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Retirees are grappling with increasing costs that are pushing up the amount needed each year for a comfortable retirement, according to Australia’s peak superannuation body.
The latest figures from the Association of Superannuation Funds of Australia (ASFA) for the June quarter revealed annual costs rose by 3.7 per cent over the past 12 months.
That means couples aged 65 to 84 who own their own home now need a minimum of $73,337 a year to enjoy a comfortable retirement.
A single person will need at least $52,085.
Estimates vary on the amount of superannuation needed for a comfortable retirement.
According to ASFA, singles require a lump sum of $595,000 in retirement savings, and couples will need $690,000.
“ASFA’s Retirement Standard has shown again … that the cost of a comfortable retirement is creeping up again,” ASFA chief executive Mary Delahunty told SBS News.
“It’s not insignificant when you are drawing down an income to fund a retirement.”
Rising costs for essentials
ASFA defines a ‘comfortable retirement’ as the ability to afford a good standard of living in a person’s post-work years.
It accounts for daily expenses such as groceries and transport, exercise and leisure activities, an occasional restaurant meal and an overseas holiday once every seven years.
Some costs are still outpacing inflation.
ASFA said in the June quarter there were notable increases in both home and vehicle insurance costs and private insurance prices, prompting further financial strain on retirees.
Insurance premiums rose by 3.1 per cent in the June quarter — and 14 per cent over the past year — while private health insurance premiums increased by an average of 3.03 per cent from 1 April.
“We’ve seen the cost of insurance — household insurance and health insurance — go up really astronomically. Even the cost of things like clothes and shoes are outpacing inflation,” Delahunty said.
While annual food inflation eased slightly to 3.3 per cent in the June quarter — down from 3.8 per cent in March — essentials such as fruits and vegetables are still 3.7 per cent higher than one year ago.
Prices for clothing and footwear rose by 3.1 per cent in the last quarter.
“Some of the good news for retirees, though, and they would know this, is that if they stay within the superannuation system, their money is also invested,” Delahunty said. “They’re being able to reap the benefit of some very strong returns from their super funds as well.”
Profits from Insurance Australia Group’s (IAG) insurance business soared nearly 80 per cent in the past year to $1.4 billion.
Premiums are up around 11 per cent, with growth set to continue next year.
“We are seeing 10 to 15 per cent inflationary pressure on motor repair costs,” IAG chief executive Nick Hawkins said.
IAG says it is trying hard to help vulnerable customers, with retirees being among them.
“We’ve waived premium accesses, we’ve extended temporary accommodation arrangements, and we’ve introduced flexible payment options,” he said.
But Delahunty said retirees have a lot of challenges and a lot of decisions to make “in a time that should be really joyous if they’ve worked very hard”.
“It is certainly a difficult period for them,” she said.