Comfortable retirement comes at a price

As the cost of a ‘comfortable’ retirement continues to rise in Australia, the government need to recognise that retirees do not have the same capacity to deal with cost pressures than those still in the workforce.

National Seniors chief executive officer, Michael O’Neill, spoke to DPS eNews yesterday (Tuesday, 19 July 2011) after he was shown latest data compiled by the Association of Superannuation Funds of Australia (ASFA) last week which indicated retirees would need more than $600 a year extra to live comfortably in retirement compared to the last quarter.

The data reported that a couple looking to achieve a comfortable retirement would need to spend $54,562 a year, while those seeking a modest retirement would need to splash out $31,263 a year.

“There are certainly big pressure points. We need to identify what the expectations are in retirement and what sort of lifestyle retirees are expecting to lead, and link that to the impacts of the ever great changing cost of living issues,” Mr O’Neill said.

The reason for the higher costs facing retirees were rises in the cost of food, fuel and pharmaceuticals.

According to the ASFA research, the largest increases were recorded in Melbourne, followed by Sydney and Adelaide.

According to Mr O’Neill, retirees need to be able to “maximise” their retirement incomes and governments need to have “regard to the cost pressures which are driven by government decisions.

“What is not recognised by the government is that when you get into retirement, you have much fewer options to adjust your income than people who are still in the workplace,” he said.

“So, a thing like private health insurance is a good example. People go up every year in insurance from 5% to 7%.

“It is overwhelming because, for retirees, their fixed income is the pension or their superannuation. They are limited and don’t have the capacity to deal with cost pressures which are far more harsh on people who retire,” Mr O’Neill said.

The ASFA Retirement Standard research recorded a “modest lifestyle” in retirement to be better than the age pension, with the ability to still be able to afford fairly basic activities.

The research defined “comfortable retirement lifestyle” as being one which enables an older, healthy retiree to be involved in a range of leisure and recreational activities, and to have a good standard of living through purchases such as household goods, private health insurance, a reasonable car and good clothes.