Westpac and the Association of Superannuation Funds of Australia (ASFA) have released their latest national Retirement Standard - Westpac-ASFA Retirement Standard. The report shows that petrol, health and food prices are driving up the costs in retirement. The details are presented in the table below with the figures assuming retirees own their own home.
Budgets for various households and living standards
| |
Modest lifestyle - single |
Modest lifestyle - couple |
Comfortable lifestyle - single |
Comfortable lifestyle - couple |
|
Housing - ongoing only |
$67.71 |
$70.04 |
$89.96 |
$92.27 |
|
Energy |
$12.44 |
$14.82 |
$13.61 |
$15.99 |
|
Food |
$67.03 |
$141.07 |
$132.96 |
$187.44 |
|
Clothing |
$14.72 |
$25.39 |
$31.08 |
$56.69 |
|
Household goods and services |
$49.45 |
$52.37 |
$87.89 |
$92.98 |
|
Health |
$12.68 |
$23.89 |
$53.40 |
$105.01 |
|
Transport |
$77.28 |
$78.13 |
$117.93 |
$118.79 |
|
Leisure |
$44.53 |
$73.73 |
$142.46 |
$204.54 |
|
Personal care |
$26.18 |
$41.25 |
$26.18 |
$41.25 |
|
Gifts and/or alcohol and tobacco |
|
|
$22.79 |
$45.57 |
|
Total per week |
$372.03 |
$520.70 |
$718.26 |
$960.54 |
|
Total per year |
$19,399 |
$27,151 |
$37,452 |
$50,086 |
The conclusions set out in the media release were:
Over the year to the end of June 2008, Food costs were up 3.9%. Living the good life in retirement became more expensive, with the cost of take away food increasing by 6.5%, restaurant meals by 4.5%, milk by 12.1%, cakes and biscuits by 8.2%, snacks and confectionery by 5.3%, cheese by 14.2%, bread by 6.8% and poultry by 11.0%. As well, alcohol and tobacco prices were up 4.8%, health costs rose 4.8% and transportation costs were up 6.9%. Over the year the average price of unleaded petrol increased from around $1.25 per litre to around $1.60 per litre.
Over the last four years the costs of a comfortable retirement have increased in total by 11.9% and for a modest standard of living in retirement by a total of 13.1%. Basic budget items tended to have the largest cost increases.
The increases are confronting and show the importance of not just holding financial assets as cash and/or fixed interest as the returns from these style of investments may mean that your financial assets do not keep pace with the rise in expenditure.
I also find that the report helps those preparing for retirement determine the level of assets they will need to live comfortably. Our rule of thumb is that retirees should be able to draw down on their financial assets at a rate of 5% in retirement. For a couple who want to afford a comfortable lifestyle this would mean that they need approximately $1 million in financial assets (in today's dollars). Of course retirement needs are different from one person to the next but the ASFA Retirement Standard is a useful starting point.
Regards,
Scott Keefer
