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The third annual How Australia Retires report found that younger Australians believe they will need nearly double what today’s retirees spend, while those between 25-34 years expect to need 59 per cent more annual retirement income than they did two years ago.

Additionally, one in three Millennials and one in four Baby Boomers anticipate retiring with mortgage debt while nearly two-thirds of retirees plan to remain in their current homes rather than downsize.

Daniel Shrimski, managing director, Vanguard Investments Australia, said in just two years there has been a sharp rise in retirement income expectations among younger Australians.

“It’s clear that needs and aspirations for retirement are evolving – and fast,” Shrimski said.

Vanguard surveyed 1,800 Australians aged 18 and over, asking them to estimate the annual household income they believe they’ll need in retirement, expressed in today’s dollars to factor in inflation.

Australians aged 25 to 34 now expect to need $106,000 a year to retire comfortably, a 59 per cent jump from $66,000 in 2023 and up from $96,000 in 2024.

For Australians under 45, the average retirement income estimate has climbed to $100,000, compared to $89,000 in 2023 and $97,000 last year. By contrast retired couples report spending just $55,000 annually, highlighting the growing gap between expectations and reality.

“Our survey shows that many younger Australians have a pessimistic outlook on retirement,” Shrimski said.

“Meanwhile, retirees — who are more likely to own their homes and have built financial resources — tend to have a more optimistic view.”

Despite rising retirement income expectations, the study found almost one in two working Australians (48 per cent) have no plan for how they will prepare for retirement.

The study also found that retirees with a solid retirement plan were three times more likely to feel highly confident in their ability to support their desired lifestyle, and 65 per cent more likely to have a positive outlook on retirement.

Furthermore, the survey revealed that many Australians have gaps in their financial literacy and struggle to understand basic concepts like interest, inflation and the importance of diversification in managing risk.

One of the biggest gaps was in knowledge of the “preservation age” at which Australians can access their superannuation, which is age 60 for people born on or after 1 July 1964. Just 40 per cent of respondents were able to answer that question correctly in this year’s survey.

While two-thirds of today’s retirees own their homes outright, younger Australians anticipate a very different housing reality in retirement. More than one in three Millennials (36 per cent) expect to have a mortgage when they retire, compared to 27 per cent of Gen X and 24 per cent of Baby Boomers. Meanwhile, only 8 per cent of retirees surveyed were still paying a mortgage this year.

Of those in the workforce who are expecting to retire with mortgage debt, nearly half (47 per cent) said they expect to continue making payments into retirement, while one in four (25 per cent) plan to eventually pay off their mortgage in a single transaction using their superannuation.

Meanwhile, about one in five retirees are renting, and only 10 per cent of them feel highly confident about their retirement. That compares with 35 per cent of retirees overall.

“Renting or carrying mortgage debt into retirement isn’t just a financial burden — it adds emotional stress,” Shrimski said.

“It’s something we’re increasingly concerned about as we look at how retirement is evolving for Australians.”

Shrimski added that while there’s a perception older Australians will sell their homes to downsize, the research suggests otherwise.

“Less than 30 per cent of retirees have moved or plan to move since retiring,” he said.

“And when you ask retirees how they think about the family home, 63 per cent said they intend to stay for life or leave it as an inheritance. That compares to only 9 per cent who view their home primarily as a source of retirement income. That’s quite different from the public perception around downsizing. Most retirees simply aren’t planning to sell.”

Keeli Cambourne
September 23 2025
smsfadviser.com