The cost of a comfortable retirement just went up

If you’re contemplating retirement any time soon, or already retired, it’s worth taking note of the latest benchmarks for how much you need to live comfortably in retirement. 

Over the year to June 2024, the cost of a comfortable retirement rose by 3.7 per cent, according to figures from the Association of Superannuation Funds of Australia (ASFA), which tracks the price of a range of household goods and services to benchmark retirement costs. 

Retirees living alone who own their own home should now expect to need an annual income of $52,085 a year, while for couples, the amount rose to $73,337.*  

These figures assume retirees own their own home . A comfortable retirement includes things like travel, private health insurance and the ability to run a car.  

The annual increase was slightly less than the Consumer Price Index, which rose by 3.8% over the same period. 

Costs increased by 0.9% for both singles and couples in the three months to June, according to the ASFA Retirement Standard.  

^{Source: ASFA Retirement Standard, June 2023 and June 2024 for retirees aged 65-84.}

The annual cost of living a more modest lifestyle also increased, to $33,134 for singles and $47,731 for couples.> 

Rising costs underline the need for a healthy super balance to ensure retirees remain engaged in the physical and social activities required for a healthy retirement, as well as being able to meet essential needs.  

“Retirees are managing an increasingly difficult landscape where the costs of essential goods and services keep rising,” says ASFA CEO Mary Delahunty. 

“Health, home, and transport are vital to their well-being, yet the expenses tied to these necessities are steadily increasing.” 

^{Source: ASFA Retirement Standard, June 2023 and June 2024. For retirees aged 65-84.}

On a weekly basis, the budget for couples seeking a comfortable retirement rose to $1,404.92, while singles came in at $997.80. 

For those living a more frugal lifestyle, couples need $914.39 on a weekly basis, and singles  $634.75. 

Housing, food, transport and leisure activities took the biggest bites out of household budgets  for those aged 65-84. 

For older retirees, aged around 85, expenditure totals were slightly lower, although health increases as a proportion of spending compared with younger retirees. 

ASFA estimates that the superannuation balances required to achieve a comfortable retirement lifestyle are $595,000 for singles and $690,000 for couples. 

For both couples and singles living a more modest lifestyle, can do so with a super balance of $100,000, reflecting the effect of receiving the full Age Pension.  

So where are retirees experiencing the biggest cost increases, according to the benchmarks for the 12 months to June? Essential services, such as insurance and electricity, rose sharply, while basics such as fruit and vegetables are also costing more.  

Insurance costs increased sharply, rising 14% over the year and 3.1% in the three months to June. This was due partly to the effect of natural disasters and increased claims. 

Electricity prices jumped 6% over the year despite being offset by the Energy Bill Relief payments from the Federal Government. Without the rebates, the cost of electricity would have risen by 14.6%. 

Private health insurance premiums rose 3.03% from April, their highest increase since the COVID-19 pandemic began. 

Food prices continued to rise but while increases eased in June, fruit and vegetables are 3.7% higher than they were a year ago. 

Clothing and footwear are also more expensive than they were 12 months ago, rising 3.1% in the June quarter. 

If you’re already retired, and looking for ways to boost your retirement income, there are a few options worth exploring. 

• Are you getting all the benefits – such as the Age Pension and the Commonwealth Seniors Health card – to which you’re entitled? As of 1 July, new asset test thresholds were set for the Age Pension, meaning singles can have assets worth up to $686,250 in addition to their home and still qualify for a part-Age Pension. From 20 September that amount will increase to $695,500. Check your eligibility with this free Age Pension eligibility calculator. 
• Many people continue, or even start, working once they’ve reached retirement age. Under the government’s Work Bonus, the first $300 you earn in a fortnight won’t affect how much Age Pension you receive, up to a maximum of $11,800.  
• If you’ve reached your preservation age and retired, but your money is still in a super account, you may be missing out on the tax benefits that come with switching over to an account-based pension where investment earnings are tax free.  Your money remains invested, but you can set up regular payments from your account. And any money you withdraw after the age of 60 is tax-free.  

If you haven’t yet retired, and you’re wondering if you have enough super to meet your needs, the amount of money you’ll need really depends on the type of retirement you want. 

Our retirement calculator can help you assess how much super you’ll need when you retire. 

Your money in super increases faster as your balance increases, thanks to the magic of compound interest, so it will grow faster the bigger your balance gets. Find out how your balance is tracking for your age.  

If your super could do with a boost, there are several strategies worth considering now, before you retire. 

• Consider making additional contributions from your before-tax or after-tax salary or wages. 
• After the age of 55, you can also consider other strategies such as downsizing to a smaller house and topping up your super balance with a downsizer contribution. 
• A transition to retirement pension is intended for people approaching retirement who want to reduce their working hours without stopping completely. It can be combined with salary sacrificing and personal contributions to boost your super from your pre-tax income. 

If you’d like more help, consider talking to a financial adviser or book a call with our guidance centre.