The eye-watering cost of retiring in Australia – and why it now costs more a year than paying a typical mortgage

Retiring now costs more per year than paying off a normal mortgage for those who want to live comfortably, pension industry figures show.

A single retiree needs $51,278 a year just to maintain his lifestyle, provided he has paid off his house, rising to a record $72,148 for couples, the Association of Superannuation Funds of Australia (ASFA) revealed.

But both figures are higher than the $45,408 annual cost of paying off an average new Australian mortgage of $615,178 with monthly repayments of $3,784.

The Reserve Bank’s 13 interest rates rise in 18 months, taking the cash rate to a 12-year high of 4.35 percent. This mainly affects younger people with mortgages, but high inflation is still weighing on Australia’s older residents who want to get on with their lives. .

The expensive pension costs would mainly affect baby boomers, who are old enough to receive an old-age pension but still healthy enough to travel and enjoy social outings.

The eye-watering costs of retirement have been revealed just days after the Aged Care Taskforce’s final report recommended wealthy retirees pay more of their own aged care costs.

“It is appropriate that older people make a fair contribution to the costs of their aged care, based on their resources,” the report said.

ASFA’s weekly expenses for one retiree were $51,082 per year, but rose to $51,278 when other hidden costs were added.

Leisure was the largest component, amounting to $11,509 per year or 22.4 percent of the total cost of a single retiree’s lifestyle, before transportation ($9,309), food ($7,372) and health ($5,873).

A single retiree with more modest incomes or tastes needs $32,666 a year, compared to $46,994 for a married couple.

ASFA chief executive Mary Delahunty said high inflation was putting pressure on pensioners’ finances.

“Pensioners’ budgets have been under significant pressure over the past two years due to the high cost of essential goods and services,” she said.

Insurance costs are a major drain on retirees’ finances. Last year, costs rose 16.3 percent, while electricity bills rose 6.9 percent and food prices rose 4.5 percent.

These items were all well above the annual consumer price index of 4.1 per cent in the December quarter, Australian Bureau of Statistics data showed.

But the 3.5 per cent annual increase in superannuation costs, as calculated by ASFA, was still below the broader headline inflation rate, with older Australians less likely to continue paying off a mortgage.

Ms Delahunty said the worst of the cost of living crisis is over.

“Fortunately, we are seeing price increases in the key categories that make up the retiree budget – home and contents insurance, fruit and vegetables, fuel and electricity – starting to ease,” she said.

ASFA recommends that $595,000 is needed for a single retiree who wants to live comfortably and receive the Old Age Pension at age 67.

For couples this rises to $690,000, with this amount covering an annual holiday in Australia, the occasional holiday abroad and a new car every few years.

Its higher life expectancy, of 81 years for men and 85 years for women, means Australia is a particularly expensive place to retire compared to other wealthy countries.

But Super Consumers Australia says $258,000 is enough for a modest retirement, with someone holidaying in Australia every year or two instead of going abroad.

ASFA suggests that $100,000 could fund a modest pension for a single pensioner or a married couple with access to the basic age pension of $1,002.50 per fortnight.