Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 218

The indignity of a modest retirement

Australians living on modest budgets, that is, those living close to or at pension level, are suffering the greatest additional cost imposts in retirement, according to new figures released by the Association of Superannuation Funds (ASFA). The calculations distinguish between 'modest' and 'comfortable' living, with the comfortable standard budget affording a much more dignified existence for Australian retirees.

ASFA Retirement Standard (RS) June 2017 quarter figures show couples aged around 65 living a comfortable retirement need to spend $60,063 per year and singles $43,695, up 0.2% on the previous quarter. The modest retirement budget has much to be modest about and is at near pension level subsistence, with singles needing to spend $24,270 and couples $34,911.

Modest retirement level suffers higher increase in costs

The annual increase in living costs at the modest level was in each case higher than at the comfortable level, reflecting the greater relative importance of electricity, health care and council and water rates in the modest budgets. The annual increase was 1.5% for comfortable and 2.1% for modest. These compare to 1.9% for the general Consumer Price Index (CPI).

The cost of retirement over the most recent quarter only increased by a relatively small amount, but many retirees are still finding it difficult to achieve a comfortable standard of living. Too many people are living without enough super, especially women. Australian retirees living at the basic level are doing it tough meeting costs of living. Financial support and literacy are part of the solution and super funds across the country can help members sort out their retirement living planning.

People need to be retirement-ready by saving for the sort of life they want to live. The magic of compound interest and tax savings in super can help lift living experiences in later life. Retirees now and in the future need super to increase and be safeguarded.

Living costs for retirees by capital city

Cost increases for retirees were highest in Sydney, Adelaide, Hobart and Canberra, while Darwin, Perth and Brisbane had the lowest average overall price increases.

In Sydney, a 3.8% increase in food costs, a 12.5% increase in electricity costs and a 5.1% increase in health costs were higher than average increases in the retirement budgets.

Annual increase in retiree living costs by capital city

Updated retirement standard costs

While seasonal fruit and domestic holidays were more affordable, critical costs of power, health care and rates and water bills continue to be a big cost issue for many retirees.

The most significant price increases in the June 2017 quarter contributing to increases in annual budgets for retirees were for medical and hospital services (4.1%) reflecting the annual increase in private health insurance premiums on 1 April. The most significant offsetting price falls were for domestic holiday travel and accommodation (-3.2%), automotive fuel (-2.5%) and fruit (-4.4%).

Fluctuations in world oil prices continue to influence domestic fuel prices. During the June quarter, automotive fuel prices fell in April (-0.8%), rose in May (+0.2%) and fell in June (-0.6%). Overall, food prices fell 0.2% in the March quarter. Clothing and footwear prices fell 0.3% as a result of sustained periods of specials.

Budgets for various households and living standards for those aged around 65

(June quarter 2017, national)

The figures in each case assume that the retiree/s own their own home and 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. All calculations are weekly, unless otherwise stated.

The difference in enjoyment of retirement years is stark between modest and comfortable (and both sets of numbers assume the retirees own their own home). The most striking difference is the amount available for leisure activities and health. Superannuation should be taken more seriously by those who seek a comfortable retirement. Inflation may seem to have stabilised, but costs are increasing for retirees on smaller budgets especially as the essentials become more expensive.

 

Dr Martin Fahy is Chief Executive Officer at the Australian Superannuation Funds Association. Costs and summary figures can be accessed via the ASFA website. The ASFA Retirement Standard Calculator can be used to obtain a breakdown of the Retirement Standard budgets for each state. Australians can find out more about superannuation on the Super Guru website.

 

5 Comments
ken
September 30, 2017

it is worse for those who don't own their home and have the full age pension directly reduced by having an income stream assets and income test imposed. It is also not feasible to buy a property to get a larger pension because the amount left over for living cannot be supplemented with more income stream withdrawals without further reducing the government pension. (using my own case and the centrelink FIS officer's projections). FOr non homeowners it is impossible to make rational decisions without affecting the government age pension which perversely gets in the way of other decisions to buy a house, say.

eric wells
September 08, 2017

Reading the responses was interesting. I say, research companies thoroughly, buy in the dips, and they will do the rest.

peter
September 07, 2017

Ashley I can live below $10 per day for food, and I eat well. The trick is to prepare your own meals, and not rely on restaurants, take-away or prepared packaged meals.

James
September 07, 2017

It's good that you can. However, many of us would prefer to not have to live like that and to not have to rely on the pension....now if only the government would stop dipping their hands into the superannuation honey pot

Ashley
September 07, 2017

Good reminder that retiree inflation is not CPI inflation, but some of those ASFA lifestyle expenses are far too low– eg $78.54 per week for food – that’s $10 per day across 3+ meals per day (including coffee, snacks, drinks, etc)

 

Leave a Comment:

RELATED ARTICLES

It's the cost of government, stupid

Recent age pension changes impact non pensioners too

Do Australians expect to have enough to self-fund retirement?

banner

Most viewed in recent weeks

Why the $5.4 trillion wealth transfer is a generational tragedy

The intergenerational wealth transfer, largely driven by a housing boom, exacerbates economic inequality, stifles productivity, and impedes social mobility. Solutions lie in addressing the housing problem, not taxing wealth.

The 2025 Australian Federal election – implications for investors

With an election due by 17 May, we are effectively in campaign mode with the Government announcing numerous spending promises since January and the Coalition often matching them. Here's what the election means for investors.

Finding the best income-yielding assets

With fixed term deposit rates declining and bank hybrids being phased out, what are the best options for investors seeking income? This goes through the choices, and the opportunities and risks involved.

What history reveals about market corrections and crashes

The S&P 500's recent correction raises concerns about a bear market. History shows corrections are driven by high rates, unemployment, or global shocks, and that there's reason for optimism for nervous investors today. 

Howard Marks: the investing game has changed

The famed investor says the rapid switch from globalisation to trade wars is the biggest upheaval in the investing environment since World War Two. And a new world requires a different investment approach.

Welcome to Firstlinks Edition 605 with weekend update

Trump's tariffs and China's retaliatory strike have sent the Nasdaq into a bear market with the S&P 500 not far behind. What are the implications for the economy and markets, and what should investors do now? 

  • 3 April 2025

Latest Updates

Investment strategies

4 ways to take advantage of the market turmoil

Every crisis throws up opportunities. Here are ideas to capitalise on this one, including ‘overbalancing’ your portfolio in stocks, buying heavily discounted LICs, and cherry picking bombed out sectors like oil and gas.

Shares

Why the ASX needs dual-class shares

The ASX is exploring the introduction of dual class share structures for listed companies. Opposition is building to the plan but the ASX should ignore the naysayers and bring Australia into line with its global peers.

The state of women's wealth in Australia

New research shows the average Australian woman has $428,000 in net wealth, 40% less than the average man. This takes a deep dive into what the gender wealth gap looks like across different life stages.

Investing

The two most dangerous words in investing

Market extremes are where the biggest investment risks and opportunities lie. While events like this are usually only obvious in hindsight, learning to watch out for these two words can alert you to them in real time.

Shares

Investing in the backbone of the digital age

Semiconductors are used to make microchips and are essential to a vast range of technology and devices. This looks at what’s driving demand for chips, how the industry is evolving, and favoured stocks to play the theme.

Gold

Why gold’s record highs in 2025 differ from prior peaks

Gold prices hit new recent highs, driven by a stronger euro, tariff concerns, and steady ETF buying – all while the precious metal’s fundamental backdrop remains solid amid a shifting global economic landscape.

Now might be the best time to switch out of bank hybrids

In this interview, Schroders' Helen Mason discusses investing in corporate and financial credit securities, market impacts of tariffs, opportunities for cash investments, and views on tier two and hybrid bonds.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.