Managing Rising Costs In Retirement: How To Protect Your Cashflow In 2026

Published 30/06/2026 
By Melina Pisani, Financial Adviser (BCom) FinPlan

If retirement has felt tighter than expected lately, you’re not the only one feeling it.

Groceries, electricity, fuel, healthcare, insurance, and household bills have all placed pressure on Australian households. For retirees, that pressure is only heightened when no salary increase is coming through to absorb the difference, and the money you draw from needs to last for the long term.

Australia’s Consumer Price Index rose 4.0% in the twelve months to May 2026, with housing, food, and transport all among the largest contributors to annual inflation. Electricity costs were also 21.1% higher over the same period, largely reflecting the end of Commonwealth and State government electricity rebates.¹

The ABS Selected Living Cost Indexes showed annual living cost increases of 3.8% for self-funded retiree households and 5.2% for age pensioner households in the twelve months to March 2026.²

The challenge for current and soon-to-be retirees is that rising costs hit differently than they do during your working years. Instead of earning more to cover the difference, you may be drawing from superannuation, investments, Age Pension entitlements, or other sources of retirement income.

The good news is that there are practical steps you can take to review your retirement cashflow, protect your income, and keep your broader retirement plan on track.

Quick Navigation:

• What a Comfortable Retirement Actually Costs Now
• Review How You Are Drawing From Your Super
• Check Whether Your Portfolio Is Keeping Pace With Inflation
• Access Every Entitlement Available To You
• Build a Cash Buffer Without Leaving Too Much Idle
• Look at Where Your Costs Are Actually Going
• What a Good Retirement Income Structure Looks Like
• Frequently Asked Questions
• When to Get Professional Help

What A Comfortable Retirement Actually Costs Now

One of the most useful things you can do right this moment is to benchmark your own retirement spending against what a comfortable retirement actually costs in Australia today.

Source: ASFA Retirement Standard, March quarter 2026. Figures are for retirees aged 65–84 who own their own home.

To fund a comfortable retirement, ASFA estimates that homeowners aged 67 need retirement savings of $630,000 for singles and $730,000 for couples. These lump sum benchmarks were revised upward in February 2026, the first increase in three years, reflecting the effect of rising living costs and changes to deeming rates.⁴

If your current income, balance, or cashflow feels below these benchmarks, that doesn’t automatically mean you’re in trouble. It does mean your retirement income structure, entitlements, spending, and investment mix are worth reviewing sooner rather than later.

"The earlier you review your retirement income structure, the more options you usually have. Small adjustments to drawdowns, entitlements, cash reserves, or investments can make a meaningful difference to how confident you feel about your retirement cashflow."

- Melina Pisani, Financial Adviser (BCom) FinPlan

Want to Review Your Retirement Plan with Melina? | Book Online

Review How You Are Drawing From Your Super

One of the most common issues we see is retirees drawing from superannuation at a rate that made sense when it was first set up, but has not been reviewed since.

If your drawdown rate was calculated before the current inflationary environment, it may no longer be serving you well. Drawing too much can deplete your balance faster than intended. Drawing too little can leave you short on day-to-day cashflow, even where your overall retirement savings remain healthy.

A review of your superannuation drawdown strategy, particularly as you move into a new financial year, can make a meaningful difference.

The goal is to find a rate that supports your lifestyle today without compromising your balance over the long term. This is something worth revisiting annually rather than setting once and leaving.

Account-based pensions also have minimum annual withdrawal rules. These minimums are based on your age and account balance, starting at 4% for those aged under 65 and increasing as you get older.⁶ The minimum rate is important, but it is not always the same as the right income level for your circumstances.

Check Whether Your Portfolio Is Keeping Pace With Inflation

A retirement portfolio that is too conservative can work against you when inflation remains elevated.

If your investments are generating returns below the rate of inflation, the purchasing power of your savings can gradually reduce, even if the dollar amount looks stable on paper.

That doesn’t mean taking on unnecessary risk. It means making sure your asset allocation is appropriate for where you are in retirement, your income needs, your time horizon, and the current environment.

This balance can shift over time. Some people need more stability as they age. Others may still need some exposure to growth assets so their retirement savings can continue supporting income over a long timeframe.

For a broader look at portfolio resilience, Frontier’s article on how to protect and grow wealth in uncertain times explains why growth, defensive assets, liquidity, and diversification all play a role when conditions change.

The right balance depends on your needs and comfort with risk. What matters most is that your retirement investment strategy is reviewed regularly and not left to drift.

Access Every Entitlement Available To You

A retirement income review should also include your Centrelink position, concession cards, supplements, and other benefits you may be eligible to receive.

This may include the Age Pension, Commonwealth Seniors Health Card, Pensioner Concession Card, rent assistance, or other concessions that can reduce everyday costs. Eligibility rules can be complex, and they do change, so it is worth getting a proper assessment rather than assuming your position is the same as it was last year.

It is also worth noting that deeming rates changed in March 2026.

For a single person, the first $64,200 of financial assets is deemed at 1.25%, with assets above that level deemed at 3.25%. For couples where at least one person receives a pension, the first $106,200 of combined financial assets is deemed at 1.25%, with assets above that level deemed at 3.25%.⁵

For some retirees, deeming-rate changes can affect how income is assessed for Age Pension purposes. In some cases, this may reduce the pension amount received, even if actual investment returns have not changed in the same way.⁵

Small adjustments here can add up to a meaningful difference in monthly cashflow.

Build A Cash Buffer Without Leaving Too Much Idle

For many retirees, it can be useful to hold an accessible cash buffer, with the right amount depending on spending needs, investment mix, pension settings, and personal circumstances.

The purpose of a cash buffer is simple: it gives you accessible funds for near-term expenses, so you are less likely to be forced to sell growth assets during periods of market weakness.

This can be especially important in retirement, because selling investments after a market fall can lock in losses and reduce the capital available to support future income.

At the same time, holding too much in cash can create its own problem. If a large portion of your retirement savings sits in low-return cash for too long, it may struggle to keep pace with inflation.

The right approach is usually a balance. You need enough accessible funds to support day-to-day confidence, while still allowing part of your portfolio to work for the long term.

Look At Where Your Costs Are Actually Going

Rising costs are not always spread evenly across your expenditure. Some of the greatest financial pressure points in recent years have come in the form of everyday expenses: electricity, groceries, fuel, healthcare, insurance, and housing-related costs. These are also among the hardest expenses to reduce without affecting quality of life.

Rather than making blanket reductions across your spending, it is worth doing a proper review of where your money is going.

Sometimes this is as simple as reviewing utility providers, insurance policies, private health cover, or subscription services that have been on auto-renew without a second look. In other cases, it may involve reviewing larger costs, such as housing, car expenses, travel, family support, or healthcare needs.

Small savings across a few categories can add up to a meaningful improvement in monthly cashflow. More importantly, they can help you make decisions with clarity rather than reacting once pressure builds.

What a Good Retirement Income Structure Looks Like

A well-structured retirement income plan usually does a few things well.

It draws income from the right sources in the right order. It holds enough accessible cash or defensive assets to cover near-term expenses. It gives your longer-term investments time to recover through market cycles. It accounts for inflation, not just in the first few years of retirement, but across the full retirement timeframe. And it is reviewed regularly as your circumstances, costs, and market conditions change.

For most retirees, this means looking at:

• superannuation drawdowns
• account-based pension settings
• investment income outside superannuation
• Age Pension or other Centrelink entitlements
• cash reserves
• tax position
• personal spending
• healthcare and aged care considerations
• estate planning and family needs
   

These areas should be reviewed together, not in isolation.

For a broader look at how income, spending, debt, superannuation, and investing fit together, you can also read our guide on cashflow management and wealth management.

If aged care may become part of your family’s planning, our guide to aged care costs and retirement planning explains how accommodation costs, the family home, pension impacts, and cashflow decisions can interact later in life.

Getting that structure right from the start, or recalibrating it when things shift, is one of the most practical things you can do to protect your retirement over the long term.