How Long Will My Money Last When I Retire?

Retiring early is an appealing idea: more time for travel, hobbies, family, and personal fulfilment. But there’s a price. More years off work mean more expenses, more risk, and greater demands on your savings, which raises the question: How long will my money last when I retire? In Australia, with rising life expectancy, increasing cost of living, and a changing superannuation and Age Pension environment, planning for early retirement requires careful, data-informed calculations.

This article explains the effect of extra years in retirement, what research shows about returning to work, and gives a straightforward method to calculate how much you’ll need if you choose to retire before traditional ages.

What is “Early Retirement” in Australia

• According to the ABS (Australian Bureau of Statistics), in 2020-21 the average age of retirement (people ceasing full‐time work or exiting the labour force) was ~ 56.3 years for all retirees aged 45+. (Australian Bureau of Statistics)
• The average intended retirement age is older (~ 65.4 years in 2022-23). (Australian Bureau of Statistics)
• Many people wishing to retire before that are hoping for what might be called “early retirement” — permanently stopping or significantly reducing paid work before the mid-60s.

Thus “early retirement” might mean retiring at, say, age 55, or even earlier, depending on one's expectation and health, housing status, lifestyle etc.

The Big Question For Retirees is: How Long Will My Money Last When I Retire?

One of the findings in recent surveys is that a non-trivial proportion of retirees end up returning to paid work (or considering it) after they’ve retired. Here are key statistics:

• From a survey of ~3,005 retirees/transitioning retirees in the Older Australians’ Perspectives on Working After Retirement research: 17.3% said they had already re-entered paid work after retiring, and another 18.5% said they would consider doing so. Meanwhile, nearly two thirds (~62.5%) said they would not consider going back. (National Seniors Australia)
• This suggests that about 1 in 6 retirees actually go back into the paid workforce at some point (with more considering doing so), often because of financial pressure. (National Seniors Australia)
• Earlier work (older, but still relevant) found among early retirees (before pension-age), many retirements are involuntary (health, redundancy, caring, etc.). For example, in one study, among men who retired early during 1992-96, about 50% experienced “employment problems” (difficulty finding work) after, and many reported their early retirement was induced rather than purely voluntary. (ASFA)

So, early retirement carries the risk that you may later need or want to return to work, sometimes because savings or pension income don’t stretch as expected.

How Longevity and Extra Retirement Years Change the Required Funds

Life Expectancy and Years in Retirement

To understand how much more money you need if you retire early, you need data on how long those retirement years might be:

• Current life expectancy: women ~ 85 years, men ~ 81 years (ABS / Australian Government actuary data). 
• If you retire at traditional ages (65-67), you are planning roughly 15-25 years in retirement. If you retire earlier, say 55-60, you may be looking at 25-30+ years of retirement years. Thus an extra 10-15 years of expenses compared to “standard” retirement ages.

Cost of Living in Retirement: Standards and Benchmarks

You then need to estimate annual living expenses in retirement. Key benchmarks:

• The ASFA Retirement Standard gives annual costs for a “comfortable lifestyle” for singles and couples aged 65-84. As of latest data:
  • Single, comfortable: ~ A$51,630 p.a. (INTHEBLACK)
  • Couple, comfortable: ~ A$72,663 p.a. (INTHEBLACK)

• For younger retirees or those seeking early retirement, other sources suggest single people might need ~$595,000 in savings, couples ~$690,000, assuming home-ownership and reasonable health, to retire at “standard” age comfortably. 

But retiring earlier multiplies the number of years you're drawing on savings, possibly before Age Pension eligibility, and increases total required funds.

Key Additional Challenges When Retiring Early

Retiring early introduces constraints and risk multipliers:

1. Access to Age Pension & Super Preservation Age
   • You can only access your super fully once you reach Preservation Age (which is between 55 to 60 depending on birth year) unless in certain hardship or other exceptional circumstances. 
   • Age Pension eligibility comes later (67 for many). If you retire earlier, you may have a gap between when you stop working and when you receive Age Pension.

2. Investment Risk & Inflation
   • More years of retirement mean more exposure to inflation eroding purchasing power.
   • If investments perform poorly or markets fall, drawing down savings over longer periods risks running out of money (longevity risk).

3. Health, Aged Care and Unexpected Costs
   • As you age, health costs tend to increase. Retiring earlier means more years during which health risks accumulate.
   • Housing maintenance, insurance, travel (if desired) etc. must be considered.

4. Lifestyle Creep
   • People often assume lifestyle in early retirement stays static. But early retirement allows more time for travel, hobbies, etc. – which tend to cost more. Without careful budgeting, expenses can escalate.

Research Findings About Financial Stress & Poverty for Early Retirees

• In Australia, early retirees (aged 55-64, no longer in the labour force) are more likely to be in financial stress compared to those who retire at older ages or own a home. Lower income, fewer savings, or reliance on partial pensions contribute. (treasury.gov.au)

• For example, the Retirement Income Review (commonwealth report) states that retirees who retire involuntarily before pension age are especially vulnerable. (treasury.gov.au)

How Much More Money Do You Actually Need If You Retire Early?

Here’s a structured way to estimate how much you’ll need if you aim to retire early (say age 55-60) instead of at 65-67.

Step	What to Estimate / Decide	Why It Matters
1. Decide your retirement (stop work) age	The younger you retire, the more years expenses must be funded before pensions or other income kick in. E.g. retiring at 55 vs 65 adds ~10 years.
2. Estimate Life Expectancy / Retirement Horizon	Use actuarial tables: e.g. if male 55, you might live to 81+, so ~ 26 years; female might be longer. Add buffer years for unexpected longevity.
3. Define Your Desired Annual Retirement Budget	Based on lifestyle (modest vs comfortable), home ownership status, location. Use benchmarks like ASFA, plus your own spending projections. Include inflation.
4. Identify Non-Savings Income Streams	Age Pension (partial or full), other pensions, rental income, investment income. Note what part you can expect, and when it starts. Early retirees may have a long period without Age Pension.
5. Calculate the Lump Sum Needed	A rough formula:

Required Lump Sum = (Annual Budget − Other Income) × Years in Retirement + buffer margin (for unexpected costs / inflation / market risk).
For example, if you want $60,000/year income, expect to receive $20,000/year from other sources, retire at 55 and live 30 years: need ($60,000-$20,000)×30 = $1,200,000, plus buffer. |
| 6. Consider Withdrawal Rate & Investment Returns | What realistic return on your invested savings can you expect? What safe withdrawal rate (e.g. 3-5%) works? Lower rate or conservative investments mean you need more lump sum. |
| 7. Account for Fees, Taxes, Inflation, Health & Housing Costs | All of these erode net value of your funds. For example, inflation reduces purchasing power; health/aged care often increase with age; property maintenance etc. |
| 8. Plan for Upside / Downside | Build guardrails: in bad years, consider working part-time, trimming expenses, delaying super withdrawals, using home equity etc. |

Example Scenarios

Here are two simplified scenarios to illustrate:

Scenario	Retire Age	Expected Retirement Duration	Annual Desired Budget	Other Income (Pension etc)	Lump Sum Needed
A: Moderate lifestyle, single, retire at 60	60	25 years	A$50,000/year	A$15,000 starting at age 67 (Age Pension etc)	(50,000 − 15,000) × 25 = A$875,000 + buffer (say 15-20%) → ~ A$1,045,000
B: Comfortable lifestyle couple, retire at 55	55	30 years	A$90,000/year	A$30,000 starting at age 67	(90,000 − 30,000) × 30 = A$1,800,000 + buffer → ~ A$2,100,000

These numbers are illustrative and assume home ownership, good health, moderate risk investments, etc. If you rent, have health issues, or want travel/luxury, required sums rise.

What Research Suggests About How Many Must Return to Work & Why

We noted above that about 17.3% of retirees had already returned to work, and about 18.5% would consider doing so. The primary motivation is financial need: when savings, pensions, or superannuation do not provide sufficient income to maintain lifestyle or cover rising expenses. (National Seniors Australia)

Older studies (though less recent) show among early retirees (pre-pension age), a large proportion had early retirement for involuntary reasons (health, redundancy). Those people may be more likely to later desire returning to work. (ASFA)

Returning to work can help in two ways:

• Supplementing income, thus reducing how much savings must be withdrawn each year (preserves capital).

• Continued super contributions (if still working), possibly boosting super and delaying full reliance on other savings.

But returning to work may have trade-offs: lower hours, lower pay, possibly health or suitability constraints, tax / pension income test interactions, etc.

Practical Advice: How to Decide If Early Retirement is Feasible for You

Based on research and financial modelling, here are guidelines:

1. Do the detailed budget: list all your current expenses, then project what they’ll be in retirement (which ones drop off, which increase). Don’t forget one-off expenses (travel, major home maintenance) and rising costs (medical, insurance).
2. Estimate conservative returns and withdrawal rates. Many financial planners suggest safe withdrawal rates of 3-4% for long retirements (20-30+ years) to avoid depleting capital too early.
3. Factor in pension eligibility and gaps. When and how much Age Pension or other government supports you can expect; policy changes; eligibility filters (income/assets tests).
4. Include health care, insurance, emergencies. Build in extra buffer for unexpected shocks (health, investment downturns).
5. Revisit periodically. Even with the best plan, circumstances change (markets, health, family, policy). Plan for being flexible (e.g. doing part time work if needed).
6. Speak to a financial professional. Especially for tax, superannuation, estate planning – the details matter, and small changes (e.g. difference of 1‐2% return, or when you spend) can make big differences over decades.

Summary: Key Take-aways

• Extra years in retirement multiply required savings — retiring 10 years early can require roughly 25-50% more savings (or more) depending on lifestyle, inflation, other income.
• Many early retirees underestimate how long retirement will last and how much will be spent in those years.
• About 1 in 6 retirees in Australia have already returned to paid work; another significant portion consider it. Financial pressures are a common cause. (National Seniors Australia)
• Using benchmarks like ASFA’s standards helps, but you may need to plan for above-benchmark lifestyle if that’s what you want.
• Be realistic about income sources, risk, inflation, buffers.

Sample Checklist: Questions to Ask Yourself

• At what age do I expect (or want) to retire?
• What is my current annual spending, and what will I want spending to be in retirement?
• How many years will be “without pension / government support”?
• What returns on investments/am I willing to accept?
• What withdrawal rate can I sustainably use without exhausting my savings?
• What health, housing, travel, life style costs may increase as I age?
• Do I have a buffer for emergencies / bad investment years?
• Am I prepared (if needed) to return to work, part time, to supplement income?

Concluding Thoughts

Early retirement is an appealing goal. But it isn't merely about having enough savings at a point in time — it's about having savings sufficient to last more years, under uncertainty; about balancing lifestyle desires against risk; and about being prepared should financial pressures force a re-entry to work.

With life expectancies rising, cost of living pressures, and super/pension eligibility ages fixed (or rising), many find that aiming for retirement in their 60s is more feasible than retiring in their 50s unless they have very strong savings, very modest expenditure, or additional income streams. If you are considering early retirement, the best move is to model your own scenario, use conservative assumptions, allow extra margin, revisit often, and have contingency plans.

References

Below is a list of the main research, reports, and data sources cited above.

1. Australian Bureau of Statistics. Retirement and Retirement Intentions, Australia, 2022-23. Average retirement age, intended retirement age. (Australian Bureau of Statistics)
2. Australian Bureau of Statistics. Retirement and Retirement Intentions, Australia, 2020-21. (Australian Bureau of Statistics)
3. ASFA Retirement Standard (latest) – comfortable / modest lifestyle annual expenditure for singles / couples. (ASFA)
4. Older Australians’ Perspectives on Working After Retirement survey: % who re-entered work / would consider re-entering. (National Seniors Australia)
5. Super Consumers Australia. Retirement Savings Targets / Consultative Report: Retirement Spending Levels. (superconsumers.com.au)
6. Retirement Income Review (Australian government). Adequacy of early retirement, financial stress etc. (treasury.gov.au)
7. Australian Bureau of Statistics, life expectancy data combined with Australian Government Actuary. (australianretirementtrust.com.au)
8. Firstlinks / ABS / money.com.au article Retiring young: Is 50 really the new 65? (First Links)