The cost of living crisis is now so bad that Australians need even more money to retire comfortably.
The 32-year high inflation rate of 7.8 percent is hitting singles and widowers particularly hard, as they can’t as easily pool their money to pay bills and buy groceries.
The Australian Superannuation Funds Association (ASFA) now recommends that a single person save up to $595,000 in pension to retire comfortably, 9.2 per cent more than the previous recommendation of $545,000.
For couples, the recommended retirement balance is $690,000, an increase of 7.8% in line with inflation, from $640,000.
ASFA, Australia’s main retirement industry lobby group, is basing its recommendations on those who have already paid off their mortgage and could qualify for an old age pension.
While retirees are less likely to be affected by rising mortgage rates, rising food, gas and electricity prices affect those on fixed incomes.
The Australian Pension Funds Association now recommends that a single person save $595,000 in pension to retire comfortably, 9.2 per cent more than the previous recommendation of $545,000. For couples, the recommended retirement balance is $690,000, an increase of 7.8% in line with inflation, from $640,000
ASFA chief executive Martin Fahy said this meant that those who retire at 67 and receive the old-age pension would need more savings to be able to live to 92.
“Unfortunately, Australians continue to face sharp price increases for essential goods and services,” he said.
Single retirees now need $49,462 a year to live on compared to $69,691 for couples in their sixties.
ASFA estimated retirement costs of living had risen 7.5 percent in 2022, according to an analysis of data from the Australian Bureau of Statistics’ consumer price index, also known as the basket of goods.
Food prices increased 9.2 percent, but a closer look showed bread increased 13.4 percent, milk 17.9 percent, meat and seafood increased 8.2 percent. percent, while cooking oil became 20.8 percent more expensive.
Vacations were the costliest cost, with domestic travel and lodging costs rising 19.8%, more severe than the 11.7% rise in electric bills and the 17.4% rise on gas bills.
Social security payments are indexed for inflation twice a year, on March 20 and September 20.
While retirees are less likely to be affected by rising mortgage rates, rising food, gas and electricity prices are hurting those on a fixed income (a Woolworths supermarket in the suburbs is pictured from eastern Sydney)
The old-age pension increased 3.7 percent on March 20, to reflect the six-month rise in the consumer price index during the September and December 2022 quarters.
Thus, the fortnightly pension for singles rose $37.50 to $1,064, while that of couples rose $56.40 to $1,604, both amounts including the pension and energy supplements.
The mandatory retirement guarantee will increase to 11 percent on July 1, 2023, from 10.5 percent.
Australians can continue to deposit up to $27,500 a year in their supermarket and pay a favorable tax rate of 15 per cent.
Starting July 1, 2025, that tax rate will double to 30 percent for those with more than $3 million in super savings, in an attempt to save $2 billion a year in the budget.
Retirees who live on their savings are more likely to benefit from higher interest rates, with the Reserve Bank of Australia (Governor Philip Lowe, pictured) from May 2022 raising the cash rate 10 times. But minutes from the March meeting suggested the RBA could pause in April, signaling the effect higher interest rates would have on the economy.
Retirees who live on their savings are more likely to benefit from higher interest rates, and the Reserve Bank of Australia since May 2022 increased the cash rate 10 times.
But minutes from the March meeting suggested the RBA could pause in April, signaling the effect higher interest rates would have on the economy.
“Members agreed to reconsider the case for a pause at the next meeting, acknowledging that the pause would allow additional time to reassess the outlook for the economy,” they said.
Since the last RBA meeting, American Silicon Valley Bank, Signature Bank and Silvergate Bank have collapsed, while battered Credit Suisse is being bought by rival Swiss bank UBS.
The RBA minutes hinted that it was concerned about unseen international developments that could affect financial stability.
“They agreed that upcoming releases on employment, inflation, retail trade and business surveys will provide important additional information, as will developments in the global economy,” he said.
