The retirement rule book just changed. Here’s what you need to know

Opinion

February 28, 2026 — 5:01am

If you’re over 50 and paying even passing attention to your financial future, the last couple of weeks have been unusually busy. Within just a fortnight, almost every key number in Australia’s retirement system has either changed or is about to.

The benchmarks for how much you need to retire. The rules around how much you can contribute to superannuation. The rates used to calculate your age pension. The caps on how much super can sit in the tax-free retirement phase.

That’s not normal. Usually, these things shuffle along quietly, one at a time. Currently, they’re moving all at once, and if you don’t know what’s changing, you could easily be missing some opportunities.

So today I’m going to walk you through it all and explain what each change means.

Retirement now costs more

Let’s start with the number people ask me about most: how much do you actually need to retire?

The Association of Superannuation Funds of Australia, known as ASFA, has just updated its retirement benchmarks for the first time in three years. And the shift is significant.

The good news is that most of these changes work in your favour, or at least don’t harm you.

For a comfortable retirement, one that covers a decent lifestyle, a reasonable car, private health insurance, and yes, a modest amount of travel, couples now need $730,000 in super at retirement, up from $690,000. For singles, that figure has risen to $630,000, up from $595,000.

If you’re planning on a more modest retirement, relying largely on the full age pension with very little discretionary spending, the benchmarks are lower but have also jumped. Couples need $120,000 in super (up from $100,000), and singles need $110,000 (also up from $100,000).

There’s also a fairly new benchmark that’s been growing in importance: the renter’s retirement. For couples who rent in retirement and want a modest standard of living, factoring in rent assistance and the full age pension, the retirement savings target is $385,000.

For single renters, it’s $340,000. These numbers reflect one of the harder realities of retirement planning today: not everyone will own their home outright, and the figures are stark.

ASFA has also released their quarterly benchmarking of the annual cost-of-living targets, which I find really useful for putting the big number into perspective. A comfortable retirement now costs couples $77,375 a year and singles $54,840. A modest retirement costs couples $51,299 a year and singles $35,503. For renters on a modest budget, those annual figures rise to $67,639 for couples and $50,055 for singles.

And here’s something worth sitting with: even the “comfortable” budget only includes one frugal international holiday every seven years. So if you’re dreaming of exploring the world in retirement, as so many of us hope to, you’ll want to plan beyond the benchmark.

From March 20: the pension changes, and so do deeming rates

The government has just announced the latest round of age pension indexation, which kicks in on March 20, 2026. Twice a year, the pension is increased in line with inflation, this is the regular rhythm of how it works.

But this round comes with something extra, and it matters: deeming rates are also changing for the second time in several years.

Deeming is the mechanism Centrelink uses to calculate how much income it assumes your financial assets are generating – your savings, shares, term deposits and the like.

It doesn’t matter what those assets are actually earning in investment markets. Centrelink “deems” them to be earning a set rate, and that deemed income is factored into your pension income test.

The lower deeming rate will rise to 1.25 per cent, applied to financial assets up to $64,200 for singles and $106,200 for couples. And the upper deeming rate will rise to 3.25 per cent, and be applied to financial assets above those thresholds.

These rates were frozen during COVID and have only moved once since, in late 2025. The government has signalled that any future movements will be gradual, and the new rates still remain well below historical averages.

Still, if you’re receiving a part pension and have savings or investments, it’s worth checking whether this affects your entitlements, because higher deemed income can reduce how much pension you receive under the income test.

The age pension rates themselves and any indexation of the caps will be confirmed in coming days, before they roll out in March, so watch for those updated figures if you’re receiving the pension or planning your retirement income.

Super changes

There’s also been some big structural changes to superannuation, thanks to inflation. These land on July 1, and there are three worth understanding:

The Transfer Balance Cap (TBC) rises to $2.1 million: The TBC is the lifetime limit on how much super you can move into the retirement phase, the tax-free zone where your investment earnings are completely exempt from tax. From July 1, that cap increases from $2 million to $2.1 million, pushed up by December’s CPI result.

If you have more than the cap, the excess stays in the accumulation phase of super where earnings are taxed at 15 per cent rather than being tax-free. This cap matters most to people with larger balances, but it’s a number everyone in the system should be aware of.

The Total Super Balance cap also rises to $2.1 million: Your Total Super Balance is the combined value of all your superannuation interests, measured at 30 June each year. This figure doesn’t cap what you already have, it simply determines what moves you’re allowed to make next to get money into super.

Once your Total Super Balance hits the cap, you lose access to certain strategies: making non-concessional (after-tax) contributions to superannuation, using the three-year bring-forward rule, and accessing carry-forward concessional contributions. With the cap lifting to $2.1 million, some people who were previously locked out of these strategies will now find the door reopened to them.

Contribution caps are going up: Finally, wages growth this week has confirmed that from July there will be three important changes to the amounts you can contribute to super. First, the concessional (pre-tax) contribution cap will rise from $30,000 to $32,500.

Alongside this, the non-concessional (after-tax) contribution cap will rise from $120,000 to $130,000. And finally, the three-year bring-forward cap will increase to $390,000. These are some of the key ways to get money into super.

Unlike the Transfer Balance Cap, contribution caps aren’t indexed to inflation. They move with wage growth, specifically, Average Weekly Ordinary Time Earnings (AWOTE). So when wages rise meaningfully, as they have this week, these caps follow.

For people in their 50s and 60s, perhaps in peak earning years, selling an investment property, receiving an inheritance, or trying to make up for time lost earlier in life, these higher limits can make a genuine difference to what you’re able to get into super before you retire. After all, most peoples’ goal is to get money in and let it compound in a low-tax environment. This helps.

What does this all mean?

In my years of writing and talking about retirement, I’ve rarely seen so many settings move at the same time. Usually, we get one or two significant changes at a time. Currently, we’re getting a whole wave, and it’s happening because the cost of living has risen, wages have grown, and the system is having to play catch up.

The good news is that most of these changes work in your favour, or at least don’t harm you. Higher caps mean more room to contribute to super and compound over time. Higher pension payments mean a little more in your pocket if you’re an age pensioner.

And the updated ASFA benchmarks, while sobering for some, at least give you an honest picture of what you’re working towards as you plan for retirement.

The piece that deserves the most attention, particularly if you’re already drawing a part pension, is the deeming rate change. It’s subtle, but it can shift your age-pension entitlements, and if you’re unclear, it’s worth running your numbers or speaking to someone who can help you do that.

That might be a free financial services officer from Centrelink, a super fund adviser if your situation is relatively simple or a financial adviser if you’re looking for ongoing and more complex financial management.

Bec Wilson is author of the bestseller How to Have an Epic Retirement and the newly released Prime Time: 27 Lessons for the New Midlife. She writes a weekly newsletter at epicretirement.net and hosts the Prime Time podcast.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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