WEEKLY E-MAIL

17 October 2022

COST OF LIVING IN RETIREMENT

By Karen Maher

Since 2004, the ASFA Retirement Standard has provided a guide to the expenses for both a comfortable and modest lifestyle for couples and singles to maintain a healthy, vital and connected lifestyle in retirement. The Retirement Standard is updated quarterly to reflect inflation, reviewed regularly to reflect lifestyle changes, and provides detailed budgets of what they estimate single people and couples need to spend to support their chosen lifestyle.

A comfortable lifestyle is defined as allowing retirees to maintain a good standard of living in their post-work years. It accounts for the retiree to be involved in a broad range of leisure and recreational activities and to have a good standard of living through the purchase of such things as household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, an annual domestic trip and an international trip once every seven years.

The modest lifestyle is defined as providing a lifestyle slightly above the Age Pension, i.e. only allowing for the basics.

Both budgets assume retirees own their own homes outright and are relatively healthy.

The Retirement Standard’s latest update for the June quarter 2022 indicates that couples aged 65 to 84, living a comfortable retirement, need to spend a minimum of $66,725 per year, and singles $47,383 per year, up by 2.0% and 1.9%, respectively, on the previous quarter.

Over the year to June 2022, this is an increase of around 6.2% for the comfortable couple budget and 6.7% for the comfortable single budget.

These increases are slightly higher than the All Groups CPI of 1.8% for the June quarter and 6.1% annually, with retirees facing significant price increases for non-discretionary items such as food, automotive fuel, and health costs.

Table: Budgets for various households and living standards for those aged 65 to 84 (June quarter 2022, national)

The AFSA Retirement Standard is a valuable guide for what the likely cost of living will be in retirement for both a comfortable and modest lifestyle. Needless to say, most would aspire to a comfortable lifestyle in retirement, which includes items like yearly domestic travel and an international trip once every seven years. However, should there be a desire to participate in a higher level of leisure and recreational activities along with more frequent travel, an income of $66,725 per year may not suffice. These are personal choices, and these numbers should only be used as a guide.

Karen Maher
Associate

If you have any questions or comments, please email me at karen@gfmwealth.com.au

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