Modesty and comfort are both in the eye of the beholder to a certain extent. But have you ever wondered how your retirement plans (or retirement reality) stack up against everyone else?
Each quarter, the Association of Superannuation Funds Australia (ASFA) release their Retirement Standard benchmark, which calculates the amount of annual income, in today’s dollars, required to meet either a modest retirement lifestyle or a comfortable retirement lifestyle. As at June 2016 a couple aiming for a modest retirement require an annual net income of $34,216, while a couple aspiring to a comfortable lifestyle must be able to generate $59,160 per annum.
For retirees aged around 85, a modest lifestyle for a couple equates to $34,598 per annum and a comfortable lifestyle requires income of $54,460.
According to ASFA, an Australian couple will need to save $130,000 more for a comfortable retirement following changes to the Age Pension and increases in the cost of living; ASFA now estimates that Australians will need a super balance at retirement of $640,000 for a couple and $545,000 for a single, an increase of $130,000 and $115,000 respectively from 2014 estimates.
Back to the question though: what is modesty and what is comfort?
According to ASFA: A modest lifestyle – is better than the Age Pension, but still only funding fairly basic activities. These activities currently allow around $160 per week for food, $78 per week for health and around $100 for transport. Around $35 per week is allocated to household goods and services and just under $17 per week for communications (the free library internet service is looking good!) Just over $110 per week is allocated to leisure. It might involve owning an older, less reliable car.
A comfortable lifestyle – is one which enables an older, healthy retiree to be involved in a broad range of leisure and recreational activities. It allows funding for private health insurance, a reasonable car and regular holidays (domestic and occasionally international). Based on current figures, there is an additional $40 per week allocated to food expenditure, an extra $50 per week for household goods and services and a total of just over $300 per week for leisure activities. Crucially however, both of the definitions (and allocations of money) above assume that the retired couple own their own home.