Yes, you can retire on $500,000 in Australia, but it will typically support a modest lifestyle rather than a comfortable or affluent one. For most homeowners retiring at age 67, combining a $500,000 super balance with a part Age Pension can generate around $47,500 to $55,000 per year in income. If you rent, retire early, or do not qualify for the pension, the numbers become much tighter.
Whether $500,000 is enough depends on your housing situation, spending habits, health, investment strategy, and geographic location. Below is a comprehensive breakdown based on Australian conditions in 2026.
Can You Retire on $500,000? (Quick Snapshot)
| Situation | Likely Outcome |
|---|---|
| Single homeowner (age 67) | $46,500–$50,500 annual income (modest lifestyle) |
| Single renter (age 67) | $50,000–$55,000 income, but higher rental pressure |
| Couple homeowners (combined $500k) | $55,500–$60,500 combined income (modest lifestyle) |
| Retire at 60 (no pension until 67) | Higher risk of running down capital early |
| Regional homeowner | More sustainable lifestyle on the same income |
| Sydney/Melbourne metro | Budget likely 20–30% tighter |
Assumptions Used in This Analysis
To keep the projections realistic and consistent, the following assumptions are used:
| Variable | Assumption Used |
|---|---|
| Retirement age | 67 |
| Life expectancy | 90 |
| Nominal investment return | 5.5% per year |
| Inflation | 2.5% per year |
| Real return (after inflation) | 3.0% per year |
| Withdrawal rate | 4.5% annually |
| Housing | Own home outright |
| Super structure | Account-based pension |
| Portfolio style | Balanced (growth + defensive mix) |
These assumptions reflect a balanced portfolio of Australian and international shares, fixed income, and defensive assets. The 3% real return (5.5% nominal minus 2.5% inflation) is what actually maintains your purchasing power over time.
Suggested Balanced Portfolio Allocation
Most super funds offer lifecycle or balanced options that approximate this allocation. Consult your fund’s investment menu or a financial adviser to align with your risk tolerance.
How Much Income Does $500,000 Generate?
Using a 4.5% withdrawal rate, a $500,000 super balance can provide:
$500,000 × 4.5% = $22,500 per year
Critical Tax Advantage
Super withdrawals after age 60 are completely tax-free in Australia. This means the full $22,500 goes into your pocket with no tax deducted. This is a significant advantage over other retirement income sources and improves your effective spending power considerably.
Many retirees with this balance will also qualify for a part Age Pension under current asset test thresholds.
Age Pension Eligibility with $500,000
The Age Pension uses both an assets test and an income test, paying whichever gives the lower result.
Asset Test Thresholds (2026 estimates)
| Status | Homeowner | Non-Homeowner |
|---|---|---|
| Single – Full pension | Up to $301,750 | Up to $543,750 |
| Single – Part pension | $301,750 to $656,500 | $543,750 to $898,500 |
| Couple combined – Full pension | Up to $451,500 | Up to $693,500 |
| Couple combined – Part pension | $451,500 to $986,500 | $693,500 to $1,228,500 |
With $500,000 in super as a single homeowner, you would receive a part Age Pension. The exact amount depends on your total assessable assets including any savings outside super.
Deeming Rules
Centrelink applies deeming rates to your financial assets to calculate deemed income:
- First $60,400 (single) or $100,200 (couple): 0.25% deemed
- Balance above threshold: 2.25% deemed
For $500,000, deemed income would be approximately $10,000 per year, which affects your pension entitlement.
Estimated Annual Retirement Income (Single Homeowner)
| Income Source | Estimated Annual Amount |
|---|---|
| Super Drawdown (tax-free) | $22,500 |
| Age Pension (part) | $24,000 to $28,000 |
| Total Income | $46,500 to $50,500 |
This places you in the ASFA modest lifestyle range for a single homeowner.
If You Don’t Qualify for Age Pension
If your total assets exceed pension thresholds, your income would sit closer to $22,500 to $30,000 per year from super alone, requiring a very conservative lifestyle.
What Lifestyle Can You Afford on $50,000 per Year?
For a single homeowner, around $50,000 per year allows a stable but careful retirement.
Example Annual Spending Breakdown (Metropolitan Area)
| Expense Category | Estimated Annual Cost |
|---|---|
| Groceries | $9,000 |
| Utilities and Rates | $4,500 |
| Insurance (home, car, contents) | $3,000 |
| Car and Transport | $6,000 |
| Healthcare and Medical | $6,500 |
| Travel | $4,000 |
| Dining and Entertainment | $5,000 |
| Home Maintenance | $5,000 |
| Clothing and Personal | $2,000 |
| Miscellaneous | $5,000 |
| Total | $50,000 |
Healthcare Cost Reality
The $6,500 healthcare budget breaks down as:
- Private health insurance: $2,500/year (basic hospital + extras)
- Out-of-pocket medical: $1,800/year
- Dental: $1,000/year
- Pharmaceuticals: $500/year (with PBS concession card)
- Optical: $400/year
- Allied health: $300/year
Healthcare costs typically rise faster than general inflation, so budget conservatively here.
What This Lifestyle Supports
- Domestic travel once per year (regional or interstate)
- Occasional dining out (once or twice per week)
- Replacing your car every 8-10 years (budget $10,000-$12,000 for reliable used vehicle)
- Basic private health cover to avoid Medicare Levy Surcharge
- Small home improvements when needed
- Modest gifts for family
What It Doesn’t Support
- Frequent overseas travel
- Luxury vehicles or new car purchases
- Major home renovations
- Supporting adult children financially
- Large discretionary purchases
Geographic Cost Variations
Living costs vary significantly across Australia:
- Regional QLD/NSW/WA: The budget above works well
- Sydney/Melbourne metro: Add 20-30% to costs (particularly groceries, utilities, rates)
- Regional SA/TAS: Could reduce budget by 10-15%
- Hobart/Canberra: Budget works as stated
- Perth/Brisbane metro: Add 10-15% to costs
Real Example 1: Margaret, Age 67, Brisbane
Margaret retires at 67 with $500,000 in super and owns her home outright in suburban Brisbane.
Her strategy:
- Invested in a balanced fund (60% growth, 40% defensive)
- Withdraws $23,000 per year from super (tax-free)
- Receives approximately $26,500 per year in Age Pension
- Keeps two years of expenses ($50,000) in cash within her super account
- Total annual income: $49,500
Margaret lives comfortably but cautiously. She budgets carefully, travels within Australia once a year (usually to visit family interstate), and helps her grandchildren with small gifts at Christmas. During market downturns, she reduces discretionary spending to preserve capital.
Her biggest concern is longevity risk. If she lives beyond 90, her capital may be significantly reduced. She works with a financial adviser every two years to review withdrawals and adjust based on investment performance.
Key decision: Margaret chose not to take the downsizing contribution option yet, preferring to keep her family home. If health issues arise, she may downsize and contribute up to $300,000 to super (outside normal caps), which would significantly improve her financial position.
Real Example 2: John, Age 67, Renting in Geelong
John retires at 67 with $500,000 in super but rents a two-bedroom unit in Geelong.
His situation:
- Rent: $380/week = $19,760/year
- Super drawdown: $22,500/year (tax-free)
- Age Pension (part, as non-homeowner): $32,000/year
- Total annual income: $54,500
- After rent: $34,740 for living expenses
John’s budget is much tighter than Margaret’s. The rental burden consumes nearly 40% of his income. He cannot afford private health insurance and relies on Medicare. Travel is limited to day trips. He drives a 15-year-old car and hopes it lasts another five years.
Key challenge: John is exploring sharehousing or relocating to cheaper regional areas to reduce rent. Every $50/week reduction in rent adds $2,600/year to his living budget.
Real Example 3: Tom & Mary, Age 67, Couple in Regional NSW
Tom and Mary retire with a combined $500,000 in super and own their home outright in regional NSW.
Their situation:
- Combined super drawdown: $22,500/year (tax-free)
- Age Pension (combined part pension): $36,000/year
- Total annual income: $58,500
Their budget includes:
- Groceries: $14,000
- Utilities/rates: $5,500
- Healthcare: $8,500 (both have basic private cover)
- Car expenses: $7,000 (one car)
- Travel: $5,000
- Other living costs: $18,500
As a couple, they have economies of scale (one home, shared utilities, one car) but also higher combined healthcare costs and grocery bills. Their lifestyle is modest but stable, with one annual camping trip and occasional visits to children in Sydney.
Key advantage: Their regional location means lower council rates, cheaper utilities, and reduced cost of living compared to metropolitan areas.
How Long Will $500,000 Last?
If invested at 5.5% nominal return (3% real return after inflation) and withdrawn at 4.5% annually, the capital may last 23 to 30 years depending on market returns and spending discipline.
However, returns are never consistent. A severe downturn early in retirement can reduce sustainability significantly. This is known as sequencing risk and is particularly critical for retirees with balances under $600,000.
Sequence of Returns Example
| Scenario | Years 1–5 Avg Return | Years 6–10 Avg Return | Balance After 10 Years |
|---|---|---|---|
| Positive early returns | +8% | -2% | ~$437,000 |
| Negative early returns | -2% | +8% | ~$373,000 |
Same average return over 10 years, but Scenario B leaves you $64,000 worse off due to withdrawing during the downturn. This is why the bucket strategy (below) is so important.
Key Risks at the $500,000 Level
1. Longevity Risk
Living beyond age 90 may strain savings significantly. If you reach 90 with reduced capital, you may need to:
- Rely more heavily on Age Pension
- Consider downsizing or reverse mortgage
- Reduce discretionary spending sharply
2. Sequencing Risk
Poor investment returns in the first 5-7 years of retirement can permanently reduce portfolio longevity. A 20% market drop early on could reduce your effective retirement span by 4-6 years.
3. Inflation
General inflation at 2.5% is manageable, but healthcare and insurance costs often rise at 4-6% annually, potentially outpacing your budget assumptions.
4. Aged Care Costs
This is the major wildcard. Residential aged care can require:
- Refundable Accommodation Deposit (RAD): $350,000-$650,000 in metro areas
- Daily Accommodation Payment (DAP): Alternative to RAD, paid daily
- Daily care fees: $50-$70/day
- Means-tested care fee: Based on assets and income
Critical planning point: If you enter aged care at 85 with $200,000 remaining in super, you may not have enough for the RAD and would need to sell your home or pay DAP, which quickly erodes capital. This is why many advisers recommend keeping the family home as long as possible—it’s exempt from Age Pension asset test while you live in it and provides aged care funding if needed later.
How to Make $500,000 Work in Retirement
1. Maximise Age Pension Eligibility
Understanding asset and income test thresholds can increase pension entitlements and improve total income.
Practical steps:
- Apply 13 weeks before turning 67 (processing takes time)
- Set up myGov account and link to Services Australia
- Gather required documents: birth certificate, super statements, bank statements
- Consider timing of large purchases or asset sales around pension assessment
- Review gifting rules (max $10,000/year, $30,000 over 5 years) if helping family
Documents needed:
- Proof of identity (birth certificate, passport)
- Super account statements
- Bank statements (3 months)
- Home value estimate
- Vehicle registration
- Investment statements
- Income tax return
2. Use a Bucket Strategy
Keeping 1-2 years of spending in cash ($50,000-$100,000) within your super account reduces the need to sell growth assets during downturns.
Three-bucket approach:
- Bucket 1 (Cash): 1-2 years expenses = $50,000-$100,000
- Bucket 2 (Fixed Income): 3-5 years expenses = $150,000-$200,000 in bonds, term deposits
- Bucket 3 (Growth): Remainder in shares = $200,000-$300,000
During market downturns, spend from Buckets 1 and 2 while Bucket 3 recovers. During bull markets, rebalance by moving growth profits into Buckets 1 and 2.
3. Consider Downsizing
Releasing home equity may boost retirement capital significantly.
Downsizing benefits:
- Proceed from sale (if downsizing to cheaper home) can go into super
- Downsizer contribution: Up to $300,000 per person (age 55+) outside normal contribution caps
- Reduced home maintenance costs
- Lower utilities and rates
- May improve Age Pension eligibility (if proceeds kept in super)
Example: If you sell a $700,000 home and buy a $400,000 unit, you could contribute $300,000 to super (taking balance to $800,000), dramatically improving retirement income while reducing housing costs.
Main residence CGT exemption applies, so no capital gains tax on your family home sale.
4. Control Investment Fees
A 1% difference in fees could reduce long-term outcomes by $80,000-$120,000 over a 25-year retirement.
Compare:
- Industry super funds: Typically 0.5-0.8% total fees
- Retail super funds: Often 1.2-2.0% total fees
- Self-managed super fund (SMSF): Cost-effective above $500,000 if you’re engaged
Review your super fund’s Product Disclosure Statement for:
- Administration fees
- Investment management fees
- Performance fees
- Buy-sell spreads
5. Review Spending Annually
Adjust withdrawals in strong or weak market years.
Dynamic withdrawal strategy:
- Strong year (portfolio up 10%+): Withdraw planned amount plus small bonus
- Weak year (portfolio down 5%+): Reduce withdrawal by 10-20% if possible
- Neutral year: Stick to plan
This flexibility can extend portfolio longevity by 3-5 years.
6. Consider Part-Time Work (Ages 60-67)
Many retirees work part-time between super access age (60) and Age Pension age (67).
Benefits:
- Work Bonus Scheme: First $11,800/year exempt from pension income test (once eligible for Age Pension)
- Earning $10,000-$15,000/year reduces super drawdown, extending capital
- Social connection and purpose
- Skills remain current
Transition to Retirement (TTR) strategy:
- Access super from age 60 while still working
- Reduce work hours, supplement with super drawdown
- Salary sacrifice to super (tax benefits)
- Bridges gap to Age Pension age
7. Optimise Tax Position
After age 60, super withdrawals are tax-free, but you can still optimize:
- Use Seniors and Pensioners Tax Offset (SAPTO): Reduces tax if you have other income
- Tax-free threshold: $18,200
- SAPTO effective threshold: ~$32,000 single, ~$57,000 couple (combined)
- Keep part-time work income below these thresholds to avoid tax
8. Insurance Review
What to cancel at retirement:
- Income protection insurance (no income to protect)
- Total and Permanent Disability (TPD) insurance (usually ends at 65-70 anyway)
What to keep:
- Life insurance if you have dependents or debts
- Trauma insurance if you can afford it (expensive at 65+)
What to consider:
- Funeral insurance (typically $10,000-$15,000 cover for $30-50/month) – compare against setting aside savings
- Home and contents insurance (keep, premiums rise with age)
Most super funds charge insurance premiums from your balance. Canceling unnecessary cover can save $1,500-$3,000/year.
What If You Retire Earlier Than 67?
If you retire at 60, you will not qualify for the Age Pension until 67. That means $500,000 must fund seven years independently.
Early retirement scenario (age 60):
- Super access age: 60 (preservation age met)
- Annual withdrawal: $40,000
- Years until pension: 7
- Approximate balance at 67: $220,000-$280,000 (depending on returns)
By Age Pension age, your balance could drop to $250,000 or below, significantly reducing retirement security. Early retirement with this amount requires:
- Very controlled spending ($35,000-$40,000/year maximum)
- Part-time work to supplement income
- Willingness to return to full-time work if markets perform poorly
- Strong emergency fund outside super
Better strategy: Work until 65, allowing super to grow and reducing drawdown years before pension eligibility.
Is $500,000 Enough for a Couple?
For a couple who own their home, $500,000 combined is challenging but possible with a part Age Pension.
Combined income estimate:
- Super drawdown: $22,500/year (tax-free)
- Age Pension (combined part pension): $33,000-$38,000/year
- Total: $55,500-$60,500/year
This supports a modest lifestyle with:
- Limited domestic travel (one trip per year)
- One reliable used car
- Basic private health cover for both
- Controlled discretionary spending
- Careful budget management
Challenge areas for couples:
- Healthcare costs nearly double ($8,000-$10,000 combined)
- Groceries higher than single person
- If one partner requires aged care, remaining partner faces financial stress
Recommendation: Couples should target $700,000-$800,000 combined for more comfortable retirement.
Common Mistakes to Avoid
1. Withdrawing Too Much Early
Taking $35,000-$40,000 in the first few years because “I’ve earned it” can permanently damage portfolio sustainability. Stick to your planned withdrawal rate.
2. Not Rebalancing During Bull Markets
If shares rise 30% and now represent 50% of your portfolio instead of 40%, rebalance by moving profits to fixed income. Failing to do this exposes you to unnecessary risk.
3. Keeping Too Much in Cash
Holding $200,000+ in cash “for safety” means inflation erodes value at 2.5%/year. You lose $5,000/year in purchasing power. Keep 1-2 years expenses in cash, invest the rest.
4. Violating Gifting Rules
Giving your daughter $50,000 for a house deposit triggers deprivation rules. Centrelink assesses you as still having that money for pension purposes for 5 years. Maximum gift: $10,000/year, $30,000 over 5 years.
5. Ignoring Aged Care Planning
Assuming you’ll never need care is risky. At least understand:
- What RAD amounts are in your area
- Whether you’d sell home or pay DAP
- How aged care would affect surviving spouse
6. Paying High Fees Unknowingly
Not reviewing super fund fees annually can cost $10,000-$20,000 over retirement. Check Product Disclosure Statements and compare.
Comparison With Other Retirement Balances
Each additional $100,000 can increase annual income by roughly $4,000-$5,000 depending on pension eligibility and investment returns.
At $600,000:
- Super drawdown: $27,000/year
- Part Age Pension: $20,000-$25,000/year
- Total income: $47,000-$52,000/year (reduced pension due to higher assets)
- Net improvement: ~$2,000-$3,000/year due to pension taper
At $700,000:
- Super drawdown: $31,500/year
- Part Age Pension: $15,000-$20,000/year (further reduced)
- Total income: $46,500-$51,500/year
- Pension continues reducing with assets
At $800,000:
- Super drawdown: $36,000/year
- Minimal or no Age Pension
- Total income: $36,000-$40,000/year
- Above this level, you’re self-funded
Pension taper rate: Pension reduces by $3/fortnight for every $1,000 of assets above the free threshold. This means each extra $100,000 in super doesn’t add $4,500 to your income—it adds less because your pension reduces.
Next in this series:
- Can I Retire on $600,000 in Australia? Here’s What You Need to Know
- Can I Retire on $700,000 in Australia? How to Make It Work
Helpful Online Tools and Resources
Government resources:
- Services Australia Payment and Service Finder: Calculate Age Pension entitlement
- Moneysmart Retirement Planner: Government retirement calculator
- myGov: Access Centrelink, ATO, Medicare in one place
Super fund tools:
- Most industry funds offer retirement calculators
- AustralianSuper Retirement Forecaster
- Aware Super Retirement Planner
Professional advice:
- Financial advisers specializing in retirement (fee-for-service recommended)
- Services Australia Financial Information Service (free appointments)
Frequently Asked Questions
Will I qualify for the Age Pension with $500,000 in super?
Most homeowners will qualify for at least a part pension as a single person. Couples with $500,000 combined will also receive a part pension. Non-homeowners have higher asset test thresholds and typically receive more pension.
Can I live off interest only?
At 5.5% returns, interest alone would generate $27,500 annually. However, this is nominal return—after inflation (2.5%), your real return is only 3% or $15,000. Most retirees draw both income and some capital to maintain lifestyle.
What happens if markets fall 20%?
Your balance could temporarily drop to $400,000. This is exactly why the bucket strategy matters—you draw from cash and bonds while shares recover. If forced to sell shares at low prices, you lock in losses. Reduce discretionary spending during downturns by 10-20% if possible.
Should I see a financial adviser?
With a balance of $500,000, strategic pension planning, tax structuring, and investment allocation can materially improve outcomes. A good adviser might find $3,000-$8,000/year in additional income through:
- Optimizing Age Pension entitlements
- Reducing fees
- Improving asset allocation
- Planning downsizing or aged care strategies
Look for fee-for-service advisers (not commission-based) and expect to pay $2,000-$4,000 for a comprehensive retirement plan.
See our Case Study: How a Financial Planner Helped Build a Confident Retirement Plan With $500k
When should I apply for Age Pension?
Apply 13 weeks before your 67th birthday. Processing takes 6-12 weeks, and payments are not backdated beyond 13 weeks. Late applications mean you lose money.
Can I access super before 60?
Only in very limited circumstances (severe financial hardship, terminal illness, permanent disability). For most people, preservation age is 60, but you must also have retired or reached 65.
Should I keep working part-time?
If you enjoy your work and are healthy, yes. Working part-time from 60-67:
- Reduces super drawdown (capital lasts longer)
- Provides social connection
- Keeps skills current
- Extra income improves lifestyle
Once you reach Age Pension age, the Work Bonus ($11,800/year exempt from income test) makes part-time work even more attractive.
What if I need to go into aged care?
This depends on your remaining capital and home ownership:
- If you own a home: Home is exempt from Age Pension asset test while you live in it. Can be sold to fund RAD if you enter care.
- If you have $300,000+ in super at age 85: Can pay RAD or choose DAP option
- If you have <$200,000: Likely will pay DAP (daily accommodation payment) and costs will erode capital quickly
Get aged care financial advice when the time comes—it’s complex and depends on your specific situation.
Final Verdict
You can retire on $500,000 in Australia if you:
- Own your home outright
- Qualify for a part Age Pension
- Manage spending carefully
- Live in a regional or lower-cost area
- Maintain realistic expectations about lifestyle
This balance supports:
- A modest but stable lifestyle
- Domestic travel once per year
- Reliable used car
- Basic private health cover
- Small home maintenance
- Limited discretionary spending
This balance does NOT support:
- Frequent overseas travel
- Luxury lifestyle
- New car purchases every few years
- Major home renovations
- Significant financial support to adult children
- Long periods in high-cost aged care without home equity
Small improvements that make a big difference:
- Delaying retirement by 2-3 years (super keeps growing, fewer drawdown years)
- Reducing super fund fees by 0.5% ($2,500/year saved)
- Optimizing Age Pension entitlements through asset structuring
- Using bucket strategy to weather market downturns
- Considering downsizing to release home equity
If you are close to this balance:
Consider speaking with a licensed financial planner to review your retirement projections in detail. A good planner can help you:
- Model different retirement ages and withdrawal strategies
- Optimize Age Pension entitlements
- Plan for aged care contingencies
- Structure assets tax-effectively
- Create a sustainable investment strategy
$500,000 Retirement Scorecard
| Category | Verdict |
|---|---|
| Modest lifestyle (homeowner) | ✅ Achievable |
| Comfortable lifestyle | ⚠️ Borderline |
| Early retirement at 60 | ❌ High risk |
| Renting long-term | ⚠️ Challenging |
| Regional living | ✅ More sustainable |
| Sydney/Melbourne metro | ⚠️ Tighter budget |
| Aged care without home equity | ❌ Difficult |
The bottom line: $500,000 can work, but it requires discipline, planning, and realistic expectations. Every extra year worked and every $50,000 saved significantly improves your retirement security and lifestyle options.
This article provides general information only and is not financial advice. Your personal circumstances may differ. Consider seeking advice from a licensed financial adviser before making retirement decisions. Age Pension rates, asset test thresholds, and tax rules are subject to change.
