Annual retirement cost surged $11,460 in 5 years

We all know that the price of virtually everything has increased over the past year or so as we continue to struggle with hardship. Cost of living crisis. So if you’re a retiree and you feel like 2023 was your most expensive year ever, that’s because it was.

The cost of retirement benefits and the amount of retirement benefits needed to live comfortably after work are also skyrocketing. In 2023, the cost of a comfortable retirement will be $71,724 for a married couple and $50,981 for a single person.

Concerned about the extent to which retirees are being affected by the inflation issue, we looked at the 2018 retirement threshold figures from the Australian Superannuation Funds Association (ASFA).

This means that just five years ago, a 65-year-old couple would have had to spend $60,264 a year. For singles, that amount was $42,764. Over the past five years alone, it has increased by up to $11,460 per year.

And when I say comfortable, I don’t mean luxurious. Here’s a look at where costs are rising the most and where there are surprising signs of hope.

How much has “comfortable” retirement benefits increased over the past five years?

Source: ASFA Retirement Standards/Yahoo Finance

The good news is that prices for some products are almost the same as they were five years ago. Given that inflation is soaring and competition and cheap production are keeping prices down. clothing and footwear It has hardly increased. Strangely, energy based on this indicator has also changed little since 2018.

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So where is the pain in the hip pocket most severe? transportation Costs are the biggest, with retirees paying 26% more, likely due to higher gas prices.

but food hike Rising gasoline prices, labor costs, and supply chain issues are “impacting” them, with a similar proportion at 23%.

Also, Nicole Pedersen-McKinnon:

Recreation costs include, but are not limited to, the following costs: Eating out ($96.06 per week for couples, $68.61 per week for singles) domestic travel (Couples book $85.86 per week; singles book $56.41) international travel ($37.68 for couples, $23.78 for singles).

alcohol consumption Couples are supposed to get back $45.67 a week, singles $21.88, or the equivalent amount spent on charity or church. Overall, the leisure sector he increased by 23%.

it wouldn’t be surprising Medical bills After accounting for health insurance premium increases and co-pays, it increased by 17%.

Please note that the above numbers do not include mortgages or rental costs. The assumption is that you will own your home outright by the time you retire (this can be a difficult but important goal).

but, Housing expense Nevertheless, categories that take into account insurance, water, rates, repairs and improvements are on the rise.

Also included in “Household Goods and Services”, which has not increased much, are items for maintaining the home, as well as items for cleaning, and even personal care purchases for oneself (beauty supplies). ) is also included.

It’s also interesting to note that just five years ago, the categories of eligible spending were revised to reflect “increasingly pervasive technology.” At first glance, only the area of ​​communication seems to be declining. But now it’s a narrower category, specifically “home phone, broadband and mobile bundles.” Streaming services were also added for $12.03 per week (in the recreation or leisure category) for each household.

Lump sum required to cover costs – then and now

The 2018 release describes it as follows: “A comfortable standard budget provides a far more dignified life for Australian retirees, while a modest budget is closer to basic superannuation level living.”

At the time, the actual total annual expenditure for a “moderate” (rather than “comfortable”) standard retirement plan was just $27,368 for a single person and $39,353 for a married couple.

But fast forward to 2023, and your annual spending will be $32,417 for singles and $46,620 for couples. So now, even though your retirement benefits aren’t that high, they’re about 18% higher.

Converting these numbers into the total amount needed for a modest and comfortable retirement is as follows.

In 2018, the estimated lump sum for a decent retirement plan was $70,000 for singles and married couples. Currently, the estimated value of his small retirement lump sum is significantly higher at $100,000.

It may seem strange that the two are the same, but this is because the superannuation provides most of the income needed for both, and the superannuation covers the difference between the full superannuation and the conservative budget amount. be.

Even ASFA’s comfortable retirement figures assume you’ll claim your superannuation, which will cost you more over time. Therefore, ASFA assumes that the lump sum is withdrawn until it is eventually exhausted, and therefore that progressively higher age pension top-ups are obtained over time, and therefore many other is more achievable than the estimate.

But what about a “comfortable” retirement figure at age 67?

To live a comfortable retirement in 2018, married couples needed a lump sum of $640,000, while singles needed $545,000. In fact, this level has been maintained for many years.

However, in March, ASFA revised that amount upward by $50,000 to $690,000 for couples and $595,000 for singles.

Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me. www.nicolesmartmoney.com.Follow Nicole Facebook, twitter and Instagram.

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