Up $13k in five years: how much it now costs to retire

The cost of a comfortable retirement has surged, with health insurance and food prices hitting seniors’ budgets hardest. Here’s how much you need per year.

A new analysis from the Association of Superannuation Funds of Australia shows it now costs $75,319 per year for a couple to achieve a comfortable retirement. That’s a $13,410 jump from the $61,909 retirees were spending in 2020.

ASFA’s Retirement Standard for the June quarter also shows a single retiree today requires annual income of $53,289 to live comfortably, compared with $43,687 in the June quarter of 2020, at the start of the pandemic.

Funding that almost $10,000 rise is typically tougher for singles because their age pension payments are less than couples and they only have one super nest egg.

ASFA CEO Mary Delahunty said the extra annual cost was “a lot to have to find”.

“We continue to see steep cost-of-living increases for retirees … it is a really tough budgeting situation,” she said.

ASFA’s research found that over the past five years, food costs for a retiree couple have jumped 22 per cent.

Ms Delahunty said private health insurance was another major component of the retiree costs increase. “That’s up again, 3.7 per cent this quarter – it’s the biggest jump since 2018,” she said.

“Health insurance, with out-of-pocket health costs, we’re seeing now at more than $220 a week for a couple in a comfortable retirement, so my suspicion is that people will have to make decisions.

“And do we want as a society for retirees to make decisions about not having private health insurance? No. And not being able to afford their health costs?”

Ms Delahunty said some retirees might be choosing less healthy eating options and not turning on heating in winter, but the situation was more positive for younger adults who were benefiting from 12 per cent employer super contributions.

“The shape of retirement, if you’re a 30-year-old, looks a lot different for people in Australia than it does in other nations,” she said.

“People can have confidence that they will have money in their superannuation account that will afford them a good retirement.”

ASFA defines a comfortable retirement as owning a home, having high-level health cover, a reasonable car, regular leisure activities, occasional restaurant meals, an annual domestic holiday and an overseas trip every seven years.

MBA Financial Strategists director Darren James said while cost-of-living concerns came up in discussions with retiree clients, many had “managed and adapted really well to it”.

Mr James said while costs had climbed, so too had age pension payments, income and asset test thresholds, sharemarkets, property values and financial returns from cash.

“People have been getting 5 per cent on term deposits,” he said.

“It’s not like the cost of living is going up without anything else going with it.”

Mr James said pension eligibility had become more widely available because asset test limits had been indexed higher.

ASFA’s new calculations say that to fund a comfortable retirement, a couple need a combined nest egg of $690,000 and a single $595,000, which gets drawn down while they also receive a part pension from Centrelink.

Age pension payments are indexed to living costs, and since 2020 have increased from $1423 to $1732 per fortnight for a couple on a full pension, or about $8000 a year.

ASFA found seniors were now spending $58 per week on their digital technologies.

“Beyond digital costs, we’re seeing heightened price pressures on some essential goods and services. This quarter brought above-inflation increases in private health insurance, electricity and fresh food,” Ms Delahunty said.

Apart from the private health insurance jump of 3.7 per cent, electricity prices surged 8.1 per cent and fruit and vegetable costs rose 4.3 per cent, ASFA found.