Cost of retirement: how much you’ll pay to be comfortable

Retirees are enjoying financial relief on several fronts, and new research shows what they need to be comfortable. See the spending tables.

Retired Australians are receiving a financial breather as their living costs climb slower than overall inflation while their incomes and assets are boosted from multiple angles.

It now costs $72,663 a year for a couple to retire comfortably and $51,630 for a single, according to the new ASFA Retirement Standard from the Association of Superannuation Funds of Australia.

The record-high figures are up 3.3 per cent over the past 12 months, but below Australia’s 3.6 per cent annual Consumer Price Index inflation and the second straight quarter that retirement costs have climbed slower than CPI.

ASFA CEO Mary Delahunty said retirees continued to feel “considerable cost of living pressure”, with insurance prices rising 16.4 per cent annually, bread and cereal prices up 7.3 per cent and dairy products rising 4.1 per cent.

‘Fortunately, in the past three months, we’ve seen the pace of price rises ease somewhat in key spending categories, namely food and fuel,” Ms Delahunty said.

Some retirees had been reducing their insurance cover or dropping it completely to save money, she said.

Ms Delahunty said retiree budgets were not growing as fast as overall inflation because they did not include secondary and tertiary education, “where there have been substantial price increases”.

The ASFA Retirement Standard also assumes that retirees own their own home, so it is not impacted by surging housing costs.

The superannuation lump sum required to pay for a comfortable retirement, assuming it is used in conjunction with a part pension, is now $690,000 for a couple and $595,000 for a single.

Older Australians have been benefiting from other positive financial factors, including higher returns on their bank deposits, rising home values and share prices, age pension rises linked to inflation and good news in this month’s federal budget.

ASFA’s new numbers follow separate research last week by CommBank iQ that found people aged over 60 were increasing their discretionary spending, which was up 11 per cent on travel, 9 per cent on general retail and 7 per cent on eating out.

MBA Financial Strategists director Darren James said many retirees were “in a unique situation at the moment”.

Recent interest rate increases did not impact most retirees because their mortgages were largely repaid, Mr James said.

“But on the other side, most retirees tend to have savings across term deposits, and at the moment they are getting higher interest rates than they have had in a long time,” he said.

“It would seem with the cost-of-living crunch, that cohort seems to be managing it the best.”

Association of Superannuation Funds of Australia CEO Mary Delahunty. Picture: Ian Currie

Mr James said retirees also benefited from the recent federal budget’s decision to keep pension deeming rates at their current low level, where pension income tests deem the first $60,400 of a person’s financial assets to earn just 0.25 per cent, and assets above that are deemed to earn just 2.25 per cent – well below typical investment returns.

“The deeming rate has been frozen so they’re not being adversely impacted in their assessment for Centrelink,” he said.

ASFA’s Ms Delahunty said the federal budget’s $300 energy relief payments to all households was “very welcome for all retirees, not just those receiving the age pension”.

ASFA says last year’s energy bill rebates meant energy prices rose 2 per cent annually rather than the 17 per cent they would have increased without the government assistance. It says many self-funded retirees were not eligible for those 2023 rebates.