Budgeting at each retirement stage

When considering retirement, rather than focussing on one lump sum at the end of your working life, it can be helpful to keep in mind the three different stages of retirement and the financial needs you may have at each stage.

Differing levels of work participation, housing needs and preferences, lifestyle factors and spending patterns characterise each of the retirement stages. Everybody’s retirement will be different, and a range of factors and personal circumstances may also need to be considered.

The three stages can provide a useful framework when setting your goals and planning for your retirement.

The early stage

The first stage of retirement is when we first stop working or transition to retirement. During this stage, we tend to be just as active as we were while working and may even continue earning an income as we take on part-time work. While earnings tend to reduce, expenses may not as we redirect our focus to our interests such as travel, hobbies, home renovations, family gatherings and other leisure activities.

Consider your own goals for stage one of retirement and use our retirement calculator to work out how much you might need to fund this stage.

The middle stage

The age we enter the middle stage of retirement will vary. It may begin at around age 65 or later and last until we turn 85 or older. During this stage, our pursuits may become more passive as we become less physically active, and possibly less mentally active too.

This is the phase during which our expenses tend to reduce the most, although health-related expenses may increase.

Our living arrangements may also change now. We might consider downsizing and moving to a smaller home and we may think about aged care and estate planning.

While some retirees in this stage may continue to enjoy overseas travel, others may prefer to make travel plans closer to home.

If you’re wondering how much you may need to fund stage two, you can consider the recommendations of the Association of Super Funds of Australia (ASFA). ASFA recommends an annual amount of between $30,582 and $48,266 for a single person during the ages of 65 and 85 years, or $44,034 to $68,014 for a couple^[1].

The late stage

These days, many retirees stay fit and healthy well into their older years. Others become increasingly frail and the ability to move around freely decreases.

You may enter the third stage of retirement during your eighties or possibly your nineties, depending on your health. If restricted mobility becomes a factor, your leisure activities will tend to become more limited and health-related expenses may increase.

During this later stage many retirees need help around the house and with daily activities while others may move into a retirement village, nursing home or aged care facility. Retirement living options at this stage can require large financial commitments, and some may offer part refunds at the end of life.

ASFA recommends an annual budget of between $28,379 and $44,851 for single people aged 85 and over, and $40,656 and $62,237 for couples^[2].

Planning your retirement

If you’d like to speak with one of our super specialists and find out what to consider when planning for your retirement, Book a time to talk with a super specialist, phone one of our team members on 1800 675 839 between 8am and 8pm AEST Mon-Fri or email us.

This article is current at the date of publication and is subject to change. It contains general information and does not take account of your specific objectives, financial situation or needs or personal circumstances. You should seek professional financial advice, consider your own circumstances and read our Product Disclosure Statement (PDS) before making a decision about Prime Super. For a PDS and Target Market Determination call 1800 675 839 or visit the primesuper.com.au/pds. Prime Super Pty Ltd ABN 81 067 241 016 AFSL 219723 RSE L0000277 (Trustee), Prime Super ABN 60 562 335 823 RN 1000276.

[1] superannuation.asn.au/resources/retirement-standard, September quarter 2022.

[2] superannuation.asn.au/resources/retirement-standard, September quarter 2022.