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It can be tricky to estimate your future living costs. Heading into retirement, your lifestyle and behaviours may change, impacting your expenses.
Without the need to drive to work on a daily basis, you could make some nice savings on car payments, insurance, maintenance, and fuel costs. If your mortgage is paid off, you may also assume you will have minimal housing costs. But don't forget that as homes age they tend to require additional maintenance and repairs. Then there’s rising council rates, and your power and other utilities bills may just go up because you may spend more time at home.
The more you think about what your retirement might cost, the more expenses you may find you need to factor in. The Household, Income and Labour Dynamics in Australia Survey1 even quantified it, saying Australians who thought a lot about their income requirements in retirement on average reported needing $6,162 more per year than those who hadn’t thought about it at all.
But, even for the best prepared, life still has a way of throwing in a few surprises.
Fortunately, the Association of Superannuation Funds of Australia’s (ASFA) Retirement Standard has done the heavy lifting on calculating retirement living costs. Based on September 2019 quarterly figures, ASFA calculates that to have a ‘comfortable’ retirement, single people aged 65 will need $545,000 in retirement savings, and couples will need $640,000. That means a budget of $43,787 a year for singles and $61,786 a year for couples to cover food and utility bills, as well as expenses such as health, communication, clothing, travel and household goods.
But you may still need extra flexibility when life deals you something unexpected.
When you have stopped working, you may get this confidence when your superannuation income stream allows you to control how much and how often you are paid, and allows you to withdraw extra money at any time.
This kind of account, such as QSuper’s award-winning2 Retirement Income account, also means your savings can continue to grow giving you the benefits of tax-free investment earnings and no tax on payments or withdrawals after you turn 60.
Here’s five costs to retirement that even the best planners may not be prepared for:
In retirement, increases in the price of many necessities can prove significant. Drought, or other natural events, may cause the prices of some food to skyrocket. Power prices and petrol prices may continue to climb, and the cost of private health insurance may grow faster than the general rate of inflation.
Between studying longer, delaying marriage, or just struggling to find their way into the housing market, more young people are choosing to stay at home and live with their parents in their early adulthood. The Australian Institute of Family Studies found that in 2016, 43% of 20 to 24-year-olds, more often young men, were still living with their parents.
Even if it’s not kids staying at home, you may well be called on to help financially for the kids’ life events like weddings, the birth of children, divorces or health issues.
It isn't just adult children. You may live in a multigenerational household in which you are caring for your parents in your own retirement. If you are part of the sandwich generation, you may be caring for both your children and your parents, and this can significantly impact your costs.
Divorce in later life may be one of the most unexpected expenses of retirement, but has become increasingly common to the point it has been named ‘grey divorce’. It’s been calculated to take a person five years to recover from the financial impacts of divorce, so rebuilding your finances after divorce may be essential.
Australians may be living longer, enjoying one of the highest life expectancies in the world3. But the latest report from the Productivity Commission explains that while Australians have high life expectancy, they also have among the highest number of years spent in ill-health compared with other OECD countries.
So, while you may retire in great physical shape, one of the most important financial needs in retirement can become medical costs and aged care – all of which reinforces the merits of utilising a trusted, well-performing Retirement Income account, such as QSuper’s product.
Even though you may have stopped working, your account has not. Your money stays invested and your savings continue to grow, all the while providing an income stream to deal with life’s usual demands, and the surprises as well.
When it comes to making the most of your retirement, getting professional guidance can help. As a QSuper member, you have access to financial advice from QInvest.
Book an appointment
2. Past performance is not a reliable indicator of future performance. Ratings, awards or investment returns are only one factor that you should consider when deciding how to invest your super.
This information is provided by QInvest Limited (ABN 35 063 511 580, AFSL 238274), which is ultimately owned by the QSuper Board (ABN 32 125 059 006, AFSL 489650) as trustee for QSuper (ABN 60 905 115 063). All QSuper products are issued by the QSuper Board as trustee for QSuper. This is general information only, so consider whether the product is right for you by reading the PDS available from our website or by calling us on 1300 360 750 © QSuper Board 2020
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