Retiring now costs more per year than paying off a typical mortgage for those looking to live comfortably, figures from the pensions industry show.
A single retiree needs $51,278 a year just to maintain their lifestyle, assuming they’ve paid off their home, rising to a record $72,148 for couples, the Association of Superannuation Funds of Australia (ASFA) revealed.
But both figures are higher than the $45,408 annual cost of paying an average new Australian mortgage of $615,178 with monthly payments of $3,784.
The Reserve Bank’s 13 rate hikes in 18 months, bringing the cash rate to 4.35 per cent for 12 years, are particularly hurting younger people with a mortgage, but high inflation is still squeezing older Australians looking to make ends meet. .
The high cost of retirement will especially affect baby boomers who are old enough to receive a retirement pension but still healthy enough to travel and enjoy social outings.
Retiring now costs more per year than paying off a typical mortgage for those looking to live comfortably, pension industry figures show (image is stock image)
The eye-popping costs of retirement have been revealed just days after the Aged Care Task Force’s final report recommended that wealthy retirees should pay more of their own aged care costs.
“It is appropriate that older people make a reasonable contribution to the cost of their aged care based on their means,” it said.
ASFA’s weekly expenses rose to $51,082 a year for a single retiree, but rose to $51,278 when other hidden costs were added.
Leisure was the largest component, adding up to $11,509 a year or 22.4 percent of the total cost of a single retiree’s lifestyle, ahead of transportation ($9,309), food ($7,372) and health ($5,873).
A single retiree of more modest means or tastes needs $32,666 a year, compared to $46,994 for a couple.
ASFA chief executive Mary Delahunty said high inflation was putting pressure on retirees’ finances.
“Pensioner budgets have been under significant pressure for the past two years due to the high cost of essential goods and services,” she said.
Insurance costs are a big drag on pensioners’ finances, with costs rising by 16.3 per cent last year as electricity bills rose by 6.9 per cent and food prices rose by 4.5 per cent.
Those items were all well above the annual consumer price index of 4.1 percent in the December quarter, data from the Australian Bureau of Statistics showed.
But the 3.5 per cent annual increase in pension costs, as calculated by ASFA, was still below the broader headline inflation rate, with older Australians less likely to still be paying off a mortgage.
Ms Delahunty said the worst of the cost of living crisis was over.
The Association of Superannuation Funds of Australia (ASFA) estimates that a single retiree will need $51,278 a year for their lifestyle, assuming they have paid off their home (pictured is a Woolworths supermarket in Sydney’s east)
“Fortunately, we are seeing price increases in the key categories that make up pensioner budgets – home and contents insurance, fruit and vegetables, fuel and electricity – starting to ease,” she said.
ASFA recommends that $595,000 is required for a single retiree who wants to live comfortably and receive the Age Pension at age 67.
For couples, that rises to $690,000, with that figure covering an annual holiday in Australia, an occasional holiday overseas and a new car every few years.
Higher life expectancies of 81 for men and 85 for women mean Australia is a particularly expensive place to retire compared to other rich world nations.
But Super Consumers Australia says $258,000 is enough for a modest retirement where someone vacations in Australia rather than going overseas every year or two.
ASFA suggests that $100,000 could fund a modest pension for a single pensioner or a couple with access to the Basic Age Pension of $1,002.50 fortnightly.