Australia’s richest and poorest areas for retirees have been revealed. And the results are not what you might expect.
Retirees living in wealthy Melbourne suburbs have an annual expenditure two-thirds higher than the national average, while those in the poorest retiree areas spend nearly a quarter less.
As the cost of living increases, this difference will have major implications, a new report is warning.
Retirees living in Melbourne’s Stonnington region can count themselves among Australia’s wealthiest retirees, spending $56,711 a year – well above the $33,943 average.
Described as a “traditionally wealthy enclave”, Stonnington includes Prahran, Toorak, Armadale, Windsor and South Yarra – East. Its retirees are funnelling a significant portion of their expenditure into discretionary areas like leisure.
However, retirees up in the Queensland region of Caboolture are spending less than half of what their wealthy counterparts spend, with their average $26,286 largely going towards essential goods and services.
“Non-discretionary costs (such as food, electricity and gas) rising at a greater pace than inflation will have a significantly greater impact on retirees in poorer areas than more affluent areas,” Milliman financial risk management consultant, Jeff Gebler said.
Continuing, he noted that the average annual retiree expenditure in Caboolture could be entirely funded by the full Age Pension.
Retirees in Stonnington would require a super balance of at least $403,000 to fund their lifestyle.
“This is still significantly lower than many industry forecasts. One reason is the interaction of the Age Pension, which effectively provides an inflation-indexed, government-guaranteed lifetime annuity backstop,” he said.
The problem is that most super fund members don’t receive personal advice, meaning wealthy retirees could become complacent and those in poorer suburbs could disengage altogether due to unachievable savings targets.
He said Aussie savers need to understand how even “modest difference in savings” can have huge impacts on their retirement.
“For example, the proportion of expenditure aimed at essential goods and services is significantly higher for Caboolture retirees (60 per cent) compared to Stonnington retirees (44 per cent).
“Drilling down further into the data, Caboolture retirees spend almost twice as much of their total expenditure on food (19 per cent versus 10 per cent) but half as much on leisure (8 per cent versus 16 per cent).”
Naturally, wealthier retirees will have more choices about how they spend their money, however the differing spending patterns highlight the importance of tailored approaches to retirement spending.
“However, many funds still rank their returns against the Consumer Price Index (CPI), which includes the cost of discretionary goods.”
“Using CPI as a benchmark means falling prices of discretionary goods and services (such as technology and travel) can distort the true impact of non-discretionary costs. Australia’s inflation rate remains less than 2 per cent, while expenditure patterns amongst super fund members vary substantially.”