — negative returns at the outset of your retirement can have an outsized impact on your returns over time. This can force some people to completely rethink their plans, put major purchases on ice, and even choose to delay retirement altogether.

How can sequencing risk play out?

Under current super rules, anyone receiving an account-based pension has to draw down a minimum amount of super each year, starting at 4% for under 65s and gradually increasing to 14% for those aged 95 and above. This applies regardless of how the market is performing.

Let’s imagine you retire with $1 million in super and intend to withdraw at least $40,000 annually in line with the minimum drawdown requirements. In the first year, the market suffers a 15% drop, followed by gains of 5% in the second year, 10% in the third year, and 20% in the fourth.

While three of those first four years were positive, the fact you started your retirement with negative returns can make all the difference.

A good chunk of your retirement portfolio will have been liquidated to fund your retirement spending, meaning it no longer has a chance to recover or generate any compound returns. And from there, there’s a much greater chance that your super balance won’t last you as long as you originally hoped.

But if luck is on your side and you retire in a bull market, the trajectory of your investments will be completely different. Yes, you’re still drawing down on your super and this affects your bottom line, but the gains generated by the market upswing will help offset this.

How to reduce the impact of sequencing risk

A market downturn can be stressful enough on its own, but having it coincide with your retirement can add a whole new layer of unease. Fortunately, there are a few things that might help minimise the impact on your hard-earned wealth.

• Diversify your investments: It often pays to have your investments spread out across different asset classes, including ones that are less affected by market fluctuations. A rental property is one of the most sought-after among retirees, but you might want to look into fixed income investments too.
• Adjust your spending: Trimming your expenses in the lead-up to retirement can help preserve your savings. And if you’ve already retired and the amount you’re drawing down exceeds the minimum drawdown requirements, consider reducing it so it’s in line. You might have to sideline any overseas travel plans for the time being, but the long-term security you stand to gain can be worth it.
• Delay retirement: Not everyone will be in a position to do this, but if you can spend a bit longer in the workforce it can give you time to ride out the downturn. You can then hang up your hat when your portfolio has recovered (and you’ve benefited from an extra period of employer super contributions).
• Take on part-time work: Many retirees find value in re-entering the workforce, if only on a part-time basis. Not only can this help smooth out your income, you might find it also helps you keep social and mentally sharp.

While there’s no telling in advance whether you’ll have to deal with sequencing risk, there are things you can do to prepare for and potentially counter it. Like many problems we face, it pays to be flexible. And if you’re looking for advice tailored to your circumstances, consider speaking to a financial adviser.

Ideally, your super and savings should be funding all the things you were dreaming about doing as a retiree, not getting eaten up by your mortgage, personal loan or credit card. But even if debt is going to play a bigger role in your post-work years than you hoped, there are strategies to help make things more manageable.

Revisit your mortgage arrangements

Your mortgage may be the biggest source of budgetary strain, so if you can reduce your monthly repayments even a little bit it might make managing your cash flow easier. Scan the market for an idea of what other lenders are charging, and if you believe you’re currently paying more than you need to be, it might be worth switching.

That might mean refinancing to a different lender or leveraging your market research to secure a lower rate with your existing one. You might even be able to switch to one of your lender’s cheaper loans, but that might involve parting with certain features (such as your offset account).

Put together a budget

Keeping a budget is good practice no matter your circumstances, but it can be particularly helpful when there’s debt to tackle. Start by calculating the income you receive from all sources. Once you have a ballpark figure, you can estimate how much you can afford to spend, how much you can save, and what you can direct towards paying off your debt.

While some people find success with budgets that account for every dollar, others might prefer a looser approach. You don’t need to tighten your purse strings so much you close yourself off from all things enjoyable; you just need a clear picture of where your money is going each month and a willingness to make a few sacrifices.

Consolidate your debts

Between the different interest charges and varying fees, having multiple debts can be a headache to manage. One potential solution is to roll all your debts into a single loan so you only have to budget for one recurring repayment rather than several.

People often choose to consolidate their debts into their home loan, as the interest rates on home loans tend to be lower than those on credit cards and personal loans. Just keep in mind that doing so will decrease the equity you have in your home.

Think about downsizing

If your children have moved out and you and your spouse no longer require a large home to accommodate them, you can think about selling your property and purchasing a smaller one. The benefits here are twofold: it might allow you to pay off the remaining balance on your mortgage, and if you’re 55 or older and meet certain eligibility criteria, you and your spouse might be able to use part of the sale proceeds to make a tax-free contribution of up to $300,000 each to your super.

Delay retirement for a little bit

Finally, you might consider putting off retirement for a few years so you can spend some more time lowering your debt levels. The more you can chip away during your working years, the less vulnerable you may be to interest rate fluctuations when you retire. And if you can free up enough money, you might be able to retire with more confidence that you’ll be able to do all the things you originally planned (as well as manage any surprise expenses).

Consider winding down gently

Some people thrive from day one of retirement, while others are at a loss for ways to spend their time.

If you’re worried you’ll fall into the latter category, you might be better off winding down gradually. This might help accustom you to the idea of not working and give you time to ponder ways to fill your days.

Here’s where a transition to retirement (TTR) income stream might help. This involves transferring a part of your super into an account-based pension, allowing you to decrease your work hours while drawing on your super to make up for the reduction in your salary.¹

Introduce some structure

Decades of work tend to accustom us to a particular routine. You might not have always enjoyed waking up early and dragging yourself to the office, but chances are it gave purpose to each day and made you appreciate your leisure time that much more.

If you feel unmoored without those work-based structures in place, it might be worth trying to establish new structures of your own. Try to visualise what your ideal week looks like, then make an effort to schedule a time for all those activities you imagine will bring you joy. And if you feel things aren’t working or your days are still blending into one another, don’t be afraid to switch things up.

Don’t let your mind atrophy

Concerns about declining cognitive health tend to ramp up in retirement, especially if work was at the centre of your life and you had few hobbies or interests outside of it. Those annoying “senior moments” might become more common than you’re comfortable admitting, and it’s easy to interpret them as a potential warning sign of what’s to come.

To help keep your brain sharp, you’ll need to look for other sources of mental stimulation. That might involve activities as simple as crosswords and jigsaw puzzles, or as demanding as learning a new language, taking night classes, or volunteering in your local community.

Retirement is also the perfect time to take up any creative hobbies you didn’t have time for during your working years. Writing, painting, pottery and woodwork are some common ones, but there are countless ways to tap into your creative side now that you have the free time.

Try to stay socially connected

Just as we depend on work to provide structure in our lives, for many of us it’s our primary source of social interaction. With your working years behind you, it can be difficult to meet new people or foster a deeper connection with those you already interact with.

Fortunately, there are plenty of ways you can ward off social isolation. Try to find like-minded people by joining book or film clubs, walking groups, or taking up volunteering. If you have a family with children of their own, offer to babysit or take them on weekly outings. And if transportation is an issue, technologies like Zoom and Google Hangouts offer the chance to connect easily with friends from the comfort of your home.

Keep physically active

The benefits of physical activity at all ages are well known. Not only can it help your mobility, balance and endurance, it can also prevent or delay many of the health problems associated with old age (such as heart disease, diabetes, stroke, and serious injury after a fall).

There’s also plenty of evidence that suggests physical activity is good for your brain. One study of more than 450 older adults (averaging 90 years old) found that increased levels of physical activity were associated with a slower rate of cognitive decline.²

For people aged 65 and above, it’s recommended that you engage in at least 30 minutes of moderate intensity physical activity each day (for example, brisk walking, swimming and aerobics).³ If that seems like too much at the moment, start with just 10 minutes of activity once or twice a day and try to increase it when you’re ready.

Sources

1 MoneySmart
2 National Institute on Aging
3 Health.gov.au

If you own your own home, are part of a couple that stays together, and have living expenses of no more than $64,000 pa (after-tax), the SCA says you need only $402,000 in savings to retire at 65 years. That income partly comes from the age pension at 67 years. A couple can currently receive up to $38,709 pa in age pension by the way.

While the earnest maths from the SCA will be accurate, their findings lack some real-world experience. I’ve written previously about three phases of retirement. Phase one is often from your mid to late 50s when you step back from big hours and a stressful role. If you can take that through to your late 60s, you can really build your retirement savings through a combination of factors – you are still contributing to super, it will grow with an above-inflation return, and your phases two and three (full retirement and your latter years) are therefore shorter. In phase two you probably have plenty of time on your hands, and if you’re in good health, plenty of spending capacity. Many people are accustomed to spending far more than $64,000 pa pre-retirement, and it doesn’t simply dial down when you stop work.

New experiences can take priority over new possessions. If you’re doing a big overseas trip every year or two, even without turning left as you board the aircraft, you’ll probably need to allow an extra $20,000 pa.

There are a bunch of unforeseen events and other nice to haves that can also make that $402,000 turn out to be insufficient. If you are in an over 55s village or another flash strata development, your quarterly levies are significant. If you’re still in your family home, maintenance and repair costs are never-ending. Not every cost is heading north though. Even with high fuel costs, and the possible capital outlay of going electric, motor vehicle expenses aren’t what they were in past decades.

Nice to haves can include helping your adult children. Perhaps it’s a $50,000 home deposit each to get them to fly the coop. Or maybe it’s a bigger boat that has long been on your bucket list.

In my professional experience retirement shocks can emerge from quite a few directions. Care expenses for a loved one. Illness, accidents, fires and flood are few life events that can diminish your next egg too. And insurance doesn’t always put you back where you were.

Separation and divorce often occur once children are reared and individuals are casting ahead to the next stage of their life. Divorce is emotionally and financially draining. The rate of divorce has spiked up as we have tried to emerge from the worst of the Covid crisis in 2022. Throughout my personal life I must admit I’ve usually heard the male perspective. Professionally though, I’ve become increasingly attuned to the impact on a female’s retirement planning. When you add in the gender pay gap, and the super gap from time out of the workforce, divorce is a life event that is both a new start and another set-back.

If you are not getting your needs professionally modelled, estimate what you think you need, then add a healthy margin of error! Better for your money to outlive you, than for you to outlive your money. Life is never as neat as planned.

Greg Cook is a Certified Financial Planner and Chief Executive of Eureka Whittaker Macnaught
greg.cook@ewmac.com.au
The information in this article is of a general nature. It is not personal advice and does not account for individual circumstances. Before making any financial decisions see a licensed financial planner, or talk to your super fund trustee.