Media

25 September, 2008

National figures released today for the Westpac ASFA Retirement Standard show the costs for a couple living comfortably in retirement increased in the June quarter 2008. Transportation, health and clothing costs all rose significantly.

As a result, for a couple to achieve a comfortable retirement they need to spend $50,086 a year, while those seeking a 'modest' retirement lifestyle need to spend $27,151 a year (See Table 1 for budget details).

For those with a comfortable lifestyle in retirement, costs rose by 1.2% from the March quarter 2008 and by 3.5% from the June quarter a year earlier.

These increases are similar to the respective 1.3% and 3.3% increases in the All Groups CPI excluding Housing and financial and insurance services. Retiree households generally own their own home and are not affected to any great extent by increases in housing prices or home mortgage interest rates.

However, retiree households on average have somewhat different spending patterns to the rest of the population. Along with generally owning their own home, they don't tend to spend much on education services. In contrast, food, health, transportation and recreation spending form a large part of retiree budgets.

Between the March and June quarters 2008 retirees faced a 0.1% decrease in the cost of food, a 2.4% increase in the cost of health services, and a 3.1% increase in transportation costs largely due to the 8.7% increase in petrol prices. Providing at least a partial offset to these price increases was a 0.2% fall in the cost of recreation goods and services. Domestic holidays fall in cost in the winter months.

	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 figures in each case assume that the retiree(s) own their own home. The figures relate to expenditure by the household. This can be greater than household income after income tax where there is a drawdown on capital over the period of retirement. Single calculations are based on female figures.

Over the year to the June quarter 2008, increases in transportation, health and food costs were the major contributors to increased living costs for retirees. 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 Westpac ASFA Retirement Standard

The Westpac ASFA Retirement Standard benchmarks the annual budget needed by Australians to fund either a comfortable or modest standard of living in the post-work years. It is updated quarterly to reflect inflation, and provides detailed budgets of what singles and couples would need to spend to support their chosen lifestyle.

• Modest lifestyle in retirement: Better than the Age Pension, but still only able to afford fairly basic activities.
• Comfortable retirement lifestyle: Enabling an older, healthy retiree to be involved in a broad range of leisure and recreational activities and to have a good standard of living through the purchase of such things as; household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, and domestic and occasionally international holiday travel.

More information:

Costs and summary figures for capital cities and certain major regions can be accessed via the Retirement Standard calculator on the Westpac website.

The full Westpac ASFA Retirement Standard research report can be downloaded from the ASFA website.