Retirement costs: how much you’ll need to be comfortable

Retirees were hit hard by the cost-of-living crunch in recent years, but relief has come. See what income and lump sum you’ll need.

Relief for retirees from surging living costs has arrived, but some senior households face fresh financial challenges in the coming months.

New figures from the Association of Superannuation Funds of Australia show couples aged 65 need $73,077 per year combined to achieve a comfortable retirement while singles require $51,805.

ASFA’s new Retirement Standard analysis found the cost of a comfortable retirement climbed 1.3 per cent in 2024, just over half the rate of the Consumer Price Index increase of 2.4 per cent.

It’s welcome news for seniors who faced higher-than-CPI living cost increases in recent years as their key household expenses including groceries, insurance and electricity rose dramatically.

ASFA says travel costs for retirees climbed in the December quarter. Picture: iStock

In the December quarter, expenses for retiree couples and singles climbed just 0.1 per cent, benefiting from a 9.9 per cent quarterly drop in electricity prices thanks to government energy rebates.

ASFA CEO Mary Delahunty said high inflation were still weighing heavily on retirees but the latest figures were good news and showed “a substantial easing in price increases for the goods and services they purchase”.

“It just shows how crucial that electricity cost is to a retiree’s budget,” she said.

“We have had a nearly 10 per cent fall in electricity prices in that December quarter, and over the course of 12 months 25 per cent.”

Ms Delahunty said electricity bill relief had been “a smart policy” for seniors.

“We don’t want retirees making decisions about their comfort and turning off electrical goods because they can’t afford it – that is not the vision of the nation,” she said. ASFA calculates the superannuation lump sums needed at retirement at age 67 to afford comfortable lifestyles using a mixture of age pension and their super. Currently, a couple requires $690,000 and a single $595,000.

New financial pressures for some seniors will emerge if the Reserve Bank continues with interest rate cuts in the coming months, reducing returns on their cash in the bank.

Ms Delahunty said people with high exposure to cash deposits would be impacted more than those with superannuation, which had more exposure to shares, infrastructure, property and bonds.

CreationWealth senior financial adviser Andrew Zbik said higher interest rates in recent years had shielded many retirees with cash savings from living cost increases, but now that rates were falling seniors should not switch everything to the share market.

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

“We are of the opinion that markets are overpriced, and as interest rates start to decline don’t go rushing to put your cash into assets like shares, as we are expecting a correction,” he said.

Mr Zbik said falling interest rates would pressure some seniors. “It’s the wealth effect – you are seeing less being earned and say you have to tighten belts,” he said.

He noted that economists were forecasting just one or two RBA rate cuts this year “so you are still getting a return on cash better than the average over the last 10 years”.

While lower growth in living costs was “a big relief for a lot of people”, many who had battled household budget strains were too afraid to draw down on their super to help cover expenses, Mr Zbik said.

“A conversation I’m constantly having with people is the system is designed for you to gradually draw down on your capital during retirement,” he said.

“The obligation is not to be like a pauper then pass on all your wealth to your children.”