Perhaps it’s time to revise those perfectly worked-out retirement savings? New figures released by the Association of Superannuation Funds of Australia show Australians will need to save even more to fund the lifestyle they want in retirement.
Australians seeking a ‘comfortable’ retirement will need to spend 0.8% more as a result of price changes in the December quarter, with the annual expenditure rising to $57,665 for couples and $42,158 for singles.
In order to achieve this, a couple would need a combined superannuation balance of around $510,000 and a single individual would need a balance of around $430,000, ASFA said.
Budgets for a ‘modest’ retirement lifestyle were slightly less affected, with the annual budget increasing by 0.7% to $33,358 for couples and 0.6% to $23,175 for singles.
Over the year to the December quarter, the cost of retirement increased by 2.4% at the comfortable level and 2.6% at the modest level.
Unfortunately, retiree budgets were subject to a steep rise in the cost of fruit (+8.1%), vegetables (+7.1%) and domestic holiday accommodation (+6.9%), but this was partially offset by a drop in fuel prices (-1.1%) in the December quarter.
The figures highlight the increasing importance of people planning for retirement, ASFA CEO Pauline Vamos said.
"Most people have a picture of how they want to spend their post-work years, like travelling or relaxing without the stress of money worries. However, research continues to indicate that many Australians will retire without enough savings to live the lifestyle they want to in their post-work years. As the cost of living continues to increase, so too will the pressure to save more.”
Vamos hopes policy makers consider how price increases impact retirees differently to the rest of the population and tailor policies accordingly, during upcoming federal budget planning.
"The expenditure required to live a modest lifestyle in retirement only requires a small amount of retirement savings in addition to the age pension, however in this category, budgets are tight and vulnerable to price fluctuations when it comes to areas where there is less discretionary choice.
"This means that when there is a substantial increase in the cost of basic items, it has the potential to hit retirees hard. Retirees also tend to spend more on health services than the general population, so it's encouraging to see prices for consumers in this area did not increase this quarter.”
The ASFA Retirement Standard benchmarks the annual budget needed by Australians to fund either a 'comfortable' or 'modest' standard of living in people's 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.