How much you need to retire in comfort in a higher cost world

What you need to fund a comfortable retirement has climbed sharply since 2019. See the list of expenses for singles and couples.

International travel costs are impacting retirees. Picture: iStock

The cost of a comfortable retirement has climbed almost 20 per cent in just five years, forcing some older Australians to rethink the size of their nest egg.

New figures from the Association of Superannuation Funds of Australia shows a couple wanting to retire comfortably today requires $73,337 a year, while a single requires $52,085.

That’s up 3.7 per cent over the past 12 months, and more than 19 per cent over the past five years because of the post-pandemic cost-of-living crunch.

The ASFA Retirement Standard says the superannuation balances necessary to achieve retirement comfort are $690,000 for a couple combined, and $595,000 for single, with their income coming from a mix of super savings and a part age pension.

The figures assume retirees are homeowners. Retirees still paying off a mortgage would have to add their repayments to weekly spending, while retire renters fare worse. People paying a $600 weekly rent would need about $100,000 a year for a couple and $80,000 for a single – requiring super lump sums near $1 million and $800,000 respectively,

ASFA CEO Mary Delahunty said retirees were “managing an increasingly difficult landscape where the cost of essential goods and services keep rising”.

She said many had noticed rising costs at the supermarket, for petrol, utilities and insurance.

“Health, home, and transport are vital to their wellbeing, yet the expenses tied to these necessities are steadily increasing,” she said.

Ms Delahunty said strong superannuation returns in recent years, plus inflation-linked age pension rises, had helped cushion some of the impacts of rising costs

“Retirees generally have seen their super funds have investment returns well in excess of the rate of inflation, which means that even with slightly higher withdrawals, their balances remain healthy and supportive of their long-term retirement goals,” she said.

ASFA CEO Mary Delahunty. Picture: NCA NewsWire/Ian Currie

Tribeca Financial CEO Ryan Watson said his clients had been expressing concern about the rising cost of food, fuel and utilities, because most were not generating a wage that could increase their assets.

“They are worried that things will just continue to become more and more expensive,” he said.

“It’s not like they can easily go out and get another job to supplement their income, so they are very conscious about the money they have invested and the income that they draw from it.

“Having enough money to last your retirement is the number concern for retirees.”

Mr Watson said while strong super balances and higher interest rates on bank deposits had helped retirees, the rising costs of everyday items “affects their day-to-day living standards”.

Expenses including insurance and utility bills had been rising “far in advance of reported inflation rates”, he said.

The ASFA Retirement Standard singles out insurance as a key pressure point for retirees, with premiums rising 14 per cent over the past year.

It says domestic travel costs remained stable but international travel and accommodation expenses climbed 8.1 per cent annually.

“As airlines increase capacity to pre-Covid levels, we can expect some moderation in air travel costs,” Ms Delahunty said.

“Although insurance premiums may remain elevated due to ongoing high claim rates and repair costs, any growth in these costs is likely to slow, providing some relief to retirees.”

ASFA said the rising cost of living meant the need for “considered financial planning and adequate superannuation savings has never been more critical”.

Originally published as How much you need to retire in comfort in a higher cost world