What retirement actually costs in Australia (2026 figures)
The Association of Superannuation Funds of Australia (ASFA) publishes quarterly retirement budgets that model actual spending for retirees at two lifestyle levels. The latest figures, from the December 2025 quarter (released February 2026), are the highest on record.
| Lifestyle | Single (annual) | Couple (annual) |
|---|---|---|
| Comfortable (homeowner) | $54,840 | $77,375 |
| Modest (homeowner) | $35,503 | $51,299 |
| Modest (renter) | Higher (see below) | Higher |
Source: ASFA Retirement Standard, December 2025 quarter. Figures assume retirees aged 65 to 84 in reasonably good health.
Please note: All figures, projections and scenarios in this article are approximate and reflect ASFA and government-published data at the time of writing. Individual outcomes will vary based on personal circumstances, location, health, and spending choices. This is general information, not personal advice.
The ASFA “comfortable” standard covers a good standard of living: private health insurance, a reasonable car, household goods, occasional overseas travel, and regular leisure activities. The “modest” standard is a step up from the Age Pension alone but only covers the basics with limited leisure.
The retiree inflation problem: why costs are rising faster for retirees
One point most retirement guides miss: retirees face materially higher inflation than the general population, because their spending is concentrated in categories that have risen fastest.
Over the year to the December 2025 quarter, general CPI rose 3.8%. But the specific costs that dominate retiree budgets rose much faster:
| Cost category | Annual increase to Dec 2025 |
|---|---|
| Electricity | +21.5% |
| Coffee and tea | +15.3% |
| Beef | +10.8% |
| Domestic travel | +9.6% |
| Water rates | +7.1% |
| Property rates | +6.2% |
| Automotive fuel | -0.8% |
Source: ASFA/ABS, December quarter 2025.
The compounding effect matters. Over a 20 to 30 year retirement, an expense category that runs 3 to 5 percentage points above headline CPI can more than double in real terms, while the Age Pension is only indexed to CPI or Male Total Average Weekly Earnings, whichever is higher. This is the core reason ASFA lifted its comfortable lump sum benchmarks in February 2026 for the first time in three years, from $595,000 to $630,000 for a single homeowner, and from $690,000 to $730,000 for a homeowner couple.
The seven biggest expenses in retirement
1. Housing (even for homeowners)
The most-underestimated retirement expense is housing. Even for retirees who own their home outright with no mortgage, the ongoing cost of holding a property is substantial.
For a homeowner couple at the ASFA comfortable standard, weekly housing costs run around $150 to $200, or $8,000 to $10,000 a year. That covers:
- Council rates (up 6.2% in the past year)
- Home and contents insurance (rising significantly across most states)
- Utilities: electricity, gas, water
- Maintenance and repairs (roofs, hot water systems, driveways, gardens)
- Strata or body corporate fees for units and townhouses
For renters, housing becomes the dominant expense by a wide margin. ASFA’s modest renter standard adds significant weekly rent on top of the base modest budget, which is why ASFA now publishes a separate renters’ retirement standard. Non-homeowners in retirement generally need an additional $18,000 to $25,000 a year to cover housing, depending on location.
For anyone approaching retirement with a mortgage, the cost sits somewhere in between. Scott and Phil talked about the mortgage-into-retirement question in Episode 5 of the Wealthlab Podcast, including the finding that around 40% of people in their late 50s still carry mortgage debt. That reality significantly changes the retirement expense equation.
Review your private health insurance regularly. Many retirees save by adjusting cover levels or removing unnecessary extras.
2. Healthcare and out-of-pocket medical costs
Healthcare is consistently one of the largest and fastest-growing retirement expenses. Two data points that clarify the scale:
- Approximately 34% of retirement savings, on average, are consumed by healthcare-related costs across a typical retirement
- The final 24 months of life account for 50 to 80% of lifetime healthcare spending
Both figures came up on Episode 19 of the Wealthlab Podcast, Is Early Retirement a Trap? The pattern is worth understanding because it shapes how retirement expenses distribute across the years.
Healthcare costs in retirement come from several sources:
- Private health insurance premiums, which have risen every year and typically increase faster than general inflation
- Out-of-pocket costs beyond Medicare rebates for specialists, procedures, and allied health
- Prescription medications, some of which fall outside PBS subsidies
- Dental and optical care, which are generally not covered by Medicare
- Hearing aids, mobility aids, and home modifications as needs change
- Ambulance cover, which is state-dependent and not automatic
A healthy 60-year-old often spends very little on healthcare. By 75, specialists, medications, and procedures typically add up. By 85, home care, aged care, and end-of-life medical support become the dominant category. Planning for this arc, rather than a flat annual figure, is where most retirement budgets fail.
3. Food and groceries
Food is the third-largest budget category for most retirees and one of the most consistent month to month.
For an ASFA comfortable retirement, a couple spends approximately $270 to $290 per week on food, which includes groceries, take-away, and occasional restaurant meals. Single retirees typically spend $150 to $175 per week. Annual food spending sits around $14,000 to $15,000 for couples and $8,000 to $9,000 for singles at the comfortable standard.
Food inflation has been meaningful over the past year. Beef prices are up 10.8%, and coffee and tea are up 15.3%. Retirees who eat at home more than the general population feel these increases proportionally harder.
4. Energy and utilities
Utilities are a separate line item worth calling out because of the size of recent price movements. Electricity alone rose 21.5% in the year to December 2025, driven largely by the expiry of Commonwealth energy bill relief subsidies. Water rates rose 7.1%.
For a homeowner couple at the ASFA comfortable standard, utilities (electricity, gas, water) account for around $2,500 to $3,000 a year. For those still in larger family homes, it can be significantly higher. This is one of the categories where downsizing, insulation, solar, and behavioural changes can meaningfully shift the annual budget.
5. Transport
Transport is a mid-sized category that includes vehicle running costs, public transport, taxis and rideshare, and any interstate or intercity travel that is not classified as leisure.
For a homeowner couple at the comfortable standard, transport typically costs $8,000 to $10,000 a year, covering fuel, registration, insurance, maintenance, and public transport. Interestingly, automotive fuel actually fell 0.8% over the year to December 2025, one of the few retiree budget categories to see a decline. Registration and insurance have risen faster.
Many retirees find their transport costs drop in the first few years of retirement (no commuting) and then rise again as they travel more in the go-go years.
6. Leisure, entertainment, and lifestyle
This is the category where the gap between the ASFA comfortable and modest standards is largest. A comfortable retirement includes:
- Regular dining out
- Club and gym memberships
- Domestic holidays and one occasional overseas trip
- Hobbies, sports, and community activities
- Cultural spending (theatre, concerts, events)
For a comfortable homeowner couple, leisure and lifestyle spending typically runs $16,000 to $18,000 a year. That drops to $6,000 to $8,000 for a modest retirement, which limits most leisure to local activities and lower-cost travel.
Domestic travel costs rose 9.6% over the past year, which is worth flagging because it disproportionately affects retirees in their active years.
7. Aged care and home support (later in retirement)
Aged care sits later in the retirement expense curve, but it is often the single largest expense any Australian faces. Aged care costs are made up of several components, and every situation depends on individual assessment, health status, and location.
The main cost components under the Australian aged care system are:
- Basic daily fee, set at 85% of the maximum single Age Pension rate and paid by all residents
- Means-tested care fee, calculated based on income and assets, with annual and lifetime caps that are indexed
- Accommodation cost, either a Refundable Accommodation Deposit (RAD) or a Daily Accommodation Payment (DAP), which varies substantially by facility and location
- Extra services fees for premium services in some facilities
Home care packages, which support ageing in place, have four levels with different funding amounts, and involve co-contributions based on the individual’s financial situation. The My Aged Care website (Services Australia) is the authoritative source for current fees and eligibility.
Aged care generally warrants specialist advice, because the interaction between aged care fees, the Age Pension assets test, and the family home is complex and structural mistakes can be expensive. This is not something Wealthlab specialises in as a service, but planning your broader retirement finances around the likelihood of some level of aged care in the later years is part of the retirement conversation.
How retirement spending changes through the phases
Retirement spending is not flat. It typically follows a “smile curve” pattern, sometimes called the go-go, slow-go, and no-go years.
Go-go years (roughly 60 to 75): Spending is at its highest. Retirees are healthy enough to travel, active in hobbies, spending on the family. This is when the leisure and lifestyle line is at its peak.
Slow-go years (roughly 75 to 85): Travel and leisure spending tapers. Some travel becomes physically harder, health issues start to influence spending patterns. Total spending typically drops 10 to 20% from the go-go phase.
No-go years (roughly 85+): Leisure and travel spending drops significantly, but healthcare and aged care spending rises sharply. The overall total often ends up similar to the go-go years, but the composition has changed completely.
Scott and Phil covered the emotional side of this spending pattern in Episode 8 of the Wealthlab Podcast, The Psychology of Money. Scott’s observation on the episode: “The goal isn’t to die with the largest super balance possible. The goal is to convert capital into confident living.” The specific pattern we generally see in practice is that people who spent 40 years accumulating super often underspend in the early retirement years when they are healthy enough to enjoy travel, then can’t spend the money in the way they would have liked in later years.
The homeowner vs renter divide
The single most important distinction in Australian retirement expenses is whether you own your home outright. It changes almost every part of the budget.
Homeowners:
- Housing costs sit at $8,000 to $10,000 a year (rates, utilities, insurance, maintenance)
- Family home is exempt from the Age Pension assets test
- Housing costs are relatively fixed and predictable
- Downsizer contribution rules allow up to $300,000 per person to move into super after selling
Renters:
- Housing costs sit at $25,000 to $40,000 a year depending on location
- Assets test threshold for the Age Pension is higher for non-homeowners ($579,500 for singles at March 2026 vs $321,500 for homeowners), which can offset some of the higher rent cost
- Housing costs rise with market rents, less predictable
- ASFA’s modest renter budget adds meaningful extra weekly rent over the modest homeowner budget
Renters generally need $150,000 to $250,000 more in retirement savings to fund the same lifestyle as a homeowner. This is one of the most consequential single factors in whether a retirement plan works.
Scott and Phil covered the downsizer contribution option and its Age Pension implications in Episode 2 of the podcast, including the 90-day deadline and how selling the family home converts an exempt asset into an assessable one under the Age Pension means test.
What happens when spending outpaces income
For most Australians, retirement income comes from a blend: superannuation drawdowns, the Age Pension from 67, and any personal savings or investments held outside super. The Age Pension currently pays $31,223 per year for singles and $47,070 per year combined for couples, as at 20 March 2026, subject to means testing.
Where retirement plans genuinely come under pressure is when spending runs meaningfully above ASFA’s comfortable standard without a matching super balance, or when unexpected costs hit early in retirement (major home repairs, health events, or a spouse’s illness). We generally see three patterns emerge:
- Retirees who spend too much in the early years and hit financial stress in their late 70s
- Retirees who spend too little in the go-go years, arrive at 85 with a large super balance they can no longer meaningfully use, and regret the caution
- Retirees who plan the spending curve deliberately, generally with an adviser, and land in the middle
The third pattern is what proper retirement planning is designed to produce.
Where next in our retirement guides
- How Retirement Works in Australia covers the three-pillar retirement income system
- How Long Will My Retirement Savings Last? helps model the drawdown side
- What Retirement Income Do I Need? covers income targets
- Superannuation strategies for accumulation and pension phase planning
- Pension and Centrelink planning for Age Pension optimisation
Want to see your numbers? The free Wealthlab super calculator gives a quick sense of how your balance, spending and Age Pension interact.
Frequently asked questions
What is the single biggest expense in retirement in Australia?
For homeowner retirees, housing (rates, utilities, insurance, maintenance) and healthcare typically compete for the top spot, with food a close third. For renters, housing sits at the top by a significant margin. Over a full retirement, healthcare tends to be the largest cumulative expense because it rises sharply in the later years.
How much does a comfortable retirement cost in Australia in 2026?
ASFA’s December 2025 quarter retirement standard sets the comfortable lifestyle at $54,840 per year for a single homeowner and $77,375 per year for a homeowner couple. These figures assume the retiree owns their home outright and is in reasonably good health, aged 65 to 84.
How much does a modest retirement cost?
ASFA’s modest retirement standard for homeowners is $35,503 per year for singles and $51,299 per year for couples (December 2025 quarter figures). At this level, the Age Pension covers most of the required income, with super providing a smaller top-up.
Do retirement expenses go down when you stop working?
Some expenses drop (commuting, work clothes, work-related meals, mortgage repayments if the home is paid off). Others rise (healthcare, leisure, travel, home maintenance). On average, retirees spend around 65 to 80% of their pre-retirement income, but the mix inside that changes significantly.
Why do retirees face higher inflation than the general population?
Retirees spend a larger proportion of their income on categories that have risen faster than headline CPI: electricity (up 21.5% over the year to December 2025), water rates (up 7.1%), property rates (up 6.2%), and food staples like beef and coffee. General CPI rose 3.8% over the same period, so retiree cost pressure is materially higher.
How much does healthcare cost in retirement?
Healthcare costs vary widely by health, private insurance choices, and age. Approximately 34% of average retirement savings are consumed by healthcare-related costs across a typical retirement, with the final 24 months of life accounting for 50 to 80% of lifetime healthcare spending. Annual out-of-pocket costs typically rise from around $2,000 to $3,000 in the early retirement years to $10,000 or more in the later years, before aged care spending kicks in.
What is the biggest retirement expense for renters?
Rent, by a significant margin. Non-homeowner retirees typically pay $18,000 to $25,000 more per year in housing than homeowners, depending on location. ASFA now publishes a separate renters’ retirement standard because the difference is material enough to warrant its own budget model.
How does the Age Pension affect retirement expenses?
The Age Pension covers most of the ASFA modest lifestyle at the current rate ($31,223 single, $47,070 couple combined from 20 March 2026). For a comfortable lifestyle, the pension typically covers around 40 to 60% of the required income, with super and other savings providing the rest. The pension is means-tested, so higher balances reduce the entitlement.
How can I budget for retirement expenses?
Start with your current spending as a baseline, then adjust for retirement changes: no work-related costs, no mortgage (if paid off), more discretionary time, higher healthcare costs later. ASFA’s detailed budget breakdown by category is a useful reference point. Most retirees benefit from reviewing spending annually rather than setting a fixed budget in year one, because retirement expense patterns shift meaningfully across the go-go, slow-go, and no-go phases.
When does aged care become an expense?
For most Australians, aged care becomes a significant expense from age 80 to 85, though it can start earlier depending on health. Home care packages typically come first, followed by residential aged care for those who need it. Aged care fees are a mix of a basic daily fee (set at 85% of the Age Pension), a means-tested care fee, and an accommodation payment. The My Aged Care website (Services Australia) is the authoritative source for current fees and eligibility.
Your next step
Retirement expenses are one of the most consistent things to underestimate in a retirement plan. The gap between what you think you’ll spend and what you actually spend, especially in the early years and the late years, is where most retirement budgets go wrong.
If you want to talk through what your own retirement is likely to cost and how your super and Age Pension entitlement stack up against that number, book a free chat with the Wealthlab team. No pressure, no jargon. Not ready for a call? The free Wealthlab retirement quiz takes about 60 seconds and gives you a snapshot of where you stand.
