Yahoo Finance Huge amount now needed to retire comfortably in Australia: 'Increasingly difficult'
Aussies who have left work are getting squeezed by the rising cost of food as well as insurance prices.
The amount an Aussie needs to live a comfortable life in retirement has increased. The rising cost of living is impacting the lives of retirees, however, another big financial stickler is insurance prices.
The Association of Superannuation Funds of Australia (ASFA) has revealed a single person needs to have at least $52,085 per year to enjoy their twilight years if they own their own home, while a person in a couple requires at least $73,337. This sum has risen 0.9 per cent in the June quarter and 3.7 per cent over the past 12 months.
National Seniors Australia chief executive officer Chris Grice told Yahoo Finance many older Aussies are being pushed to "breaking point" due to rising costs.
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"This is especially true for many older Australians without savings or who are at the mercy of an unforgiving rental market, who have described to us their experience of hardship and uncertainty as ‘existing’, ‘surviving’, ‘helpless’, and ‘hopeless’," he said.
"The Age Pension was designed on the assumption older people own their homes. While 85 per cent of older Australians do, 15 per cent do not and this is set to rise as the cost of owning a home skyrockets."
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What caused the comfortable retirement amount to increase?
ASFA noted that home, vehicle and private health insurance costs went up in the June quarter, which have squeezed retirees' savings even more.
The Association's CEO, Mary Delahunty, said it's more important than ever to have a retirement plan that doesn't solely depend on superannuation as this can provide retirees with financial security so they can enjoy their twilight years.
“Retirees are managing an increasingly difficult landscape where the costs of essential goods and services keep rising. Health, home, and transport are vital to their well-being, yet the expenses tied to these necessities are steadily increasing,” she said.
"For Australians to have the retirement they deserve, it’s crucial that they have access to adequate superannuation savings."
What is causing retirees the most financial stress?
There is a seemingly endless list of costs that have increased in the past three months that are causing trouble for Aussie retirees.
Insurance Costs: Insurance premiums rose by 3.1 per cent in the June quarter and 14 per cent over the past year. ASFA said this surge is largely due to higher reinsurance costs, the impact of natural disasters, and increased claims.
Private Health Insurance: Private health insurance premiums increased by an average of 3.03 per cent since April, which was the "largest rise since the pandemic began".
Electricity Prices: Electricity costs jumped by 2.1 per cent in the last three months and 6 per cent over the past year.
Food Costs: Annual food inflation dropped from 3.8 per cent to 3.3 per cent between the March and June quarters, but retirees still face rising costs for essentials like fruits and vegetables, which are 3.7 per cent higher than a year ago.
Clothing and Footwear: Prices for clothing and footwear rose by 3.1 per cent during the quarter, which was driven by the introduction of new season stock and the end-of-sales promotions.
Fuel Prices: These have increased by 1.7 per cent in the June quarter.
Travel and Accommodation: Domestic travel costs remained stable in the quarter but international travel and accommodation expenses increased by 8.1 per cent.
Weekly spending breakdown for a comfortable retirement
ASFA provided data on how much a retiree could spend on certain items per week without breaking the bank.
Household type | Single Modest | Couple Modest | Single Comfortable | Couple Comfortable |
Housing - ongoing only | $120.99 | $136.75 | $142.42 | $148.70 |
Energy | $40.82 | $54.82 | $51.71 | $64.13 |
Food | $111.98 | $207.61 | $144.78 | $251.64 |
Clothing | $21.57 | $40.99 | $28.81 | $53.66 |
Household goods and services | $39.53 | $46.54 | $86.16 | $106.81 |
Health | $57.92 | $112.05 | $117.74 | $220.49 |
Transport | $111.15 | $118.38 | $181.61 | $196.70 |
Leisure | $112.69 | $176.85 | $221.91 | $333.31 |
Communications | $18.11 | $20.40 | $22.64 | $29.47 |
Total per week | $634.75 | $914.39 | $997.80 | $1,404.92 |
Total per year | $33,134 | $47,731 | $52,085 | $73,337 |
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