Rising costs of essential goods and services are forcing retirees to spend more for a comfortable retirement.
According to the Association of Superannuation Funds of Australia (ASFA), the cost of maintaining a comfortable retirement has increased by 3.7 per cent over the last 12 months due to rising home and vehicle insurance premiums, along with higher private health insurance costs.
As a result of these financial pressures, retired couples now need $73,337 per year to enjoy a comfortable lifestyle, while singles require $52,085.
ASFA CEO, Mary Delahunty, explained that “retirees are managing an increasingly difficult landscape where the costs of essential goods and services keep rising”.
“Health, home, and transport are vital to their well-being, yet the expenses tied to these necessities are steadily increasing,” she noted.
Several spending categories saw notable price changes, impacting retirees’ wallets significantly in certain cases.
Insurance premiums surged by 3.1 per cent in the June quarter and 14.0 per cent over the past year, largely due to higher reinsurance costs, natural disasters, and an increase in claims.
Private health insurance premiums saw an average rise of 3.03 per cent starting April 1, the largest increase since the pandemic began.
Electricity prices increased by 2.1 per cent in the June quarter and 6.0 per cent over the year. The Energy Bill Relief Fund offered some respite from increasing power costs, without these rebates, electricity costs would have jumped by 14.6 per cent over the past 12 months.
Although food inflation eased to 3.3 per cent in the June quarter from 3.8 per cent in March, retirees are still facing rising prices for essentials such as fruits and vegetables, which are up by 3.7 per cent compared to a year ago.
Clothing and footwear prices climbed by 3.1 per cent during the quarter, driven by new seasonal items and the end of sales promotions.
Automotive fuel prices rose by 1.7 per cent in the June quarter, adding to the ongoing fluctuations in fuel costs that retirees need to navigate.
Although domestic travel costs remained steady, international travel and accommodation expenses saw an increase of 8.1 per cent.
Delahunty emphasised the importance of both compulsory superannuation and voluntary contributions to help ease the burden of these rising costs.
“For Australians to have the retirement they deserve, it’s crucial that they have access to adequate superannuation savings,” she said.
As financial pressures on budgets persist, retirees encounter fresh challenges, underscoring the critical need for careful financial planning to ensure a fulfilling retirement.
A financial plan is essential for a successful retirement as it helps you make informed decisions about your financial future and ensures that you have enough resources to support yourself throughout your retirement years.
Sydney-based Wealth Coach Andrew Woodward from The Investor’s Way suggested that “to create a plan for your money you first need to understand how much is coming in, and from where, and then how much is going out.”
“Knowing how much is coming in should be relatively straightforward, it will either be in the form of a pension, investment income, superannuation or a combination of all,” he said.
It’s recommended that retirees review their expenses regularly and keep on top of what they have spent in the previous 12 months.
“Once you review what you were spending, you can then anticipate what you need to spend in the coming 12 months,” Woodward advises.
“Anticipating what you need to spend in the coming 12 months, and beyond, requires making some judgements on price increases and your needs, like potentially additional medical expense, and of course the impact of inflation on almost everything.
“Once you have an understanding of the incoming and outgoing of your money, put it into a plan and stick to it.”
There are several ways to put a financial plan into place to manage your retirement and ensure you have adequate funds put away to finance the retirement of your dreams. Founder and CEO of Stockspot, Chris Brycki cited some of the “common approaches” for managing finances in retirement which include: