As people age, the algorithms seem to know and suddenly, you are besieged with links to stories that espouse the need for a superannuation of $1 million and more.

It is great if someone does have that amount. The Association of Superannuation Funds of Australia (ASFA) data showed 2.5 per cent of the population had a balance of more than $1 million in June 2021.

Facts that are not considered when the $1 million figure is banded about are the integration of the nation’s social security system with a person’s savings in retirement, and that most retirees do not have to worry about matters such as tax. Also, most seniors have access to hefty discounts on utilities, public transport and other costs through a Seniors Card.

While it is getting less likely that a person or persons own their home when they retire, aside from the mortgage many people are debt free. That means a small mortgage outstanding, a personal loan or other payments which are a huge impost on a person’s pay-packets during our working lives.

In retirement, expenses will broadly fall into the six categories of food, energy, maintenance, medical, transport and semi-discretionary expenditure like gifts and holidays.

Everyone’s different, but ASFA reckons a modest retirement for a couple will cost annually about $47,000. A comfortable retirement is priced at $72,000 a year. For a single, the range is between $33,000 and $51,000.

From 20 March 2024, a single person on the full Age Pension received $1,116.30 per fortnight (about $29,028 per year) and a couple (each): $841.40 per fortnight (approximately $21,876 per year).

On 31 March 2023, around 2.8 million people aged 65 and over received income support payments, equating to 63% of the population aged 65 and over. Of these, the vast majority (92% or 2.6 million) received the Age Pension.

It’s far from $1 million but a lot of people do live off the Age Pension.

Couple living off $60,000 a year on retirement

Instead of $1 million in savings, the couple have about $350,000 (less than the “average” total amount of about $570,000 that a working male and female couple would have). Of the available $350,000, $330,000 will be put into super leaving $20,000 in the bank.

At this level, the couple are not means tested as they are under both the Centrelink income and asset test thresholds. That means a full Age Pension of a combined $43,752 a year. To that, we add the super fund that’s now been converted into an account-based pension paying the mandated 5% – or $16,500 a year. That generates a grand total of $60,252 a year.

All this with not a cent of tax to pay – and that’s also without factoring in those seniors’ discounts which can be worth thousands of dollars a year in savings.

The information provided is for educational and informational purposes only. It is not intended to be financial advice. You should not make any financial decisions based solely on the information provided.