A Financial Update for Retired Australians: Easing the Cost of Living Pressures

By May 29, 2024 No Comments

Retired Australians are receiving some financial respite as their living costs rise more slowly than overall inflation, while their incomes and assets see gains from various sources.

According to the latest ASFA Retirement Standard from the Association of Superannuation Funds of Australia, it now costs $72,663 a year for a couple to retire comfortably and $51,630 for a single. These figures have increased by 3.3% over the past 12 months, which is below Australia’s annual Consumer Price Index (CPI) inflation of 3.6%. This marks the second consecutive quarter where retirement costs have risen slower than the CPI.

Current Retirement Costs

The table below outlines the current weekly and annual costs for retirees:

Cost Category Single Retiree Couple
Housing (ongoing only) $140.98 $147.18
Energy $50.66 $62.83
Food $143.05 $248.64
Clothing $27.95 $52.04
Household goods and services $85.87 $106.50
Health $115.84 $216.77
Transport $180.11 $195.08
Leisure $221.80 $333.27
Communications $22.82 $29.70
Total per week $989.07 $1,392.01
Total per year $51,630 $72,663

Insights from ASFA CEO Mary Delahunty

ASFA CEO Mary Delahunty highlighted that retirees still face “considerable cost of living pressure,” particularly with insurance prices rising 16.4% annually, bread and cereal prices up 7.3%, and dairy products rising 4.1%. However, she noted that in the past three months, the pace of price increases has eased somewhat in key spending categories like food and fuel.

Delahunty also mentioned that retiree budgets are not growing as fast as overall inflation because they do not include costs for secondary and tertiary education, where there have been substantial price hikes. Additionally, the ASFA Retirement Standard assumes that retirees own their homes, thus not impacted by the surging housing costs.

Do You Have Enough to Retire Comfortably?

Determining whether you have enough to retire comfortably involves assessing your savings against the ASFA Retirement Standard benchmarks. The superannuation lump sum required to fund a comfortable retirement, when used in conjunction with a part pension, is now $690,000 for a couple and $595,000 for a single.

Consider the following factors to evaluate your readiness for a comfortable retirement:

  1. Current Savings: Compare your current retirement savings and superannuation balance with the required lump sum figures.
  2. Expected Expenses: Review your expected annual expenses in retirement, including housing, healthcare, and leisure activities.
  3. Income Sources: Account for all potential income sources in retirement, such as age pension, superannuation, and investment returns.
  4. Debt Status: Ensure your mortgage and any other significant debts are paid off to reduce financial strain.

Positive Financial Factors for Retirees

Retirees have been benefiting from several positive financial trends, including:

  • Higher returns on bank deposits
  • Rising home values and share prices
  • Age pension increases linked to inflation
  • Positive news from the recent federal budget

According to MBA Financial Strategists director Darren James, many retirees are in a unique situation where recent interest rate increases do not significantly impact them as their mortgages are largely paid off. Instead, they benefit from higher interest rates on their term deposits.

The recent federal budget’s decision to maintain pension deeming rates at their current low level is another benefit, allowing retirees to avoid adverse impacts in their Centrelink assessments. Additionally, the federal budget’s $300 energy relief payments to all households have been particularly welcomed by retirees, not just those receiving the age pension.

In summary, while retirees continue to face rising living costs, the slower pace of these increases compared to overall inflation, coupled with higher income from investments and favorable policy changes, is providing some much-needed relief. As always, careful financial planning and staying informed about market trends and government policies remain crucial for managing retirement comfortably.

If you need assistance with understanding your current financial position, speak with Ben Seeger from HTA Wealth today.



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