The cost of retirement for Australians has increased slightly over the last 12 months, following a rough couple of years of high inflation. However, new figures reveal that inflation pressures have finally begun to ease. The Association of Superannuation Funds of Australia (ASFA) found that couples aged 65 now need $73,077 per year combined to retire comfortably, while singles need $51,805.
This assumes that the retiree owns their home outright. The budgets for a modest lifestyle were unchanged at $47,470 for couples and $32,897 for singles. ASFA said the new figures highlighted that Australians likely needed to top up their superannuation with voluntary contributions to ensure they achieve the kind of retirement they need.
The cost of a comfortable lifestyle rose by around 1.3 percent over the last 12 months, which was just over half of the general inflation rate of 2.4 percent over the same period. Cost pressures eased slightly in the December quarter, with falling electricity prices helping to keep costs low. Electricity prices fell 9.9 percent in the quarter, largely driven by government measures.
ASFA CEO Mary Delahunty commented, “There has been a substantial easing in prices for the goods and services that retirees purchase.
Retirement costs are still rising slightly
However, the last couple of years of high inflation are still affecting their ability to fund a comfortable retirement.
Insurance costs rose 1.1 percent, the weakest quarterly rise since June 2022, while food prices were up 3 percent.
Domestic holiday travel and accommodation rose by 5.7 percent due to increased demand. ASFA calculated that the lump sums needed for a comfortable retirement at age 67 were $690,000 for a couple and $595,000 for a single. In contrast, the government puts this amount lower at $420,000 for a couple and $310,000 for a single to maintain their living standards in retirement, combined with the age pension.
Delahunty said recent strong investment returns were helping those planning for retirement to reach their desired lifestyles but warned that topping up superannuation would be necessary. The most recent Retirement Standard budgets reinforce that Australians need compulsory superannuation and voluntary contributions preserved until retirement to have the sort of retirement they need and deserve,” Delahunty emphasized. Balanced super funds showed a typical return of at least 10.5 percent in 2024, with some funds recording nearly 12 percent.
However, SuperRatings found that monthly returns turned negative in February, marking the second negative monthly return for the financial year. Both Australian and international share markets, which are key drivers of super fund returns, declined over the month. The impact of tariffs on China and potential market uncertainties influenced Australian share expectations, offsetting any possible benefit from the reduction in interest rates.
SuperRatings executive director Kirby Rappell noted, “While markets are more turbulent, it’s important for Australians to remember that superannuation is about long-term outcomes.”
The latest findings underscore the importance of compulsory and voluntary superannuation contributions in securing a comfortable retirement for Australians.
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