As the cost of living continues to climb, so too does the price of a comfortable retirement with the savings needed to retire hitting “a new record high,” according to the latest Retirement Standard released by The Association of Superannuation Funds of Australia (ASFA).
To live “comfortably” — that is, above the standard that an Age Pension-only income can afford — singles now need to budget for $51,278 per year, and couples $72,148 per year.
That’s well above half a million dollars by retirement age, and a 3.5 per cent increase since the last quarter.
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To achieve a comfortable retirement, which includes the occasional restaurant meal and an international holiday once every seven years, singles will need a total of $595,000 to retire, and $690,000 for a couple.
For a “modest” retirement, allowing a lifestyle only marginally better than what can be afforded on the Age Pension — only infrequent access to exercise, leisure and social activities — both singles and couples will need to have $100,000 in their fund.
But both of those budgets assume retirees own their own home outright.
After years of regular price hikes on basic essentials such as food, fuel, electricity and insurance, consistent cost-of-living increases are beginning to ease.
ASFA analysis shows exactly how inflation is affecting retiree budgets.
Although annual food inflation did ease to 4.5 per cent in the final quarter of last year that was from a food inflation peak of 9.2 per cent in December 2022.
To retire today, a single person living comfortably would need to put away $283 per fortnight for food alone, according to the ASFA standards.
But food is far from the only cost to consider. Delahunty said: “The cost of medical services increased 1.2 per cent in the December quarter.”
Electricity prices rose 1.4 per cent in the last quarter, and 6.9 per cent over the last 12 months, but ASFA said that without the Energy Bill Relief Fund rebates from July 2023, “electricity prices would have increased 17.6 per cent over this period”.
Insurance prices rose 16.2 per cent in the 12 months to the December 2023 quarter, which ASFA called: “the strongest annual rise since March 2001.”
And while petrol prices dropped 0.2 per cent in the last quarter, the fall followed nearly record-high prices.
“Retiree budgets have been under substantial pressure for the past two years due to the high cost of essential goods and services,” Delahunty said.
Independent superannuation advisory body Super Guru said: “Many of us will spend more than a quarter of our life retired.”
“So, you might need a lot more money for your retirement than you think.”