The eye-watering cost of retiring in Australia

Retiring now costs more a year than paying off a typical mortgage for those who want to live comfortably, superannuation industry figures show.

A single retiree needs $51,278 a year just to maintain their lifestyle, provided they have 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 off an average, new Australian mortgage of $615,178 with monthly repayments of $3,784.

The Reserve Bank’s 13 interest rates rises in 18 months, taking the cash rate to a 12-year high of 4.35 per cent, are particularly hurting younger people with a mortgage, but high inflation is still squeezing Australia’s older residents who want to live it up.

The expensive cost of retirement would particularly affect baby boomers who are old enough to get the age pension but still healthy enough to travel and enjoy social outings. 

The eye-watering cost of retirement has been revealed only days after the Aged Care Taskforce’s final report recommended wealthy retirees pay more of their own aged care costs.

‘It is appropriate older people make a fair co-contribution to the cost of their aged care based on their means,’ it said.

ASFA’s weekly expenses added up to $51,082 a year for a single retiree but rose to $51,278 when other hidden costs were added.

Leisure was the biggest component, adding up to $11,509 a year or 22.4 per cent of the overall costs of a single retiree lifestyle, ahead of transport ($9,309), food ($7,372) and health ($5,873).

A single retiree of more modest means or tastes needs $32,666 a year, compared with $46,994 for a couple.

ASFA chief executive Mary Delahunty said high inflation was putting pressure on retiree finances.

‘Retiree budgets have been under substantial pressure for the past two years due to the high cost of essential goods and services,’ she said.

Insurance costs are a major drain on retiree finances with costs surging by 16.3 per cent last year, as electricity bills rose by 6.9 per cent and food prices climbed by 4.5 per cent.

These items were all well above the annual consumer price index of 4.1 per cent in the December quarter, Australian Bureau of Statistics data showed. 

But the annual increase in retirement costs of 3.5 per cent, 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 had passed. 

‘Fortunately, we are seeing price increases in the key categories that make up retiree budgets – home and content insurance, fruit and vegetables, fuel and electricity – begin to ease,’ she said.

ASFA recommends $595,000 is needed for a single retiree wishing to live comfortably and getting the age pension at 67.

For couples, that rises to $690,000 with this figure covering an annual holiday in Australia, an occasional holiday overseas and a new car every few years. 

Higher life expectancy, of 81 for men and 85 for women, means Australia is a particularly expensive place to retire compared with other rich-world nations. 

But Super Consumers Australia says $258,000 is enough for a modest retirement, where someone holidays in Australia rather than going overseas every year or two.

ASFA suggests $100,000 can fund a modest retirement for a single retiree or a couple with access to the basic age pension of $1,002.50 a fortnight.