The cost of living for Australian retirees edged up towards the end of last year. The Association of Superannuation Funds of Australia’s latest Retirement Standard for the December quarter finds that in order to live a comfortable retirement, couples aged around the age of 65 should budget for $60,977 per year and singles $43,317.
This marks an increase of 0.2 and 0.3 per cent respectively from the September quarter figures.
According to ASFA’s figures, the lump sum that is required for a comfortable retirement is $640,000 for couples and $545,000 for singles. The figures assume that capital will be drawn down and retirees will receive the age pension at some stage.
The Grattan Institute’s recent report on money in retirement argues that Australian’s don’t need that much money to have a good retirement.
Authors of the report, John Daley and Brendan Coates say: “ASFA’s ‘comfortable’ standard would support an affluent lifestyle more luxurious than most Australians currently have during their working lives. And it misleadingly suggests that anyone with fewer resources will have an ‘uncomfortable’ retirement.”
ASFA’s figures indicate that retirees who want to live a more modest lifestyle need $27,648 a year for singles and $39,775 for couples. At this modest level the increase was 0.2 per cent for singles and 0.3 per cent for couples
ASFA suggests a lump sum amount of $70,000 for a modest lifestyle for both couples and singles, as the base rate of the Age Pension will meet the expenditure.
Grattan Institute disagrees with this figure for a modest retirement as average living stands are lower before retirement than the ASFA benchmark for retirement.
“About 25 per cent of couple households and 30 per cent of single households spend less than the modest standard when they are working age and when they are retired,” say Daley and Coates.
ASFA’s cost of living increases are lower than the 0.5 per cent increase in the CPI in the December quarter. The increase in CPI over the quarter can be attributed to the 9.4 per cent increase in tobacco however ASFA does not include tobacco in its retirement figures.
ASFA chief executive Martin Fahy says: “The fact that the cost of retirement over the most recent quarter only increased by a relatively small amount is welcome news for retirees as prices have been increasing for a number of essentials.”
There has been a decrease in wine by 0.4 per cent over the year, computing and AV equipment by 1.5 per cent and telecommunication costs by 4.7 per cent.