Vanguard says young Aussies are overestimating how much income they will need in retirement to fund an enjoyable lifestyle.
The superannuation services provider conducted a nationally representative survey of more than 1,800 Australians aged 18 years and over in February to form the basis of its 2025 How Australia Retires report.
The survey showed that Australians under the age of 45 expect to need a minimum annual household income of $100,000 to fund their retirement.
This is vastly higher than the average $55,000 that retired couples reported spending over the past 12 months.
It's also much higher than the estimated annual living costs published in Australia's Retirement Standard.
The Standard is compiled by the Association of Superannuation Funds of Australia (ASFA) and updated every quarter.
It is considered the definitive guide for retirement budgeting in Australia.
ASFA says a comfortable retirement currently costs $75,319 per annum for couples and $53,289 for singles who own their own homes.
A modest retirement is cheaper at $49,992 for couples and $34,522 for singles who own their own homes.
Retirement costs more if you're renting.
ASFA estimates that a modest retirement costs $66,269 per annum for couples and $49,044 for singles who rent their homes.
You can find out exactly how ASFA defines a 'comfortable' and 'modest' retirement here.
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Why are young people overestimating how much they'll need?
Vanguard cited some reasons why young people are overestimating how much income they'll require in retirement:
This could reflect lower levels of retirement planning among these age groups, as well as the inherent uncertainty in making financial projections for a life stage that may be decades away.
Another explanation is that younger Australians may be factoring in continued increases in the cost of living.
However, Vanguard noted that young people may genuinely require a higher income because more of them will be renting or still paying off a home loan in retirement.
Of course, it could also be that younger Australians genuinely require a higher minimum household income in retirement.
This may reflect rising expectations for lifestyle and living standards, or concerns about ongoing housing costs — such as rent or mortgage payments — extending into retirement.
The survey showed 36% of Millennials expect to have a mortgage when they retire, compared to 27% of Gen Xers and 24% of Baby Boomers.
Renting in retirement is on the rise
Vanguard says the number of people retiring while renting is a rising trend, and young people are aware that they may never own a home.
Daniel Shrimski, Managing Director of Vanguard Investments Australia, said:
Renting or carrying mortgage debt into retirement isn't just a financial burden — it adds emotional stress.
It's something we're increasingly concerned about as we look at how retirement is evolving for Australians.
In recognition of this rising trend, ASFA introduced living expense estimates for retirees who are renting just this year.
What about superannuation?
ASFA says couples need $690,000 and singles need $595,000 in superannuation by age 67 to fund a comfortable lifestyle.
Both couples and singles only need $100,000 in super to fund a modest lifestyle.
