The Association of Superannuation Funds of Australia (ASFA) has developed a new retirement standard, the ASFA Retirement Standard for Older Retirees, which gives a clear picture of the expenditure required for Australians aged 90-95 to maintain a comfortable or modest lifestyle in retirement.
The existing ASFA Retirement Standard focuses on the spending requirements of those aged around 70 who are in relatively good health for their age and who reside in their owner-occupied home. However, as people age, their spending requirements change as they are unable to engage in the same types of activities, and often require increased care and support. This has different cost implications, which is why there was a need to develop a new standard.
"As average life expectancies continue to increase, most older Australians will require both superannuation savings and financial support from government to accommodate their long-term retirement spending needs," says ASFA CEO Ms Pauline Vamos.
"This will pose challenges for governments as they seek to put in place policies that provide financial support to this group, while working within the fiscal challenges that will arise as a result of the pool of retirees growing and the number of working Australians declining.
"The ASFA Retirement Standard for Older Retirees will give governments a better picture of the spending magnitude and behaviour of older retirees. This will allow them to better analyse the impact that policy changes or price fluctuations in particular areas will have on this cohort of people and make better decisions accordingly," says Ms Vamos.
"This information will also help individuals and their financial advisers with their own retirement planning, as they will be able to see how their spending will change in their later years and plan to save to accommodate this."
Released as part of a report 'The spending patterns of older retirees', the new standard found that older retirees spend less in aggregate than younger retirees due to a decrease in holidays and other leisure activities outside the home, most likely reflecting their reduced capacity for activity.
"However, they tend to spend more on assistance in the home, including for cleaning services and meals, as well as contributions towards Home and Community Care services. They also tend to have increased out-of-pocket expenses for major medical procedures and ongoing chemist and other medical expenses. This means policy changes in these areas can have a major impact on older retirees and individuals also need to budget for increased expenditure on these items," says Ms Vamos.
She says the new standard also highlights how important it is to save as much superannuation as possible, to ensure you have the means to live with comfort and dignity in retirement.
"There is a $20,000 gap between the Age Pension and the level of expenditure required each year for a single person to live comfortably in retirement for a long time. Building your own private nest egg is the best way of ensuring you are able to live your retirement free from major financial worries," Ms Vamos concluded.
The ASFA Retirement Standard for Older Retirees and accompanying report 'The spending patterns of older retirees' can be accessed here.
For further information, please contact:
Lisa Chikarovski: Manager – Consumer Strategy, Media and Public Affairs, 0451 949 300.
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, which aims to advance effective retirement outcomes for members of funds through research, advocacy and the development of policy and industry best practice.