Climbing cost of retirement is hitting single seniors the hardest

Retirement costs have climbed faster than inflation, while superannuation is doing more ‘heavy lifting’ to help stop seniors from struggling financially.

Retirement costs have climbed faster than inflation, while superannuation is doing more “heavy lifting” to help stop seniors from struggling financially, research has found.

The cost of a comfortable retirement is now $66,725 for a couple and $47,383 for a single aged about 65, according to the latest ASFA Retirement Standard from the Association of Superannuation Funds of Australia.

Costs rose 6.2 per cent for couples and 6.7 per cent for singles in the year to June 30, above the official inflation rate of 6.1 per cent.

ASFA deputy CEO Glen McCrea said “inflation is hitting a single retiree that little bit harder” because bill costs could not be shared and key expenses such as petrol and food rose strongly in 2021-22.

Automotive fuel jumped 32.1 per cent, vegetables 14.6 per cent, beef 9.4 per cent, tea and coffee 9.3 per cent and breakfast cereals 8.8 per cent, ASFA found.

“Inflation is hitting those staple areas, which is a concern … inflation isn’t great for people on fixed incomes,” Mr McCrea said.

ASFA also examined data from the Department of Social Services and Australian Bureau of Statistics to find 40 per cent of new retirees today receive an age pension – down from 60 per cent a decade ago and 80 per cent when compulsory super started in the early 1990s.

Mr McCrea said compulsory super was “doing its job” and helping people deal with rising costs.

Senior couples need more than $66,000 a year to retire comfortably, ASFA says.

“Clearly super is doing that heavy lifting now and supporting the age pension to make sure people have a little bit of dignity,” he said.

Under current Centrelink rules, a retired homeowner couple cannot get a pension if their combined assets are above $915,500. There is also an income test where the full pension of $1488.80 per fortnight reduces by 50c for each dollar a couple earns above $336 per fortnight.

Compulsory super payments rose from 10 to 10.5 per cent in July and are scheduled to rise to 12 per cent by 2025.

JBS Financial Strategists CEO Jenny Brown said the impact of the super rise was “mixed” as it could mean lower wage rises for some.

“For the average Australian it’s a good thing – for the average employer it adds another half a per cent to your wages bill,” she said.

Ms Brown said compulsory super had helped produce richer retirements. “If you go back 40 years, unless you planned for retirement you wouldn’t be putting money away,” she said.

Surging living costs this year meant retirees were now looking more closely at their spending, Ms Brown said.

ASFA calculates that to achieve a “comfortable” retirement through a mix of assets and pension payments, a couple needs $640,000 in super and a single $545,000. This numbers were questioned last month by Super Consumers Australia, which said a “medium” spending couple required $402,200 and a single $301,000.

Mr McCrea said: “Eighteen years of experience, ongoing analysis of feedback from fund members and retirees about their lived experience, and rigorous testing of the underlying assumptions all support the ASFA Retirement Standard and the reasonable expectations of a country with a mature retirement system”.