Retirees see 7.5% increase in retirement costs: ASFA

Association of Superannuation Funds Australia (ASFA) retirement data shows the cost of funding a comfortable retirement has risen 7.5% in the past 12 months. 

The organisation’s latest retirement standard found food, fuel, travel and electricity costs had driven up the cost in the December quarter, although the increase was slightly lower the latest CPI inflation figure of 7.8%.

Domestic travel and accommodation rose by 19.8%, the largest annual increase, while fuel rose by 13.2%, electricity rose by 11.7% and food rose by 9.2%.

These increased costs meant couples aged around 65 would need $69,961 per year to achieve a comfortable retirement while singles would need $49,462. 

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For those who were around 85, couples would need $63,639 while singles would need $45,955 which ASFA said was around 2.3% higher than in the previous quarter.

ASFA also updated its superannuation lump sum figures which were needed to fund a retirement from 67 to 92. This also took into the consideration the real value of the Age Pension relative to movement in the CPI.

“The lump sum ASFA calculates is needed for a comfortable retirement assumes that wages will grow at a higher rate than CPI, which has generally been the case. However, over the last few years growth in prices has outstripped wages and thus an adjustment to the lump sum is required.

“The stability over the previous few years in the ASFA estimates of lump sum amounts reflected the assumption that in the future, wages would grow faster than prices, leading to an increase in the Age Pension in real terms over time. Unfortunately, this has not occurred in recent years, leading to the necessity to revisit the lump sum amounts.”

For a comfortable single retirement, the lump sum increased by 9% from $545,000 to $595,000 while a couple had seen the required lump sum increase 7.8% from $640,000 to $690,000. 

“Unfortunately, Australians continue to face sharp price increases for essential goods and services," said ASFA chief executive, Dr Martin Fahy.

"Additionally, for retiree households, falling real wages have meant that the Age Pension payments have not benefitted from adjustments linked to wage increases."