As the cost of living continues to increase, retirees are being hit hard – with many being pushed outside their comfort zone. The vast majority of retirees are now being forced to assess or alter their ongoing retirement plans and associated expenditure requirements.
The industry peak body, Association of Superannuation Funds (ASFA), has released new income levels required for retired singles and couples to have a modest or comfortable lifestyle. As with any increase in price there are some demographics which are affected more than others. It is no different in this case. Recent studies have found that those on modest budgets are finding it increasingly tough to just get by. This is found to be the case even more so for those in Sydney, Adelaide, Hobart and Canberra.
Whilst the price of basic goods and services has stayed relatively stable of late, the year hasn’t provide retirees much in the way of benefits. With inflation stabilised, those on modest or minimal budgets nationwide have felt the effect of rising prices according to ASFA.
On average living costs increased 2.1 percent for those living modestly compared to a 1.5 percent increase for those on a comfortable retirement budget. The general Consumer Price Index (CPI) rose 1.9 percent over the same period.
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How much do you need?
Recent release of the new budgets now provide us with updated figures on required levels of lifestyle expenditure. To be comfortable, new figures reveal that couples aged 65 and over need to spend $60,063 per year and singles $43,695. For those in the same age bracket on basic budgets, singles need to spend $24,270 per year and couples $34,911 to just get by.
“The pension is not enough. In particular, retirees with health care needs are facing significant increases in costs. The costs of electricity and gas and the council and water rates are a serious concern for many.”
Martin Fahy has suggested people become “super skilled” to prevent major financial stress, which includes addressing areas such as compound interest and tax savings which are available within the superannuation environment.
What should we do?
Much of the retirement population fit into the modest lifestyle bracket with only a relatively small percentage fitting into the comfortable bracket. Superannuation will play a critical role in increasing the level of comfortable retirees in the coming years. It is believed that as the compulsory superannuation system matures, more people will be pushed up into the higher of the two brackets. This is believed to be around 50 percent of the population by 2050-2055 which will be assisted by the increase in Superannuation Guarantee Contributions (SGC) set to increase to 12 percent and having more people in the system for more of their working lives.
For this very reason, it is now more than ever important to look at and consider areas such as consolidating your existing superannuation accounts, ensure your insurance levels are aligned to your needs and objectives and look at planning for the long term. Taking into consideration these areas you will ensure that come retirement you are better prepared and more equipped to meet a comfortable retirement lifestyle.
If you wish to discuss one or all of the areas highlighted in this article Contact Us on (07) 3284 7875 to arrange an appointment with one of our financial advisers.
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