Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 319

Retirees facing steep increases for basic items

The ASFA Retirement Standard benchmarks the annual budget needed by Australians to fund either a 'comfortable' or 'modest' standard of living in the post-work years. It is updated quarterly to reflect inflation and provides detailed budgets of what singles and couples would need to spend to support their chosen lifestyle.

What does modest and comfortable mean?

A modest retirement lifestyle is considered better than the age pension but still only able to afford fairly basic activities.

A comfortable retirement lifestyle enables an older, healthy retiree to be involved in a broad range of leisure and recreational activities and to have a good standard of living through the purchase of such things as:

  • household goods
  • private health insurance
  • a reasonable car
  • good clothes
  • a range of electronic equipment
  • domestic and occasionally international holiday travel.

The June quarter 2019 figures indicate that couples aged around 65 living a comfortable retirement need to spend $61,522 per year and singles $43,601, up 0.8% for each on the previous quarter. At the modest level there was an 0.6% increase for singles and a 0.5% increase for couples.

These various changes are more or less in line with the All Groups CPI 0.6% increase between the March and June quarters.

Over the year to the June 2019 quarter, costs were up around 1.5% for couples at both the comfortable and modest levels, compared to the 1.6% increase in the All Groups CPI. This equates to couples needing to spend $918 more a year, and for singles the amount is $648.

Budgets for older retirees rose from the previous quarter by around 0.7% at the comfortable level and by 0.5% at the modest level.

Many retirees would have welcomed the recent decision to decrease the deeming rate in the asset test for the age pension but at the same time they have been facing increased costs of living and lower returns from investments, such as term deposits. Having sufficient savings in superannuation to support the lifestyle Australians want and deserve in retirement is an imperative. Moving to 12% for the Superannuation Guarantee is a necessity for those not yet retired.

Prices that have risen substantially

However, while the increase in the headline rate of the CPI might not look large, retirees have been facing significant increases in the price of many necessities of life. The drought has impacted the prices of a range of foods, the cost of private health insurance continues to grow at around twice the general rate of inflation, and petrol prices are up.

The costs for retirees that increased substantially over the last 12 months are:

  • Price of bread up by 4.8%
  • Price of beef up by 6.0% and lamb up by 13.5%
  • Price of milk up by 2.9%
  • Price of fruit up by 4.9%
  • Price of vegetables up by 6.2%
  • Price of beer up by 2.5%
  • Property rates up by 2.3%
  • Price of hairdressing up by 2.9%
  • Price of private health insurance up by 3.25% on average
  • Price of dental services up by 2.3%
  • Price of domestic travel up by 3.5% and price of international travel by 4.1%

The most significant price increases in the June quarter were automotive fuel (10.2%), medical and hospital service (2.6%) and international holiday, travel and accommodation (2.7%).

The figures in each case assume that the retiree/s own their own home and relate to expenditure by the household. This can be greater than household income after income tax where there is a drawdown on capital over the period of retirement. All calculations are weekly, unless otherwise stated. Annual figure is 52.2 times the weekly figure.

More information

Costs and summary figures can be accessed via the ASFA website. ASFA provides individual calculators to help Australians plan for retirement. Australians can find out more about superannuation on the independent Super Guru website.

 

Martin Fahy is Chief Executive Officer of The Association of Superannuation Funds of Australia (ASFA), the peak policy, research and advocacy body for Australia’s superannuation industry. This article is general information and does not consider the circumstances of any person.

 

5 Comments
Geoff
August 19, 2019

I've run my personal numbers for (retired) life at 60 and they're certainly way, way higher than the comfy / miserable numbers that are forever being touted and upgraded by ASFA. I can't see that all that much will change between 60 and 65. People should interrogate them and come up with their personal costs and work backwards from there. Guidelines, not rules.

You just don't get two phones, an internet connection and a "sinking fund" style allowance for replacing a couple of laptops and/or tablets every five years or so for $30.34 a week (communications/comfy/couple/65). Not even close. And that's modern day essential for a cohabiting couple, I'd suggest.

And is wine under food, health or leisure? :)

Roger Farquhar
August 16, 2019

I would think that these sums are conservative and are dependent on what you consider to be comfortable. Our housing - rates and insurance - are far more than allowed and then there are the inevitable replacements due to wear and tear.

Yes there are retirees on the road - they crawl along in high gear to save fuel and budget from one park to the next.

Graham W
August 16, 2019

What a load of rubbish that retirees need $65k pa. I know many pensioners solely receiving the age pension that have full and active lives. As long as you own your place of residence this is pretty much a given,apart from mainly the capital cities. We maintain a large home ,3 vehicles and lots of holidays towing a luxury caravan,more like $50k pa.
We all started as frugal baby boomers and know how to make a quid stretch ,without economising too much.The north of WA is chokka with caravanners enjoying the good life,few need $60k pa to live a life in their unit doing little but watching the goggle box.Economists are rubbish.

Peter W
August 17, 2019

Graham W,
I would suggest that you may not represent all retiree's. I think I can make a number of assumptions about you.
You are obviously blessed with extremely good health as health can be a major cost to a retiree. Also i wonder if you even have private health cover which is another cost. You don't have any diet issues as the cost of food if you have an intolerance is much higher than usual. Also you obviously don't travel overseas or if you do it is to very low cost destinations on a low budget and a rare occasion. Also when I consider you own three vehicles and a caravan and considering the depreciation, running costs and the maintenance cost on your home I would like to see look over your finances to see how you manage on $50k a year. Sorry but I very much doubt your costing.

Frank
August 14, 2019

Most important to realise is all these numbers assume you own your own home. This will become increasingly uncommon putting a lot of pressure on older folk.

 

Leave a Comment:

RELATED ARTICLES

Uncomfortable truths: The real cost of living in retirement

The big questions facing retirees

The impact of superannuation on retirement outcomes

banner

Most viewed in recent weeks

Are term deposits attractive right now?

If you’re like me, you may have put money into term deposits over the past year and it’s time to decide whether to roll them over or look elsewhere. Here are the pros and cons of cash versus other assets right now.

Uncomfortable truths: The real cost of living in retirement

How useful are the retirement savings and spending targets put out by various groups such as ASFA? Not very, and it's reducing the ability of ordinary retirees to fully understand their retirement income options.

How retiree spending plummets as we age

There's been little debate on how spending changes as people progress through retirement. Yet, it's a critical issue as it can have a significant impact on the level of savings required at the point of retirement.

Where Baby Boomer wealth will end up

By 2028, all Baby Boomers will be eligible for retirement and the Baby Boomer bubble will have all but deflated. Where will this generation's money end up, and what are the implications for the wealth management industry?

Is Australia ready for its population growth over the next decade?

Australia will have 3.7 million more people in a decade's time, though the growth won't be evenly distributed. Over 85s will see the fastest growth, while the number of younger people will barely rise. 

20 US stocks to buy and hold forever

Recently, I compiled a list of ASX stocks that you could buy and hold forever. Here’s a follow-up list of US stocks that you could own indefinitely, including well-known names like Microsoft, as well as lesser-known gems.

Latest Updates

Property

Financial pathways to buying a home require planning

In the six months of my battle with brain cancer, one part of financial markets has fascinated me, and it’s probably not what you think. What's led the pages of my reading is real estate, especially residential.

Meg on SMSFs: $3 million super tax coming whether we’re ready or not

A Senate Committee reported back last week with a majority recommendation to pass the $3 million super tax unaltered. It seems that the tax is coming, and this is what those affected should be doing now to prepare for it.

Economy

Household spending falls as higher costs bite

Shoppers are cutting back spending at supermarkets, gyms, and bakeries to cope with soaring insurance and education costs as household spending continues to slump. Renters especially are feeling the pinch.

Shares

Who gets the gold stars this bank reporting season?

The recent bank reporting season saw all the major banks report solid results, large share buybacks, and very low bad debts. Here's a look at the main themes from the results, and the winners and losers.

Shares

Small caps v large caps: Don’t be penny wise but pound foolish

What is the catalyst for smalls caps to start outperforming their larger counterparts? Cheap relative valuation is bullish though it isn't a catalyst, so what else could drive a long-awaited turnaround?

Financial planning

Estate planning made simple, Part II

'Putting your affairs in order' is a term that is commonly used when people are approaching the end of their life. It is not as easy as it sounds, though it should not overwhelming, or consume all of your spare time.

Financial planning

Where Baby Boomer wealth will end up

By 2028, all Baby Boomers will be eligible for retirement and the Baby Boomer bubble will have all but deflated. Where will this generation's money end up, and what are the implications for the wealth management industry?

Sponsors

Alliances

© 2024 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.