partners for life
Combatting Rising Retirement Costs
Throughout 2022, much has been made of the impact of growing inflation, rising interest rates, and cost of living pressures on businesses and families – but perhaps less attention has been given to retirement costs. Single retirees in particular have felt the strain, but no matter the living situation, the average Aussie retiree is now having to lean more on superannuation and reduce spending to keep themselves afloat, which for many will impact the lifestyle they had hoped to enjoy in their retirement years. In this article we’ll look at why retirement costs have gone up, and what can be done to mitigate the impact.
Why Have Retirement Costs Increased?
According to the June quarter 2022 ASFA Retirement Standard, the minimum annual cost of a “comfortable” retirement is $47,383 for singles, and $66,725 for couples. This is up 1.2% and 1.0% respectively on the March quarter. So, why has this increased by that much in a short space of time?
Put simply, rising inflation and cost of living pressures have had the greatest impact on retirement costs. In fact, retirement costs climbed faster than inflation (at 6.2% for couples and 6.7% for singles) in the year to 30 June 2022. This is in contrast to inflation, the official rate for which was 6.1% over the same period. This combined with other factors, including supply chain issues and unrest in Europe, to put upward pressure on the price of staple goods including fuel (up 32.1%), vegetables (up 14.6%), and beef (up 9.4%) – a concern for retirees on fixed incomes.
What Can be Done to Combat Rising Retirement Costs?
While the outlook for the cost of living still makes for grim reading, there are things that retirees (and those close to retirement) can do. Budgeting is arguably the most important thing. Get a handle on exactly what your income is, what your outgoing expenses look like, what you’re spending money on, and where you can trim the fat. Discretionary spending is usually the area to focus but also consider what you get most “value” from which is very much in the eye of the beholder! Our catalogue of Free Resources includes a Budget Planner which you may find useful.
If you’re heading towards retirement, consider how much you have in superannuation. According to ASFA, a couple looking for a comfortable retirement on a mix of assets and pension payments needs $640,000 in super, while a single retiree looking for the same needs $545,000. While this figure may be slightly different depending on the person, it does highlight the scale of assets that many people need when it comes time to retire. Taking advantage of available superannuation contributions before you retire can help you reduce your taxable income now, and reap the benefits later of having more invested in your super.
How MP+ Can Help
Retirement Planning is one of the many services that our Wealth team provides. We ensure that our clients are on track to achieve their ideal retirement lifestyle, and have sufficient income sources in place to manage the costs. Seeking advice from professional planners is critical, to ensure the most beneficial investments and structures are in place. Combining this with our experience in Centrelink and aged care advice, as well as tax and estate planning, you can be sure that we’ll put you in the best position to retire to the lifestyle you want.
Please don’t hesitate to reach out to the Wealth team on 08 9301 2200, or via our website.
Thinking about becoming a client?
Book your free, no obligation consultation right now via our online booking system or get in touch to find out more
Already a client and want to get in touch?
Send us an email via our enquiry form or give us a call today