As the nation grapples with rising living expenses, Australian retirees find themselves in an increasingly challenging position, as the cost of maintaining a comfortable retirement steadily rises, placing considerable strain on household finances.
The Association of Superannuation Funds of Australia (ASFA), revealed that the cost of funding a comfortable retirement has increased due to a raft of higher costs, including medical expenses and insurance premiums.
According to the latest findings from ASFA, the cost of a comfortable retirement rose 0.7 per cent to hit a record high of $72,663 per year for couples, and $51,630 per year for singles in the March quarter.
ASFA CEO Mary Delahunty said that “retirees continue to feel considerable cost of living pressure on their household budgets”.
“Fortunately, in the past three months, we’ve seen the pace of price rises ease somewhat in key spending categories, namely food and fuel,” she added.
“Ongoing inflationary pressure reinforces the need for Australia’s strong superannuation system which is designed to ensure retirees can achieve a dignified lifestyle in their post-work years, and adequate retirement income to withstand these more challenging times.”
Several spending categories saw notable price changes, impacting retirees’ wallets significantly in certain cases.
The cost of medical and hospital services increased by 2.3 per cent in the quarter, surpassing the 1.2 per cent rise in the December quarter.
Insurance costs also saw a notable increase, with prices climbing 3.7 per cent from the previous quarter and a substantial 16.4 per cent rise annually, the highest annual rise since 2001.
Food costs saw a year-on-year increase of 3.8 per cent, slightly down from the 4.5 per cent rise observed in the December quarter. Bread and cereal prices rose by 7.3 per cent over the year, while dairy products saw a 4.1 per cent increase. Prices for fruit and vegetables rose by 2.5 per cent during the quarter, partly offset by a 0.7 per cent decline in meat and seafood prices.
While some prices increased, automotive fuel prices decreased by 1.0 per cent on average in the March quarter, with unleaded petrol averaging $1.94 per litre. Electricity prices saw a moderate annual increase of 2.0 per cent. Lastly, domestic travel and accommodation costs rose by 1.3 per cent over the quarter.
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: