Curious about how much money you actually need to retire in Australia? In this post, we break down what it takes to retire early, sharing tips on budgeting, investing, and mindset shifts. Whether you're in your 20s or approaching retirement age, there are actionable steps to secure your financial freedom and enjoy life on your terms.
How much money do we actually need to be able to retire comfortably and early in Australia?
I'm going to share a couple of strategies but also what is actually required right now in Australia to retire early.
You might be reading this in your 20s or 30s and think: Hey, sitting on a beach at 45 is great, or you might be in your 50s and thinking, I need to secure my financial freedom; otherwise, I'll have to rely on the pension.
If you guys are interested in my thoughts, then definitely keep reading..
As part of my research process, I go through many articles, educate myself, speak to a lot of people, and, of course, we have our own consulting team at Search Property.
We talk to so many of you who read my blogs and watch my YouTube channel, and a lot of the questions you guys ask are around how much you need to retire early.
We all have this goal of financial freedom—not having to get up on a Monday—so I thought: why not make a blog and video about this? I think there are a few things we can tweak, and I don't just want to focus on: Hey, we need to buy property, and do this and do this and do this.
I think there’s more around mindset, so we’re going to cover both right now.
Now, how much money do you need to retire early?
For context, if you follow the trend—go to school, go to uni, get a job—you’re pretty much in full-time employment by the time you're around 21 or 22. That's exactly when I started getting into full-time work officially after I finished my university degree.
From that point, you've got another 44 to 45 years before you actually retire.
Now, I know that sounds like a lot, and you may be reading this article and going: I’ve not known any other way. That's pretty much the norm.
I think with social media exposing so many people and their lifestyles, we're in a space where we want instant gratification, and unfortunately, that’s how we are as a society now.
We see people that are so much further ahead and think: "Why aren’t we there yet?"
However, what you don't see is the stuff that’s happened in the background for years and years.
Take, for instance, running a business. If you start running a business today and compare yourself to someone who started their business 10 years ago, it is completely different. Equally, if you go: Hey, I'm going to start this passion project, my new channel on TikTok, you’re starting at zero. When you compare yourself to someone else, remember that they also started at zero.
If you’re in your 20s and see everyone else around you thinking: Well, this is the norm; this is what I’m going to do, you don’t have to do the same thing.
In fact, so many people make the wrong decision when it comes to buying their own place. What’s their first property going to look like? The reason I keep coming back to real estate is because a large portion of Australia's wealth is all tied up in real estate.
Whether we like to admit it or not, we want to buy property that we can hopefully see appreciate. The byproduct is, yes, we can live there. I know that if you bought a property and said: I don’t really care if the prices go up; I just want to live in this property, there are very few of you out there who think about this purely emotionally and say: I just want to live here; I don’t care about the price.
What’s most likely happening is someone told you that you should get into the property market as soon as possible. That way, you can see the appreciation of your wealth, and as a byproduct, you get to live in it.
This mindset is really screwing up young Australians right now. Take my example, for instance: I did the exact opposite of all my schoolmates, and now, 10 to 15 years later, I don't talk to any of them.
The reason for that is because I felt they didn’t understand me; they didn’t understand that I wanted the 1% life. And that 1% life meant I needed to go and invest.
At the time, I was fortunate enough to be living at home, but I’ve been living out of home for almost five years now, paying rent and investing—called rentvesting, which I talk about on the channel. But so many people still think the only way is to go to school, go to uni, get a job, buy a house, get married, have kids, and then retire at 65.
For the few of you who actually want a different life and are open-minded to thinking like the 1%, let's continue.
So let's break that down: $72,000 as a couple or $51,000 as a single person. Now, if you go as a single person, that's roughly about $11,000; if you’re a couple, that’s about $600 to $700 per person.
Now, if you’ve got your house paid off, that’s actually a really good life. I know some people have a lavish lifestyle, but if you think about it, your groceries cost, what, $300 to $400 a week, I assume? Then you’ve got a couple of hundred bucks left over for entertainment and whatnot.
If you've already got the house paid off, this works quite well. But how many people today are going to get to 65 and not have their house paid off? That’s really scary, and the bigger question to ask is, how are you generating that income?
Let’s say, for instance, you have your own house and it’s paid off; you'll most likely receive the pension.
However, if you want to retire on your own terms and not have the government tell you what your budget is, you’re going to need investments yourself. It might be your super fund, which is invested in various markets.
If the market is giving you a 5% return, that dictates how much you can spend that year. Equally, if it's going up by 10% that year, you might be able to get a large Zinger box instead of just the regular one! But this is all on the basis that you have your house paid off and plan to retire at 65.
Now, keep in mind, you can't access the pension until you're 67. So even if you decide: I've got my house paid off and I want to retire at 60, you won't get any of the pension until you're 67. In that case, you’re relying on the income that your assets generate or your investments produce, and I don't know if that's going to be enough.
Let's say, for example, you have a million dollars in your super fund.
Now, most people will never get to a million, but let’s assume a million. If you reach a million as a couple, you would need to be generating at least 7.2% to live comfortably, according to the ASFA. For a single person, you’d need that million to be returning at least 5%.
So if you look at industry averages of, say, 7%, you would need at least $800,000 in your super account.
A really good exercise, especially if you're in your 40s and edging into your 50s, is to calculate how much super you currently have and project how much you'll end up with by the time you actually retire. Because if you can't generate $50,000 to $70,000 with your house paid off, you're going to find yourself not living comfortably here in Australia.
One of the other factors I haven’t discussed in this article is inflation.
Inflation has been a really hot topic over the last 3 to 4 years.
Will we see periods of high inflation for a long time? Nobody really knows, but this is why you want to have options. You need to be proactive, because if you face high inflation just as you retire, the 7% you’re earning won’t mean much if inflation is at 10%. That's something some pensioners had to go through.
Now, fortunately, when inflation is high, interest rates are typically high as well, which means savings rates are often higher. For those lucky few retirees, they could place money in the bank and get a higher return than they might in the market, without volatility—something important at that age.
It’s also reported that:
Every 7 years is pretty bonkers. If you've been watching anything online right now, everyone seems to be overseas all the time, some going multiple times every year.
Therefore, if you find yourself in a position where you can’t travel for a 7-year period because you didn’t make the right choices early on, you only have yourself to blame.
I know this sounds piercing, but the reality is we can only control what we control. If we decide Australia is too expensive, we might have to move, but Australia is one of the best countries in the world, in my opinion. It’s by far the best country, which is why I plan to live here long-term.
I live in Sydney, which also means it’s super expensive. That’s why you have to plan ahead and take action early.
Whether it’s making a budget for the first time or getting into the right circles to learn advanced strategies to grow your wealth, it’s necessary.
What steps can you take to retire early?
I know this sounds silly to some people, but I really urge you to look into it. Budgeting isn’t as simple as you thought—like: Hey, income comes in, expenses go out, and look, I’ve got 100 bucks at the end of the week—happy days!
This goes into your savings account.
However, all that will happen is that by the end of the year, when you decide you want to go on a holiday, you'll dip into that savings fund. You might say: Hey, I did really well; maybe I’ve got about $3,000 here, I’ll use it for a trip, and now you’ve just gone through the whole year only to end up in the exact same spot.
If you’re renting and haven’t got any investments, you really need to start making moves.
If you rent and invest, “rentvesting” is a smart strategy. It’s probably better than just buying your own place.
However, if you rent without any investments and take advantage of not having a mortgage by spending more on your lifestyle, you’re setting yourself up for deep trouble later on.
In that case, it’s better to own a property, because chances are it will outperform inflation anyway.
One of the easiest things you can do right now to get started is to look at your expenses over the last 3 months and then compare that to your actual income.
From there, break down how much you’re spending on needs, wants, and how much you’re investing or saving.
You need your investment and saving amount to be as high as possible. I’ve referenced the 50/30/20 rule before:
I’d actually suggest flipping it around: 50% of your income should go towards saving and investing and if you save enough to invest, I’d choose investing over simple savings.
You need a strategy here because we’re not just talking about having some goals written on paper, then letting 12 months go by without achieving those New Year's resolutions.
You then go: Well, this year is different, and create goals again.
You do this time and time again, only to be disappointed by the end of the year.
However, in this case, you're talking about the longer term—you're talking about 20 to 30-year plans. You need to be very clear about your vision.
If you actually want to retire early, you need to put that down on paper. It may sound silly, but by writing it down, the likelihood of achieving it drastically improves.
I’m not going to quote stats because, frankly, I don’t have stats in front of me, but there's a large percentage increase in achieving goals for those who write them down compared to those who don’t.
My final tip for you to retire early is to get into the right conversations with the right people.
It astounds me that, with so much information available, some people are still making poor financial decisions.
If you need to budget to make money to invest, you need to take accountability and do it. If you feel like you don’t make enough money, you need to find another job or a second job to invest adequately.
If you make these moves in your 20s and 30s, it’ll be a lot easier by the time you’re 50 or 60. For those listening who didn’t have the opportunity or didn’t take it in their 20s and 30s, it will be harder, but it’s not impossible.
That’s why I urge you to have a strategy, talk to the right people, and budget—it's so simple right now, and if you’re not doing it, you’re in trouble.
If you need any help at all with building out a strategy for property, and you have enough there but don’t know what move to make next, you can reach out to us at Search Property by booking a FREE discovery call. We not only find the property, but we also provide the long-term strategy you’ll need.
I hope you guys enjoyed this article. Thanks, guys!
Disclaimer: Search Property Pty Ltd (SP) does not provide financial or investment advice and does not hold a financial services license as defined in the Corporations Act 2001 (Cth). Any advice given by SP is general in nature and does not take into account your personal circumstances or objectives, financial situation or needs.
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