Retirement income of $100k

The most popular question that I receive from new clients, readers of my blog or listeners of this YouTube channel is: “How much do I need to have saved to live comfortably on $100,000 for life without the fear of running out of money”, which is the key concern for most Australians, assuming that one has no other income sources, but personal savings only.  

Therefore we are talking about the situation of spending the same amount of money each year with expenses being adjusted annually with inflation. 

If you read articles, books, and most blogs you will find that to have an income of $100,000pa adjusted for inflation, you need to accumulate $2mil in your superannuation. We always recommend superannuation savings as your income stream, as you can easily draw the full income of $100,000 with ZERO tax payable, unlike any other income source.  

So let’s review this theory, is $2mil enough? Will you be able to be provided with ongoing $100,000pa income adjusted to inflation annually. 

It appears that $2mil is the magic number to have as personal superannuation savings in order to enjoy the requested retirement income for life. 

Why this number? Well mostly because this is the maximum you can transfer to a pension fund. From 1st July 2025 the transfer balance cap was increased from $1.9mil to $2mil. This is the maximum in 2025 that you can move from your superannuation accumulation account to a pension account that will provide you with the tax-free pension income. If you have more savings than $2mil, you can keep the remaining balance in your superannuation accumulation account or in your personal investment account.  

Of course, if you are a couple, each one of you can have that $2mil in a pension account. 

So why do I question that simple answer that $2mil is the number for reaching income of $100Kpa plus annual inflation.  

The reasons are:

1. The outcome is different for a single retiree and a couple – a single retiree can have up to $2Mil in a pension account, while a couple could have up to $2Mil each, therefore a total of $4Mil

2. The age matters, there will be a different strategy for a couple of a similar age, when comparing to a couple with a significant age gap between partners

3. The age of commencing your retirement will also matter. The earlier you retire, the longer your retirement period, therefore your money needs to last longer.

4. Your investing style will matter as the outcome will be different for a very conservative investor as opposed to a growth oriented investor.

5. Additionally, and based on years of experience, I have noticed that most retirees will spend more in their first 10 to 15 years of retirement when enjoying travels, going out with friends and having an active lifestyle, with expenses dropping later on in life with a lower level of activities.

So I have run the retirement calculator, for a couple retiring together both at age of 65 and both with $1Mil in their pension account, invested in a balanced portfolio:

Income projections for 30 years with average balance portfolio returns of 7%pa

From this projection we can see the following:

• There is no issue with being provided with the required income that is annually adjusted to inflation. There are years when the minimum pension payments are lower than the requested income, but that has been adjusted as additional income withdrawals. Interestingly enough the calculator shows the Age Pension eligibility at the age of 93, but if planned correctly with the assistance of retirement planning specialist, this eligibility could come much faster and at much younger age. If that was to happen, an income from Age Pension can replace part of your own income paid from your pension account, ensuring your savings will last longer.

Let’s now look at what happens to your pension balances, will the money last the distance? Will your pension accounts still have any money left?

This chart shows the value of your total investments:

• At the age of 95, you still have in the account over $1.6mil – Net capital value
• The value of that total is actually worth $671K in todays dollars (this is what we call Net capital PV – present value)

Those graphs are just an example of what the default option for your retirement planning looks like, but lots of improvements can be made by a specialist retirement planner, such as:

1. Make your money last even longer or leave a greater inheritance for your beneficiaries – often children

2. Allow the access to government benefits earlier

3. Establish an appropriate for your retirement needs investment portfolio that would reduce the volatility while improving income certainty and returns

4. Ensure that your retirement is not based on hoping for positive market returns, but rather a solid, predictable and reliable retirement structure of utilizing a comprehensive income portfolio that will ensure income and asset longevity

5. Ensure that whatever is left-over to be passed on to your beneficiaries, such as your children for example, will be done with tax minimization or even fully tax-free if possible.

If not done correctly, your estate or your beneficiaries could lose up to 17% of the inheritance value from your super, this is a silly tax, that could be avoided if only you asked for assistance and advice. Imagine paying 17% tax on $2mil. That is $340,000 tax that can be reduced or avoided altogether, meaning your beneficiaries could receive that money instead of the ATO.

As I mentioned before, this is just a basic example of a very simple couple situation. Life is not that simple and most certainly is more complicated with many changes needed to be implemented and strategy or portfolio needing adjustments as you go through your retirement. So retirement planning is a very personal exercise, different for every couple, different for singles and needs to be prepared specifically for your situation and not relied upon a default calculator. This is a good starting point, but not a calculator to rely on for your full retirement.

If this is your situation and you would like to find out how to set up your retirement income to ensure $100K pa for life, please visit our website AboutRetirement.com.au or contact our office directly to set up a meeting with the retirement planning specialist.  

By: Katherine Isbrandt CFP®
Money Strategist & Retirement Planner
Principal of About Retirement