The latest ASFA Retirement Standard shows that in the September quarter a couple looking to achieve a 'comfortable' retirement needed to spend $56,236 a year, while those seeking a 'modest' retirement lifestyle would need to spend $32,511 a year.
These figures are up by 1.7 per cent and 2.3 per cent respectively on the September quarter 2011 figures of $55,316 and $31,767 a year. In comparison, the increase in the All Groups Consumer Price Index (CPI) was 2.0 per cent over the year.
The change in costs of retirement was significant between the June and September quarters 2012, up by 1.9 per cent at the comfortable level and 2.3 per cent at the modest level (see Table 1 for budget breakdown). This compares to a more modest 1.4 per cent increase in the All Groups CPI.
There were several contributors to this increase in the costs of retirement. There was a 15.3 per cent increase in the price of electricity. Property rates and charges increased by 5.8 per cent between the two quarters reflecting higher charges at the start of a new financial year. The ABS notes that many residential utility providers have cited investment in infrastructure and the introduction of carbon pricing as some of the influences driving price increases in the September quarter 2012.
Another contributor to the increase in costs of retirement was the 1.9 per cent increase in the price of food. The main components of this was a 10.5 per cent increase in the price of vegetables and 9.7 per cent increase in the price of fruit, reflecting unfavourable growing and weather conditions.
There was also a significant increase in health costs in the quarter.
There was a 6.6 per cent increase in cost of international holiday travel and accommodation but this was offset to some degree by a fall of 1.3 per cent in the costs of domestic holiday travel.
One good bit of news on the cost front was that there was a 0.8 per cent decrease in transport costs in the September quarter as the result of a 3.9 per cent fall in the price of petrol and a 1.0 per cent fall in the price of motor vehicles.
The reason that the increase in the costs of retirement was greater than the increase in the All Groups CPI is that retiree households on average have somewhat different spending patterns to the rest of the population.
Along with generally owning their own home outright (so cost increases for housing are less important for retirees), they don't tend to spend much on education services.
In contrast, electricity, food, health, transportation and recreation spending form a large part of retiree budgets. The relatively large increases across most of these categories led to the larger than usual increase in the costs of retirement at the comfortable level and particularly at the modest level.
However, over the longer term it is not unusual for the effects of the various differences to largely cancel out.
Table 1: Budgets for various households and living standards (September quarter 2012)
||Modest lifestyle - single
||Modest lifestyle - couple
||Comfortable lifestyle - single
||Comfortable lifestyle - couple
|Housing - ongoing only
|Household goods and services
|Total per week
|Total per year
The figures in each case assume that the retiree(s) own their own home and relate to expenditure by the household. This can be greater than household income after income tax where there is a drawdown on capital over the period of retirement. Single calculations are based on female figures. All calculations are weekly unless otherwise stated.
The ASFA Retirement Standard is an initiative of the Association of Superannuation Funds of Australia (ASFA) benchmarking the annual budget needed by Australians to fund either a comfortable or modest standard of living in the post-work years.
It is updated quarterly to reflect inflation and provides detailed budgets of what singles and couples would need to spend to support their chosen lifestyle.
Modest lifestyle in retirement
Better than the Age Pension, but still only able to afford fairly basic activities.
Comfortable retirement lifestyle
Enabling an older, healthy 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; and domestic, and occasionally international, holiday travel.
Costs and summary figures can be accessed via the ASFA website.
For further information, please contact:
Pauline Vamos, CEO, 0433 169 342
Rebecca Glenn, GM Marketing and Communications, (02) 8079 0825 or 0416 170 439
Megan McDougall, Media and Communications Co-ordinator, (02) 8079 0849
ASFA is the peak policy, research and advocacy body for Australia's superannuation industry. It is a not-for-profit, sector-neutral, and non-party political national organisation whose aim is to advance effective retirement outcomes for members of funds through research, advocacy and the development of policy and industry best practice.