Australian couples dreaming of a comfortable retirement have received a stark wake-up call, with the annual cost soaring to a new record high. The latest figures from the Association of Superannuation Funds of Australia (ASFA) paint a challenging picture for those planning their golden years.
The Soaring Price of a Comfortable Lifestyle
The ASFA Retirement Standard for the December 2023 quarter shows that a couple now needs an annual income of $72,148 to enjoy a comfortable lifestyle after leaving the workforce. For singles, the required figure is $51,278 per year. This represents a significant increase from the previous quarter, driven largely by rising costs for essentials like insurance, electricity, and groceries.
To generate this level of income without relying on the government Age Pension, a couple would need a superannuation nest egg of approximately $1.6 million. A single person would need around $690,000. These calculations assume the retirees own their home outright and are in relatively good health.
What Does a 'Comfortable' Retirement Actually Include?
ASFA defines a comfortable retirement as one that enables an older, healthy retiree to be involved in a broad range of leisure and recreational activities. It allows for a good standard of living through the purchase of household goods, private health insurance, a reasonable car, and domestic and occasional international travel.
In practical terms, this budget allows for:
- Weekly grocery bills of around $200 for a couple.
- Regular meals at good restaurants.
- Domestic holidays each year and an overseas trip every seven years.
- Comprehensive private health insurance.
- The ability to run and maintain a decent car.
In contrast, the 'modest' retirement standard, which is broadly in line with the Age Pension, provides only for the most basic needs. It covers far fewer leisure activities and leaves little room for unexpected expenses.
Navigating the Savings Challenge
ASFA Deputy CEO, Glen McCrea, emphasised the importance of these updated benchmarks for financial planning. "The ASFA Retirement Standard is the go-to guide for Australians to understand how much they need to save for retirement," he stated. The figures are updated quarterly to reflect real changes in the cost of living for retirees.
The record-high costs underscore the critical role of the superannuation guarantee, which is currently set at 11% of wages and is scheduled to rise to 12% by 2025. Consistent contributions over a working life remain the cornerstone of building an adequate retirement fund. Financial advisors stress that starting early, making voluntary contributions, and reviewing investment strategies are key steps for those aiming to meet or exceed these challenging targets.
For many Australians, the gap between their current super balance and the $1.6 million target may seem daunting. However, experts point out that a combination of super savings, other investments, and a partial Age Pension can help many couples achieve a comfortable standard of living in retirement. The key is to plan ahead, understand the costs involved, and seek professional financial advice tailored to individual circumstances.
