The cost of a comfortable retirement if you are renting.
Retirement
3 June 2019 | 
5 min read
The Association of Superannuation Funds of Australia (ASFA) regularly crunches the numbers to help inform Australians what retirement may cost. Here’s what it may look like for retirees who are renting.
Everyone owns their own retirement, via their goals and intentions. There are around 3.6 million Australians who are retired from the labour force,1 so what does a “comfortable” retirement mean?
ASFA regularly calculate the current cost of retirement in Australian, against both a “comfortable” and a “modest” measurement.
Comfortable Retirement
A lifestyle which affords a good car, top-tier private health insurance, regular dining out, domestic and some international travel, and many of the trappings enjoyed during working life.
Modest Retirement
Better than the Age Pension, but still only able to afford fairly basic activities. No budget for home improvements. Can do repairs, but can’t replace kitchen or bathroom.
How much superannuation do you need at retirement?
The Association of Superannuation Funds of Australia (ASFA) has been tracking retirement costs for more than a decade and has come up with some benchmark figures that are very useful in planning for your post-working life.
When it comes to retirement, ASFA has calculated that a single person wishing to have a “comfortable” retirement would need, at age 65, a nest egg of about $545,000, or $640,000 for a couple. The incomes needed to be generated from these amounts would be approximately $43,000 and $61,000 respectively.
A modest retirement requires much less superannuation (approximately $70,000 for both singles and couples) due to the fact that the base rate of the Age Pension (plus various pension supplements) is sufficient to meet much of the expenditure required at this budget level.
Importantly though, the assumption ASFA makes is that both groups would own their own home and be in good health. Not everyone, though, is in the fortunate position of owning their own home when they retire. Indeed, about 285,000 households headed by someone aged 65 or over are renting.2
This is not necessarily a result of circumstance - people may choose to rent because it means they can live in desirable locations - by the sea, or the inner city - for a fraction of the cost of buying a place there.
But of course rent has to be paid, and that can present a challenge for retirees trying to work out how much they will need to fund their lifestyle after they clock off for the last time.
ASFA calculated in 2017 that the lump sums needed jump to more than a million dollars for a couple, and just under seven figures for a single person.3 Rental growth has stalled in Queensland in the past five years, so ASFA’s figures hold good today, but they are still daunting.
What does your retirement money get spent on?
ASFA has broken down the weekly costs for essential and discretionary spending, making it simple for you to estimate what your retirement needs may be. Here are their headline costings for a comfortable retirement, but note that these figures assume home ownership. If you’re renting, factor additional cost4:
|
Comfortable lifestyle $ per week
|
| |
Couple |
Single |
| Housing Costs |
121.69 |
116.41 |
| Housing goods & services |
89.96 |
73.01 |
| Clothing & footwear |
49.95 |
26.82 |
| Food |
204.69 |
117.77 |
| Utilities |
89.73 |
71.19 |
| Transport |
153.90 |
141.80 |
| Health Services |
187.17 |
100.05 |
| Leisure |
272.65 |
181.58 |
| Total Weekly Spending |
$1,169.75 |
$828.63 |
Go to the ASFA website for the detailed budget breakdowns, and more information about their Retirement Standard.
The figures may seem daunting to some, but the important thing is to formulate a plan on how to achieve the level of savings you believe you will need. Good advice coupled with determination can get you there.
How are you tracking right now?
The QSuper Retirement Income Calculator shows you what super balance you’re tracking towards, and what income that balance will likely give you.
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1. Australian Bureau of Statistics. 6238.0 - Retirement and Retirement Intentions, Australia, July 2016 to June 2017.
2. Australian Bureau of Statistics. 4130.0 - Housing Occupancy and Costs, 2015-16
3. ASFA Media release: ‘Retirees renting need more than $1 million to be comfortable.’ Released 13/3/17
4. All figures quoted sourced from the ASFA Retirement Standard, March quarter 2019 report, www.superannuation.asn.au/resources/retirement-standard
5. QInvest Limited (ABN 35 063 511 580, AFSL 238274) (QInvest) is ultimately owned by the QSuper Board (ABN 32 125 059 006, AFSL 489650) as trustee for QSuper (ABN 60 905 115 063). QInvest is a separate legal entity responsible for the financial services it provides. Advice fees may apply.