The increasing cost of living is making retirement more expensive than ever, according to the Association of Superannuation Funds of Australia (ASFA)1 as the cost of living grows, so does the pressure on Aussies who are saving for retirement.
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”2. To live “comfortably” as defined by ASFA, which includes the occasional restaurant meal and an international holiday once every seven years, singles now need to budget for $51,278 per year, and couples $72,148 per year, for those who own their own home outright.
To achieve this “comfortable” retirement, you’ll need to have a nest egg well above half a million dollars by retirement age, with singles needing a total of $595,000 and $690,000 for a couple.
For a “modest” retirement as defined by ASFA, allowing a lifestyle only marginally better than what can be afforded on the Age Pension, with only infrequent access to exercise, leisure and social activities, both singles and couples who own their own home outright will need to have at least $100,000 in their fund.
ASFA analysis shows exactly how inflation is affecting retiree budgets.
- Although annual food inflation eased to 4.5% in the final quarter of 2023, that was from a food inflation peak of 9.2% in December 2022. To retire today, a single person living comfortably would need to put away $283 per fortnight for food alone.
- The cost of medical services increased 1.2% in the 2023 December quarter.
- Electricity prices rose 1.4% in the 2023 December quarter and 6.9% 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% over this period.”
- Insurance prices rose 16.2% in the 12 months to the December 2023 quarter, which ASFA called: “the strongest annual rise since March 2001.”
- While petrol prices dropped 0.2% in the December 2023 quarter, this 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. With many of us spending more than a quarter of our life retired, you might need a lot more money for your retirement than you think.
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1 https://www.superannuation.asn.au/media-release/retiree-budgets-continue-to-face-significant-cost-pressures/
2 https://www.superannuation.asn.au/media-release/retiree-budgets-continue-to-face-significant-cost-pressures/