Planning for retirement

We're spending more time and money in retirement than ever before. Here's how to plan for a happy retirement, free of financial worries.

Five retirees do a conga line dance on the beach celebrating the special dividend announced by Grange Resources today

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Happy days!

Saying goodbye to the office is arguably one of life's most significant and exciting milestones – up there with getting the keys to your first home, landing your first job, and having your first child.

However, this hard-won freedom from work comes with a hefty price tag.

We are living longer than ever, with today's 65-year-olds now expected to live to an average age of 85.3 for men and 88 for women.1

People are spending considerably more time in retirement than previous generations and need more funds to support themselves post-work.

All of this is a long-winded way of saying that careful planning is essential to ensure a happy and stress-free retirement. Our complete retirement guide is here to help you get started!

So, when do I need to start retirement planning?

You can never start doing the groundwork too early. Research has shown that in 2023, most Australians feared they would not have enough financial resources for retirement.2

The decision to retire rarely happens overnight. It's often a gradual process that requires you to take into account your financial needs, whether you want to call it quits entirely or simply cut back on your working hours, whether you're emotionally ready to lose the support structure of an office and routine, how long it will take you to save that nest egg, and so on.

What sort of retirement are you planning? A jet-setting whirl of yearly overseas trips or a quieter life of gardening, golf, and the occasional meal out? Are you a social animal, a travel fan, or a homebody? 

Will you have to support children at university, and what health costs do you anticipate? Are you planning to downsize, embark on a sea change, or stay put?

Whatever your circumstances, detailed planning, foresight, and strategic thinking can pay off big in the long run.

And while we may think we control when we pull the plug on work, sometimes life happens, and retirement can be forced on us. This might be through accidents, ill health, redundancy, or other factors that may mean an earlier-than-expected exit from the workplace.

Having a financial plan to help see you through can be a lifesaver. Here are nine steps to help you on your way.

1. Conduct a financial audit

So you've worked out your retirement personality and desired lifestyle. The first step in retirement planning is a strict audit of your financial situation. 

You need to know the answers to these critical questions:

2. Understand your goals

A clear understanding of your debt, income, assets, and expenses is vital. Having a good grasp on your financial big picture will ensure you figure out your best retirement plan. Bear in mind that you might need to fund three decades without a salary.

As a general rule of thumb, you will need between two-thirds and 80% of your pre-retirement income.

The Association of Superannuation Funds of Australia (ASFA)3 has estimated that to support a 'modest' lifestyle in retirement, singles need a yearly retirement income of $32,665 and couples $46,994. A 'comfortable' lifestyle, with a broader range of leisure activities, requires an annual retirement income of $51,278 for singles and $72,148 for couples.

Check out the Australian Preservation and Age Pension eligibility guidelines and the AFSA Retirement Standard as a starting point. You can also tailor estimates according to your specific circumstances with online budget calculators.4

3. Save for retirement

It's time to put your retirement planning into action and begin working on building that healthy nest egg.

Firstly, don't rely on your employer's required 11% super guarantee. If you can afford it, salary-sacrificing pre-tax income into your super fund offers substantial tax benefits, with amounts taxed at 15%5 – far lower than the tax on employment income. You should also understand how money in your super fund is invested and incorporate this into your financial planning. 

Other tips to build that financial cushion? Create a separate emergency fund for those rainy days and ensure you pay bills in full and on time to avoid unnecessary fees. 

Pay down high-interest debt. Save tax refunds and bonuses. Ensure you have adequate health insurance in retirement, as the average Australian will likely face increasing healthcare costs as they age. Many insurance companies offer healthcare plans tailored to those aged 65 and over.

Perhaps most importantly, try to clear as much debt as you can – the average Australian household owes a debt of almost $261,500 in the form of mortgages, investment debt, personal debt, student loans, and credit cards.6

4. Invest for retirement

Of course, it's not just about trimming the fat and hoarding those nuts for winter. Investing to grow your retirement savings is another vital part of the retirement equation.

Saving money in the bank is an accessible and low-risk option, but don't forget the potentially higher returns from investing in other asset classes, such as shares.

It might seem intimidating if you haven't dipped your toe in the share market before, but there are plenty of ways to build your know-how.

5. Learn your investing profile

But before you leap in, some factors to consider include the time until you'll need the money and what your investing personality is – basically, how risk-averse are you?

Generally, a more conservative approach is preferable if you're older, as you have less time to ride out the market's highs and lows. This means focusing on lower-risk investments, which usually means a lower return. 

Investments that promise a higher return usually involve greater risk, so they can be more suitable to younger investors who have time to hold through market cycles. Think carefully, too, about your liquidity preferences. Are you likely to need quick access to cash, or can you withstand your money being locked up in shares or other investments?

Think about how much you can afford to invest, how much you can afford to lose, how long you can stay in the market, and a contingency plan if prices start to fall.

6. Decide what to invest in 

There is a wide array of investment options available to retail investors, each offering unique characteristics and potential returns. 

Ultimately, the choice of investment option depends on factors such as risk tolerance, investment objectives, and individual preferences, with diversification often being a key consideration in managing risk effectively. Some of the main classes of investments include: 


Bonds enable investors to lend money to governments or corporations in exchange for regular interest payments and the return of principal upon maturity. They are a type of debt instrument and are typically considered safer investments than stocks because they offer a predetermined income stream and defined repayment structure. 

They are also rated by credit rating agencies based on the issuer's creditworthiness, providing investors with an assessment of the bond's risk level. Bonds with higher credit ratings are generally associated with lower default risk and may offer lower yields than riskier bonds.

ASX shares

Stocks or shares represent ownership interests in a company. When stocks are purchased, their holder becomes a shareholder in the company. Shareholders have certain rights, including voting rights and the potential to receive a portion of the company's profits in the form of dividends

Investing in stocks offers potential returns through capital appreciation and dividend income. As a company's value and profitability increase over time, its stock price may rise, allowing investors to sell their shares at a higher price than what they initially paid. Although the returns on shares have historically exceeded the returns on bonds, they are also considered higher risk. 


Individuals can invest in residential or commercial property, potentially benefiting from rental income and property value appreciation. It is possible to do so without directly owning or managing the property by investing in real estate investment trusts (REITs), which pool funds from multiple investors to acquire a diversified portfolio of properties, spreading risk across different sectors and locations. 


Commodities include energy resources (such as oil and natural gas), precious metals (like gold and silver), industrial metals (such as copper and aluminium), agricultural products (including corn, wheat, and soybeans), and other natural resources. Different ways to invest in commodities include futures contracts, exchange-traded funds (ETFs), commodity-focused mutual funds, and direct ownership of physical commodities.

7. Diversification is key

Assets like shares, bonds, and property can provide regular income in the form of dividends, interest payments, or rental income. Strategically incorporating these assets into financial planning can help position you for long-term financial stability. 

Whatever your approach, building a diversified portfolio is fundamental to minimising investment risk.  Mutual funds and ETFs pool money from multiple investors to invest in a diversified portfolio of assets. These funds provide access to various asset classes, including stocks, bonds, and even alternative investments.

For example, you can invest in an ETF that follows a share market index, such as the S&P/ASX 200 Index (ASX: XJO), which is made up of the 200 largest companies on the ASX by market capitalisation. It is also possible to gain exposure to companies listed on international stock exchanges, such as the NASDAQ, via ETFs traded on the ASX. 

You can research and choose your investments, from shares to property, or use a professional, such as a financial adviser, to help. But be aware that anyone providing financial advice in Australia must hold an Australian Financial Services Licence issued by the Australian Securities and Investments Commission (ASIC) or be the authorised representative of a licence holder.7

And finally, note that investment returns are taxable when investing outside superannuation, so make sure you consult with your accountant.

8. Stay on track

So, how do you make sure you're on the right path towards creating that ideal financial future?

There are several ways to build that nest egg. Here's a checklist to follow to keep you on track. 

Automating savings: This can be a great way of imposing financial discipline on yourself. Draw up a strict budget, including an automatic deposit into your savings account with each pay. This way, you'll pay yourself first and prioritise your financial future over anything else.

Revisiting savings annually: Do a regular stocktake to ensure you meet your financial goals as you head into retirement. Are you sticking to that budget you carefully drew up last year, or are a few too many pricey evenings out creeping back in? Did you put a little more money aside to account for that unexpected big car repair bill, or was it just business as usual? Maintaining discipline and regular audits are key.

Avoiding high fees: Use online banking to set up periodic payments for regular bills so you're never hit with late fees. Consider low-fee credit cards and only use credit card cash advances in an emergency. Shop around regularly for the best deals on home loans, credit cards, and utilities.

Sticking with the market: Maintaining your investment strategy is crucial. Don't panic over daily fluctuations or gloomy predictions about the economy. Sticking to your core principles and focusing on the big picture is important, as dumping or picking shares based on blind emotion can come at a steep price.

Avoiding risk: Life is innately risky – you never know what's around the corner. However, you can minimise financial risk in several ways. Careful asset allocation is crucial when it comes to your share portfolio. 

Diversification is king: A multi-asset mix of bonds, shares with solid franked dividends, and Australian property assets such real estate investment trusts (REITs), utilities, and infrastructure help balance risk and return. Make sure you have adequate insurance: health, car, homeowner's, and so on.

9. Ready, set, retire

So, when is the optimal time to call it quits and start enjoying that hard-earned leisure time?

It's a highly personal decision. According to the Australian Bureau of Statistics, the average Australian retirement age is 65.5 years, but many keep working into their 70s. There is no compulsory retirement age in Australia. For some people, the choice is made when they become eligible for the age pension; for others, it is when they can access their super.

In many ways, the decision to retire is as unique as a thumbprint – and it's not just a matter of only considering dollars and cents. Factors you must consider include your current and future lifestyle and expectations, health conditions, family needs, and more. 

Want to learn more about investing?

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This article is part of Motley Fool Australia's comprehensive Investing Education series, covering everything from budgeting and saving to basic investing concepts and how much money you'll need to start.

Packed with easy-to-understand and regularly updated information, our articles contain the answers to your most frequently asked questions about share market investing.

Motley Fool's Education series is tailored for beginner and experienced investors alike and includes helpful tools and resources, an A-Z glossary of Investing Definitions, and guides to specific topics of interest.

Frequently Asked Questions

The 3% rule in retirement says you can withdraw 3% of your retirement savings a year and avoid running out of money. Historically, retirement planners recommended withdrawing 4% per year (the 4% rule). 

However, 3% is now considered a better target due to inflation, lower portfolio yields, and longer lifespans. This lower rate assumes a more cautious approach to withdrawals, providing a greater buffer against market downturns and the risk of outliving one's savings. It reflects a preference for preserving capital, which may be particularly appealing in environments of prolonged low returns or for individuals with a more conservative risk tolerance.

The 4% rule is a widely recognised retirement planning guideline suggesting that retirees can withdraw 4% of their retirement savings in the first year of retirement and adjust the amount for inflation in subsequent years, aiming to ensure the funds last for at least 30 years. 

The sustainability of this rule can be significantly influenced by how retirement funds are invested due to the impact of investment returns and market volatility on the retirement portfolio.


A good retirement income target depends on individual lifestyle expectations, location, and personal goals, but a commonly referenced benchmark is to aim for a retirement income that's about 70% to 80% of your pre-retirement annual income. 

This guideline assumes that some expenses, such as commuting costs, work attire, and mortgage payments, will decrease in retirement (if your home is paid off) while others, such as healthcare, leisure, and travel, may increase. For a more personalised approach to calculating a good retirement income target for you, consider your lifestyle expectations, living costs, healthcare needs, expected longevity, and other potential income sources, such as the government pension.

Article Sources


  1. Australian Institute of Health and Welfare, “Deaths in Australia: Life Expectancy
  2., “Majority of Australians fear they don’t have enough for retirement
  3. Association of Superannuation Funds of Australia, “ASFA Retirement Standard
  4., “Budget planner
  5. IndustrySuperFunds, “Tax rates for superannuation
  6. Australian Bureau of Statistics, “Average household debt grows by 7.3 per cent
  7. Australian Securities and Investments Commission, “AFS licensees

This article contains general educational content only and does not take into account your personal financial situation. Before investing, your individual circumstances should be considered, and you may need to seek independent financial advice.

To the best of our knowledge, all information in this article is accurate as of time of posting. In our educational articles, a 'top share' is always defined by the largest market cap at the time of last update. On this page, neither the author nor The Motley Fool have chosen a 'top share' by personal opinion.

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The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.