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Hold on tight! The cost of living in retirement is now rising faster than inflation
Yup! Sadly, the latest cost of living data is telling us a couple now needs nearly $70k p.a. to retire comfortably in Australia, and that's before they pursue their big epic retirement dreams.
Hey there, retirement rebels. It’s Bec Wilson here, and if you’re anything like me, you’re feeling the pinch of inflation in your weekly budget... But what you might not know is that retirees are feeling it even more. In fact, the cost of living for retirees in Australia has just been announced as rising at a faster rate than the general inflation rate. This means that if you want to retire in comfort, you now need to have more saved up than you might have thought. 🤯 Let me explain.
The latest analysis, released yesterday from the Association of Superannuation Funds of Australia (ASFA) shows that the cost of living for retirees has jumped up by an average of 2.5 percent in just three months versus a national inflation rate in the same quarter of 1.9percent. That’s a big increase in a short amount of time. To live a comfortable retirement, ASFA says that a couple now needs to budget for a cost of living of $69,691 per year, while a single person needs $49,462. And get this – that’s up 7.6 percent from just a year ago!
This rise in the cost of living has a direct impact on how much you need to have saved up to retire comfortably. In their new ‘example’ retirement budgets, updated yesterday, ASFA now recommends that a couple needs to have saved $690,000, while a single person needs $595,000, assuming they can draw on a part pension. And guess what – that’s up 9 percent in the last year alone! It’s going to be putting pressure on retirement decision-making all over Australia. [And you need to remember, those numbers don’t really accomodate sizeable budgets for travel or celebratory moments - the things that we really look forward to in our epic retirements.]
So if you’re planning on retiring anytime soon, it’s worth taking a close look at your retirement savings and making sure you’re on track to live the lifestyle you want.
Where are the biggest price rises you might ask? Well - they’re on almost all the big things in a retiree’s budget!
Food rose by 9.2%
Meat and seafoods 8.2%
Oils and fats 20.8%
Household appliances 10.2%
Automotive fuel 13.2%
Domestic travel and accommodation 19.8%
International travel and accommodation 15.9%
What is the Retirement Standard? The ASFA Retirement Standard is an example budget and savings guideline for retirees developed by the Association of Superannuation Funds of Australia (ASFA) and updated every three months to help individuals understand how much money they might need to fund their desired retirement lifestyle in Australia. It’s the national benchmark for how much you really need to retire.
The most recent version of the ASFA Retirement Standard was released in March 2023 based on quarter end data from December 2022. It can be accessed on the ASFA website, here: https://www.superannuation.asn.au/resources/retirement-standard.
What can you do if you’re feeling the pinch?
Review your budget without delay:
Inflation can erode the value of your retirement savings over time, so it's really important to regularly review your budget to ensure you're living within your means. Take a close look at your expenses and identify areas where you might be able to cut back so you can stretch your retirement savings further. The ASFA Retirement Standard offers an example budget that benchmarks what they expect a retiree to spend in either a comfortable or a modest retirement. Download it and compare it with your own spending. You might discover places you are over-spending.
Invest more wisely:
To combat inflation, it's important to make sure your retirement savings are invested in assets that have the potential to outpace inflation. This might mean investing in a diversified portfolio that includes stocks, real estate, and other assets that have historically performed well in inflationary environments or reviewing the risk allocation on your superannuation fund’s investments. You should really speak to an independent financial adviser or a financial adviser associated with your superannuation fund if you haven’t done so already, and think you might want to revise your investment allocations.
Consider delaying retirement:
If you're able to work a few extra years, even just part time or casual, it could be beneficial to delay your retirement and continue saving for a bit longer. This can help you build up your retirement nest egg and ensure you have enough saved to cover rising costs in the future.
Don't wait. Take action to stop inflation eating your nest eggs.
Who says retirement has to be dull? Let's make it epic together!
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Until next time, keep working towards your epic retirement dreams. Comment below so everyone can see your thoughts. And remember you can email me on firstname.lastname@example.org to ask me questions or suggest things you’d like me to cover.
Bec Wilson Xx