The Retirement Standard budgets for the March quarter 2018 have been released by the Association of Superannuation Funds of Australia (ASFA).
Australian retirees are afforded a much more dignified existence within the comfortable standard budget, while the modest budget is closer to the Age Pension level. The budget shows couples aged around 65 need to spend $60,265 per year to live comfortably in retirement and singles will need $42,764.
Singles will need to spend $27,368 at the modest level and couples will need to spend $39,353.
The comfortable retirement levels figures are slightly different from the previous figures published in September 2017. There are, however, significant differences in the component expenditure items, particularly the increasingly cost of technology.
The changes to the modest budget are greater than in the comfortable budget. Spending for singles increased from the previous $24,506, and couples from $35,189, which reflects price increases.
The estimated changes at the comfortable level are not much different to the previous budget, an estimated $640,000 for couples and $545,00 for singles. The budget has been updated with item price increases, providing more detailed information on items. Subscriptions to digital services such as music and video streaming have also been included, as well as allowances for broadband internet connections with substantial downloads.
The necessities of life for retirees are addressed in the revised budget. Water charges have been broken down for council and other rates for the first time, with the revised budget taking into account the council and water costs, which tend to increase at a greater rate than other Consumer Price Index tax items.
The cost of various levels of private health insurance coverage have been accounted for and allowances have been made for considerable out of pocket expenses for surgical procedures and the continued purchase of prescriptions and other medications.
The revised budget makes allowances for leisure activities, such as eating out and going to the cinema. The comfortable retirement level still allows for occasional overseas travel, a major trip every seven years or a less expensive holiday more frequently.
The budget for over 85s will continue to be published with the budget for the June quarter 2018.
The Association of Superannuation Fund Australia (ASFA) has called for the Federal Government to use the Federal budget to progress structural policy reforms to enhance and protect the economic structure of women in retirement.
Despite the increasing participation of women in the workforce, there is still a significant gap between the retirement income of men and women. Both the average account balance and having any superannuation at all differs significantly between women and men.
The average superannuation balance achieved by those approaching retirement age in 2015/2016 was $237,022 for men and $123,642 for women. More than 80 per cent of women will fall short of the $545,000 needed for an individual to be comfortable in retirement.
Martin Fahy, ASFA chief executive, said it is important to close the gap in retirement savings to ensure women are not fated to experience poverty or even homelessness in retirement. Older single women have been identified as one of the groups who are especially vulnerable by Homelessness Australia. Older women may be forced to retire from the workforce early, face discrimination in the housing market, and have insufficient funds for the cost of living in retirement.
ASFA has released a paper on Women’s Economic Security in Retirement.
Fahy said there have been positive initiatives to help women achieve economic security in recent years but there is more that can be done in this budget.
Some of the potential key reforms include applying the superannuation guarantee to the self-employed and income replacement payments, lifting the superannuation guarantee to 12 per cent, reforming the Anti-discrimination Act, improving the operation of family law and super splitting, removing the $450-a-month superannuation guarantee threshold, and allowing access to super in domestic violence cases.