How much does a year of relaxed retirement cost now?

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There is finally some financial mercy for retirees trying to stretch their income streams to cover the rising cost of living: the increases are easing.

The June budgeting benchmark put out each quarter by the Association of Superannuation Funds of Australia shows that retirees are getting some relief from the rampant inflation last year and at the beginning of this one, with the necessary outlay up just 0.5 per cent over the quarter.

The price of a comfortable retirement has soared.Credit: Getty

Of course, the price of a comfortable retirement has jumped significantly to sit 6.1 per cent higher in the last financial year.

This is even more than the inflation reading for the economy as a whole over that period, which was 6 per cent. It’s since dropped to 4.9 per cent, a further reprieve that should be reflected in the next quarterly ASFA Retirement Standard.

But before we get into today’s new cost of a comfy retirement, just what does that enticing prospect look like?

Well, it includes a bit of leisure – eating out, takeaways, domestic or international travel, streaming services, cinema trips and alcohol or the equivalent for charities or to a church – to the tune of $217 a week for a single and $327 a week for a couple.

By contrast, the available funds for “fun” for someone with only enough super to subsidise a modest
retirement are $111 a week for a single and $174 for a couple.

Another benefit of a “comfortable” retirement over and above what a modest one looks like is a bigger health budget, whether you choose to spend it on private cover or look to “cover” the cost yourself.

For a single, $113 a week is allocated and for a couple, $212. The figures are $55 and $107, respectively, if your standard of living is only modest.

There is also a big difference in the money you may have to spend on clothes and a category called household goods and services – a total $254 for a comfy couple but only $122 for a modest one; for singles, the comparable numbers are $196 and $78.

(As an aside, these are the spending splits of retirees aged 65 and you should be aware that your
wants and needs won’t stay the same. When you first retire, ASFA assumes more money will go
towards the leisure and transport categories, while by its age 85 retirement index, some of this
spend is unappealingly redistributed to health.)

The other probably pertinent point of difference is that a modest retirement doesn’t afford nearly
the quantity or quality of groceries and other fresh food – the budget is just $108 a week for a single
and $201 for couples, versus $140 for more affluent singles and $244 for those couples.

So, what’s the bottom line? How much does it cost to live, if not large, then live a little in
retirement?

A comfortable retirement is now said by ASFA to set back singles $50,207 a year and couples,
$70,806.

Just over $30,000 ($31,867) will if you are single see you live modestly, while $45,947 will if you are
in a couple.

What, then, is the lump sum required to generate these standards of retirement?

Not as much as you think, assuming – as ASFA does – that you both own your own home by
retirement and thus have no accommodation costs, and that you draw down all your capital over
time and also receive a (growing) portion of the government age pension.

As it explains in its detailed assumptions document: “In March 2023, ASFA revised the modest and
comfortable lump sums needed to reflect the high rate of inflation, and that there has been no real
increase in the age pension as price growth has been greater than the increase in average wages.”

While a lump sum of $545,000 was previously said to be sufficient for a single to retire comfortably,
and $640,000 for a cost-sharing couple, today the amounts are $595,000 and $690,000 respectively.
So, yes, these are higher than last year. But no, they are not a probably impossible $1million.

Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me. Follow Nicole on Facebook, Twitter or Instagram.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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