How much money it now costs to retire comfortably

Retired Australians are suffering a bigger cost of living crunch than other households. Here’s why.

Surging petrol, health, grocery and petrol prices have put seniors under extra financial pressure as the cost of a comfortable retirement climbs at its fastest rate since 2010.

Retirees suffered greater price rise pain than other households in 2021 because rising inflation hit unavoidable, non-discretionary expenses the hardest, pushing a couple’s annual comfortable retirement budget to $64,771.

This was up 3.5 per cent since 2020, while the budget for a single retiree rose 3.9 per cent to $45,962, according to a new report by the Association of Superannuation Funds of Australia (ASFA).

The ASFA Retirement Standard for the December quarter found fuel prices jumped 6.6 per cent in three months, dairy products rose 1.7 per cent and non-durable household goods – such as toilet paper – increased 3.7 per cent.

ASFA Deputy CEO Glen McCrea said higher food, petrol and health costs meant many retirees were “really suffering at the moment” as their price increases outstripped those of employees.

“That triple whammy is really having an impact on the budget of retirees,” he said.

ASFA says a retiring couple wanting a comfortable lifestyle will need a combined super balance of $640,000, while a single retiree requires $545,000, based on a combination of super drawdowns and the age pension.

“The higher the cost of living, the more you need to get to that comfortable standard,” Mr McCrea said.

“For retirees it’s harder to save money, and you can’t work more,” he said.

“For those people who are approaching retirement, and also younger people, the more you save in super will give you more room to deal with some of these inflationary shocks, which are very hard to manage when you’re a retiree on a fixed income.”

MBA Financial Strategists director Darren James said the rising cost of living came up in a lot of retirement conversations with clients.

“Especially in the initial discussions about what you think you need to live on, the first thing they say is the cost of living going up is scary,” he said.

“Everything costs a lot more and private health insurance scares a lot of them.”

A comfortable retirement now costs almost $65,000 a year. Picture: iStock

Mr James combining super savings and the age pension would fund the retirement of a majority of people who did not have a full working lifetime of receiving compulsory superannuation.

“If you spend all of your retirement savings, your fallback position is you get the age pension of $38,000 a year (for a couple),” he said.

“Anything you can add to that just improves your quality of life.”

The Australian Bureau of Statistics this month revealed that in 2021 the cost of living for age pension households rose 3.4 per cent, almost one-third higher than the 2.6 per cent price rise for employee households.

ABS head of prices statistics Michelle Marquardt said: “automotive fuel prices have increased over 30 per cent over the last 12 months and continue to be the largest contributor to higher living costs for Australian households”.

“Food makes up a higher proportion of overall expenditure for age pensioner households compared to other types of households,” she said.