What Should I Include in a Retirement Budget?

One of the most important questions when planning for retirement is also one of the simplest: how much will I actually spend?

You might know your super balance. You may have an idea when you'd like to retire. You might even have calculated how much retirement income you expect to receive.

But without understanding your expenses, it's difficult to know whether that income will support the retirement you want.

That's where a retirement budget comes in.

A retirement budget isn't about cutting out everything you enjoy. It's about getting a realistic picture of what your life after work could cost.

Here are the main areas to consider.

1. Start With What You Spend Today

You don't need to guess what retirement will cost from scratch.

Start with your current spending.

Go through your bank and credit card statements and look at where your money has actually gone over the past several months.

Separate your expenses into categories such as:

• Housing
• Food
• Utilities
• Transport
• Insurance
• Healthcare
• Entertainment
• Travel
• Debt repayments
• Family commitments
• Personal spending

This gives you a useful starting point.

Then ask yourself which expenses are likely to increase, decrease or disappear when you retire.

2. Housing Costs

Housing will usually be one of the first areas to consider.

Even if you expect to own your home outright in retirement, living in it isn't free.

Your retirement budget may need to include:

• Mortgage or rent
• Council rates
• Water charges
• Home and contents insurance
• Electricity and gas
• Internet and telephone
• Repairs
• General maintenance
• Gardening
• Strata fees, if applicable
• Major future repairs or renovations

Think beyond your normal monthly bills.

A hot-water system, air conditioner, roof or major appliance may eventually need replacing.

Those larger costs are easy to forget when creating a retirement budget.

3. Food and Everyday Living

Groceries won't disappear when you retire, but your spending habits may change.

Include things such as:

• Groceries
• Takeaway meals
• Restaurants and cafés
• Household supplies
• Clothing
• Haircuts and personal care
• Pet expenses

You may also find that being home more often changes some of these costs.

The aim isn't to create the cheapest possible budget.

It's to create one that reflects how you realistically expect to live.

4. Transport

Retiring may mean you no longer have daily commuting costs.

But that doesn't mean transport becomes free.

If you plan to keep a car, consider:

• Registration
• Insurance
• Fuel
• Servicing
• Tyres
• Repairs
• Roadside assistance
• Eventual vehicle replacement

If you expect to use public transport, taxis or rideshare services more often, include those as well.

A vehicle replacement is particularly easy to overlook.

If you're planning for a retirement that could last 20 or 30 years, there's a reasonable chance you'll need to replace your car at some point.

5. Healthcare

Healthcare deserves its own section in your retirement budget.

Your costs may include:

• Private health insurance
• Medical appointments
• Dental treatment
• Prescription medication
• Optical expenses
• Hearing services
• Physiotherapy
• Specialists
• Medical equipment
• Other out-of-pocket healthcare costs

Your current healthcare spending may not necessarily reflect what you'll spend later in retirement.

Allowing some room for changing healthcare needs can make your budget more realistic.

6. Insurance

Review the insurance you expect to keep after you stop working.

That could include:

• Home and contents insurance
• Car insurance
• Private health insurance
• Travel insurance
• Life insurance
• Other personal insurance

Some insurance held through superannuation may also change or end as you get older or when your circumstances change.

Check what cover you currently have rather than assuming it will continue indefinitely.

7. Travel and Holidays

For many Australians, travel is one of the things they're most looking forward to in retirement.

If that's part of your plan, put it in the budget.

Don't treat holidays as an expense you'll somehow pay for later.

Consider:

• Australian holidays
• Overseas travel
• Caravan or motorhome costs
• Flights
• Accommodation
• Fuel
• Travel insurance
• Tours and activities
• Meals while travelling

Your travel spending may also change throughout retirement.

You might spend considerably more on travel during the first ten years of retirement and less later.

Your retirement budget doesn't have to assume you spend exactly the same amount every year.

8. Hobbies and Entertainment

Retirement isn't simply about paying bills.

You've worked for years to reach this stage of life, so your budget should include money for enjoying it.

That might include:

• Golf
• Fishing
• Camping
• Clubs
• Gym memberships
• Sporting events
• Streaming services
• Restaurants
• Movies
• Hobbies
• Social activities
• Community groups

These expenses are part of your lifestyle.

Leaving them out may make your retirement budget look better on paper, but it won't necessarily reflect the retirement you're actually planning.

9. Family and Gifts

Many retirees continue helping children, grandchildren or other family members.

That might include:

• Birthday and Christmas gifts
• Family holidays
• Helping grandchildren
• Education expenses
• Financial assistance
• Travel to visit family

If helping family is important to you, consider including an amount in your retirement budget rather than treating every payment as an unexpected expense.

10. Debt Repayments

If you expect to retire with debt, include the repayments.

This could include:

• Mortgage
• Personal loans
• Car finance
• Credit cards
• Investment debt

Then consider what happens to your retirement budget if those debts are paid off.

Reducing debt before retirement can reduce the amount of income you need to fund your lifestyle, but decisions about using super or investments to repay debt should be considered carefully.

11. Large and Irregular Expenses

This is where many budgets fall short.

Not every retirement expense arrives weekly or monthly.

Think about expenses such as:

• Replacing a car
• Home renovations
• Major home repairs
• New appliances
• Dental work
• Family emergencies
• Major holidays
• Technology replacements

Instead of pretending these expenses won't happen, build an allowance for them into your long-term plan.

12. Keep an Emergency Buffer

Life doesn't become completely predictable when you retire.

An emergency reserve can help deal with unexpected expenses without immediately disrupting your regular retirement income.

The appropriate amount will depend on your circumstances.

The important point is to recognise that unexpected expenses are likely to occur at some stage.

How Much Do You Need to Spend in Retirement?

There isn't one number that applies to every Australian.

Your retirement costs depend on factors such as:

• Whether you own or rent your home
• Whether you have debt
• Where you live
• Your health
• Your travel plans
• Your hobbies
• Your family commitments
• The lifestyle you want

Retirement spending benchmarks can be useful as a comparison, but they shouldn't replace your own budget.

Your retirement belongs to you.

Your budget should reflect that.

Create More Than One Retirement Budget

One useful approach is to create several scenarios.

For example:

Essential budget: What would it cost to cover your basic needs?

Expected budget: What do you realistically expect to spend?

Lifestyle budget: What would it cost to include more travel, entertainment and discretionary spending?

This can give you a much clearer picture than relying on one number.

It can also help you understand which expenses could be adjusted if your financial circumstances change.

Your Retirement Budget Will Change

A retirement budget isn't something you create once and never look at again.

• Prices change.
• Your health may change.
• Travel may change.
• Your housing situation may change.
• Your income may change.

Review your budget regularly and adjust it as your circumstances develop.

The Australian Government's Moneysmart guidance recommends using your current spending as a starting point and considering housing, utilities, food, healthcare, leisure and other living costs when planning for retirement.

The important thing is to start.

For general government guidance, see Moneysmart retirement planning

Ready to Build Your Retirement Budget?

Knowing what retirement could cost is one of the foundations of good retirement planning.

The RGX Retirement Budget Planner is designed to help you organise your expected expenses and see the bigger picture more clearly.

When you're ready to take a closer look at your retirement expenses, explore the RGX-101 Retirement Budget Planner

If you're at the beginning of your retirement journey, start with our Free 10-Step Retirement Planning Checklist and work through the important areas one step at a time.