The Association of Superannuation Funds of Australia’s Retirement Standard (RS) budgets have tracked the average cost of a household budget since June 2006, and the cost of retirement has only gone up since, whether you’re single or part of a couple.
With soaring power, health care and food costs, Australians will need to save more to enjoy a comfortable retirement. @alexhart7 #7News pic.twitter.com/awLGhOpgf2
— 7 News Brisbane (@7NewsBrisbane) May 29, 2017
So how much more will retirement cost me?
ASFA found that between June 2006 and March 2017, the cost of retirement increased by:
- 33% for a single, modest retirement
- 23% for a single, comfortable retirement
- 36% for a couple’s modest retirement
- 26% for a couple’s comfortable retirement
RS budgets assume that retirees own their home outright and are relatively healthy, but ASFA CEO Dr Martin Fahy noted that the increasing number of renting retirees was an issue.
“Of increasing concern is the reality of many more retirees at the mercy of the private rental market, so when you consider the increase in renting costs, it highlights the need for increasing numbers of retirees to have much greater super balances to support a reasonable retirement,” he said.
The silver lining is that the same period also saw average earnings go up by 43%, and the maximum Age Pension increase in real terms by 70% for a single person and by 54% for a couple.
However, ASFA stresses the fact that the Age Pension alone “still does not permit a retiree to achieve even a modest standard of living in retirement at the levels set by the ASFA RS”.
Figures for the March quarter demonstrated that the financial requirements for a comfortable retirement at 65 were:
- $59,971 per year for couples
- $43,665 per year for singles
Both figures represent a 0.3% increase from the previous quarter.
Why does retirement cost more now?
According to ASFA, the increase has come courtesy of “significant hikes in the cost of power, health care, food and rates,” which Dr Fahy said was not particularly shocking.
“The categories of expenditure that really impact the budgets are not altogether surprising,” he said.
“Over the period, electricity costs increased by 124%, health costs by 6%, property rates and charges by 83% and food costs by 24%.
“Price changes for less essential items tended to be lower and in some cases fell.
“The price of clothing fell by a total of 3% over the period with an 8% fall in the cost of communications (including telephone and mobile phone charges).”
Other notable price increases were:
- Tobacco (178%)
- Wine (6%)
- Beer (45%)
- Rent (51%)
- Postal services (45%)
- Vet fees (49%)
- Insurance costs (72%)
Speaking purely in terms of the March quarter, the most significant contributions to increased budget sizes came from automotive fuel (5.7%), medical and hospital services (1.6%), and electricity (2.5%).
However the March quarter also saw a number of living costs decrease, with the cost of international holiday travel and accommodation falling by 3.8%, the cost of clothing and footwear falling by 1.4%, the cost of fruit falling by 6.7%, and the cost of food overall falling by 0.2%.
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