Couple homeowners now need $76,505 per year and singles $54,240 a year for a comfortable lifestyle, ASFA found. (Source: Newswire/Getty)
Australians need to budget more money to achieve a comfortable lifestyle in retirement. Prices have risen faster than inflation on the items retirees spend the most on, including food, energy and healthcare, meaning some will feel the squeeze this Christmas.
Homeowner couples aged 65 and over now need an annual budget of $76,505 per year to maintain a comfortable lifestyle in retirement, the latest Association of Superannuation Funds of Australia (ASFA) retirement standard found. Singles need an annual budget of $54,240.
These retirement budgets are up 1.6 and 1.8 per cent respectively in the September quarter, and 3.5 and 3.6 per cent over the year. In comparison, the Consumer Price Index rose 1.3 per cent in the quarter and 3.2 per cent annually.
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ASFA found rising living costs had pushed the price of a comfortable retirement to “record levels”, with retirees experiencing stronger price pressures than others because they spend more of their budget on essential items that have risen the most.
“Retirees might be feeling the squeeze this Christmas because prices have risen fastest in the things they spend most on, like food, energy and health,” ASFA CEO Mary Delahunty said.
“Some older people may cut back on pricier gifts, travel and social occasions to stay on top of the basics.”
ASFA found the cost of domestic holiday travel and accommodation were up 5.2 per cent, electricity prices were up 9 per cent, property rates 6.3 per cent, and eating out and takeaway up 1.3 per cent.
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The amount of money you need for retirement will depend on a number of factors, such as the lifestyle you hope to live, the costs you’ll have, whether you own your own home, and the government support you will receive.
ASFA’s retirement standard can give you an idea of what a typical retirement might cost based on estimated costs for a comfortable or modest lifestyle.
A comfortable retirement is defined as one that allows for top-level private health insurance, fast reliable telecommunications, owning a reasonable car, regular leisure activities, confidence to use utilities at home, occasional meals out, and an annual domestic trip and an overseas trip every seven years.
Couple homeowners 65 and over would need $76,505 a year to live comfortably and $50,866 to live modestly, per the standard, which would cover total weekly expenditure of $1,465.61 and $974.44 per week respectively.
Single homeowners would need $54,240 a year to live comfortably and $35,199 to live modestly, which would equate to $1,039.08 and $674.31 in weekly expenditure.
Couple renters would need $67,125 a year to live modestly, while single renters would need $49,676 to live modestly. There are no calculations for renters hoping to live a comfortable lifestyle.
According to ASFA, a homeowner couple would need $690,000 in superannuation and a single would need $595,000 to achieve a comfortable retirement. This assumes they draw down all their capital and get a part age pension.
Separate calculations by Super Consumers Australia found a couple homeowner would need a lower amount of $432,000 and a single homeowner would need $322,000 for a comfortable retirement. This is based on ABS expenditure data.
The average super balance in Australia has reached $172,834 across nearly 18 million account holders aged 15 and over. For those approaching retirement, ASFA said the figure was higher, with those aged 65 to 69 now averaging around $420,934 in retirement savings.
“Thanks to superannuation, most Australian retirees are living with additional income beyond the Age Pension each month, which makes them more financially resilient, including at financially stressful times of the year like Christmas,” Delahunty said.
“In many countries, retirees rely almost entirely on a state pension. In Australia, retirees’ own super savings sit on top of our state pension and provide a buffer. This means financial flexibility they would not have if they solely depended on monthly payments from the taxpayer.”
Delahunty said changes to super, including the move to 12 per cent super and payday super, would boost retirement balances for future generations.
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