The ASFA Retirement Standard: What You Actually Need
The Association of Superannuation Funds of Australia (ASFA) publishes quarterly updated figures for what retirees actually spend. The March 2025 figures show:
- Couples comfortable lifestyle: $72,148 per year - covers private health insurance, a holiday, restaurant meals, and a reasonable car
- Singles comfortable lifestyle: $51,278 per year - the same lifestyle costs more per person when sharing is removed
- Couples modest lifestyle: $46,620 per year - better than the Age Pension but limited travel and entertainment
- Singles modest lifestyle: $32,417 per year - broadly equivalent to life on the full Age Pension
- The 25× rule of thumb: Multiply your target annual income by 25 to estimate the lump sum needed (assumes a 4% real return/drawdown rate, based on the Trinity Study)
- ASFA comfortable couple: $72,148 × 25 = $1,803,700 - but couples can also access the Age Pension if assets fall below thresholds
- Age Pension (March 2025): Full single rate $1,149.60/fn ($29,890/yr), couple combined $1,732.20/fn ($45,037/yr)
- Assets test full pension: Single homeowner under $301,750; couple homeowners under $451,500
Super Balance Benchmarks by Age
These are widely-used industry benchmarks based on ASFA research and industry modelling. They assume SG at 11.5% (2024-25), median wage growth, and a balanced investment option. They are starting points, not targets carved in stone:
- Age 30: $45,000 - if you're above this, you're ahead of the median; below it, time to review your contribution rate
- Age 35: $85,000 - missed years through part-time work, study, or career breaks show up here
- Age 40: $145,000 - the mid-career check-in; a $15,000 catch-up concessional contribution can make a material difference
- Age 45: $220,000 - peak earning years should be driving above-SG contributions
- Age 50: $310,000 - carry-forward concessional contributions now available if you have unused cap from prior years (check myATO)
- Age 55: $430,000 - TTR strategies become available; downsizer ($300,000 per person if selling family home held 10+ years)
- Age 60: $580,000 - preservation age met for most; super draws become tax-free from a taxed fund
- Age 65: $750,000+ - work test removed for non-concessional contributions; Age Pension age also 67
Decade-by-Decade Action Plan
What you should actually be doing at each life stage to maximise retirement readiness:
- In your 20s: Consolidate multiple super accounts (check via myGov); choose a high-growth investment option (historically 1.5-2% more per year over 40 years compounds dramatically); start with even $50/month in voluntary contributions
- In your 30s: Review fund performance using APRA's YourSuper comparison tool; ensure you have adequate income protection (hardest decade to take a disability hit); if buying a home, use FHSS ($50k lifetime cap) before the window closes
- In your 40s: Salary sacrifice becomes more powerful as you move into the 37% tax bracket - every $1 saved costs you 78 cents (22% saving); update your insurance review inside super; consider whether your fund's lifecycle option is de-risking you too early
- In your 50s: Carry-forward concessional contributions (up to $150,000 in a single year if prior years unused, $500,000 balance test removed); downsizer at 55 allows $300k each into super outside normal caps; TTR pension from preservation age to salary sacrifice more aggressively
- In your 60s: Transition from accumulation to retirement phase - pension phase super is tax-free on earnings and withdrawals (taxed fund); timing of retirement to hit a new financial year can reduce tax on a final salary payout; sequence-of-returns risk is highest in first five years of drawdown
- Preservation age: Born before 1 July 1960 = 55; born 1 July 1964 or later = 60; born between those dates = 56-59 depending on birth year
- Age Pension age: 67 for everyone born after 1 January 1957
Transition to Retirement (TTR) Strategy Explained
A TTR pension lets you draw from your super while still working, once you reach preservation age (60 for most people now). The mechanics matter:
- TTR earnings taxed at 15% - unlike a full retirement pension which is tax-free; this has been the rule since 1 July 2017 (prior to that, TTR was in tax-exempt pension phase)
- Drawdown limits: Minimum 4% of account balance per year, maximum 10% - cannot take lump sums from a TTR
- The strategy: Draw TTR pension to replace salary, then salary sacrifice the equivalent into super concessionally - net tax saving at 37% bracket can be meaningful
- Break-even analysis: At 37% marginal rate, salary sacrificing $20,000 saves $4,400 in tax minus 15% contributions tax = net saving of $4,400 annually
- When TTR makes sense: Highest value when you're in the 37%+ bracket, within 5-7 years of full retirement, and have sufficient balance to draw from meaningfully
- When TTR doesn't make sense: If you're in the 32.5% bracket or below, the maths rarely favours the complexity; or if your fund's TTR earnings tax eliminates the benefit
- Retirement phase conversion: Once you fully retire (or turn 65), convert TTR to a retirement account-based pension - earnings become tax-free and no maximum drawdown cap applies
Minimum Annual Drawdown Rates
In retirement (account-based pension), the ATO mandates minimum drawdown percentages based on age. These were temporarily halved during COVID but returned to normal from 1 July 2023:
- Under 65: 4% of account balance per year
- 65-74: 5% per year
- 75-79: 6% per year
- 80-84: 7% per year
- 85-89: 9% per year
- 90-94: 11% per year
- 95 and over: 14% per year
- Transfer Balance Cap (TBC): $1,900,000 for 2024-25 - the maximum you can move into tax-free pension phase; excess stays in accumulation phase (taxed at 15% on earnings)
- Strategy: If you have more than $1.9M in super, consider holding the excess in accumulation or diversifying into investment bonds or direct property
Sequence of Returns Risk: The Retirement Killer
One of the most underappreciated risks in retirement planning is the order in which investment returns occur - not just the average return. A bad market in the first five years of drawdown permanently impairs a portfolio:
- Why it matters: If you draw $60,000/year from a $1M portfolio and markets fall 30% in year one, you've withdrawn from a $700k base - the portfolio may never fully recover
- The bucket strategy: Hold 2-3 years of living expenses in cash/term deposits (bucket 1), 3-7 years in conservative bonds (bucket 2), remainder in growth assets (bucket 3) - replenish buckets in sequence
- Dynamic drawdown: In bad market years, reduce discretionary spending and draw the minimum required; in good years, take more and rebuild cash buffer
- Bond ladder: Purchasing government bonds maturing in successive years provides guaranteed income regardless of market conditions for a defined period
- SMSF application: SMSFs have more flexibility to implement bucket strategies and bond ladders; APRA funds increasingly offer these through their pension products
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