Australians reckon they need at least $1 million in savings to afford a comfortable retirement, if they're on their own.
That's according to the 2026 Rethinking Retirement report from Colonial First State.
The reality is far different.
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How much do you need in savings for retirement?
According to Australia's benchmark budgeting tool, the ASFA Retirement Standard, a single person who owns their own home needs $630,000 in superannuation savings by age 67, plus a part pension, to fund a comfortable retirement.
This means Aussies are overestimating how much they need by almost 40%.
If you're coupled up, you need a bit more for a comfortable retirement: about $730,000 in superannuation savings.
How about a modest retirement?
Colonial's 2025 report showed Aussies think they need just under $400,000 to have a modest retirement, if they're single.
But ASFA says single homeowners need just $110,000 in superannuation savings, and couple homeowners need just $120,000.
That means we're overestimating how much savings are required by at least 70%.
It's worth noting that people who don't own their homes need higher savings to fund a modest retirement.
ASFA puts the number at $340,000 in savings for singles renting in retirement, and $385,000 for couples.
These numbers assume retirees earn a 6% average gross investment return on their savings each year.
ASFA provides specific and detailed definitions as to what constitutes a comfortable and modest retirement.
What does retirement cost every year?
ASFA says a comfortable lifestyle costs $54,923 per year for singles and $78,566 per year for couples, if they own their homes.
A modest retirement costs $36,434 per year for singles and $52,473 per year for couples, if they own their homes.
For renters, a modest lifestyle costs $51,164 per year for singles and $69,002 per year for couples.
The Standard is updated for inflation every quarter to ensure it provides realistic cost estimates for retirement in today's dollars.
It's important to have good savings because the age pension does not cover life's expenses in full.
Currently, the full age pension, including supplements, is $31,223 per year for singles and $47,070 for couples.
Australians born on or after 1 January 1957 become eligible for the pension at age 67, whether retired or not.
The pension is subject to an assets test and an income test.
If you own or earn too much, you may only qualify for a part-pension, or no pension at all.
Find out how much you can own and earn while still qualifying for the pension.
The mental load of worry
Retirement wealth specialist, Drew Meredith, a principal adviser at Wattle Partners, said Australians pay dearly, in terms of emotional and mental strain, and lifestyle, for overestimating how much they need in savings.
People delay retirement they would otherwise enjoy. Instead of enjoying a hard-earned exit from the workforce, people take on unnecessarily aggressive portfolios to chase returns they simply don't need.
Others prematurely part with the family home or reluctantly slide back into part-time employment because a flawed projection insisted their savings weren't big enough. None of those decisions are easily reversible.
Meredith said life after work is more affordable than people realise, adding:
Once the mortgage is gone, the children are independent, the commuting cost has stopped, the work wardrobe has stopped, and the income tax is largely off the table because of pension-phase concessions, the cost of running a household drops sharply.
Kelly Power, CEO of CFS Superannuation, said Aussies are carrying a high "mental load" worrying about their retirement savings.
She commented:
The findings suggest that for many, retirement feels like a challenge, not a milestone.
There are persistent gaps in how confident Australians feel about retirement and how prepared they are.
The report found more than 75% of Australians who received financial advice feel prepared for their retirement.
For those who have not sought advice, less than 50% feel prepared.
