What’s the real cost of retiring in Australia?

You spend decades working hard to save enough money for a comfortable retirement, but do you actually know how much you’ll need to make it last? With the rising cost of living and fluctuating trends in financial markets, it can be difficult to get a real handle on what you need in your super and savings.

The good news is that the latest retirement figures can give you a solid idea about the real cost of retiring in Australia. But what steps do you need to take into account to make sure you live your best life in retirement?

Step #1: Learn more about how much you’ll need from the Australian Retirement Standard

The Association of Superannuation Funds of Australia (ASFA) pours heaps of resources into monitoring the costs associated with retirement, so understanding how much you’ll need for retirement and the true cost of retiring in Australia is probably easier than you expect.

Every year, ASFA publishes budgets for singles and couples aged over 65 and estimates how much they’ll need to live either a ‘modest’ or ‘comfortable’ lifestyle. It’s known in the biz as the Retirement Standard, and it’s a great jumping-off point if you’re trying to wrap your head around what you should be putting away for your golden years.

Here’s the latest budget suggestions from ASFA’s Retirement Standard for those aged around 65:

• Modest lifestyle for singles: $27,987 per year
• Modest lifestyle for couples: $40,440 per year
• Comfortable lifestyle for singles: $43,901 per year
• Comfortable lifestyle for couples: $62,083 per year

Keep in mind though that the Retirement Standard isn’t a blanket budget suggestion for every Aussie. That’s because it’s based on two important assumptions: that you live in a home you own outright and that you’re in good health. If you’re likely to be renting for the rest of your life or spending a significant amount on mortgage repayments or medical bills (especially in the early years of retirement), then you’ll need to factor these differences into your budget.

Step #2: Determine how much it costs to live a comfortable retirement

Most of us would prefer to be able to enjoy a comfortable lifestyle in retirement, but it’s all about defining what ‘comfortable’ looks like for you. After all, what’s comfortable for one person might be having the freedom to spend time with family whenever they like without worrying about the cost of bills, whereas someone else’s level of comfort might mean regular jaunts around the world to explore new places.

It helps to write down a list of everything that would be included in your ‘comfortable lifestyle’. This should include travel and holidays, fuel and car upkeep, maintenance of expensive appliances and electronics, and any other must-haves. Planning ahead with these in mind will help you build out the amount of income you’ll regularly need in retirement.

Step #3: Include the big-ticket essentials into your retirement budget

It’d be nice if prices stayed the same and inflation just vanished into thin air, but unfortunately, that’s just not on the cards! If you’re planning on living comfortably in retirement, you need to factor in rising costs — particularly for big-ticket essentials. ASFA says retirement cost increases are being driven by four specific essentials:

• Power, such as electricity, gas and water bills
• Food
• Rates, such as quarterly council rates
• Healthcare

Because these are all necessary to live a comfortable (even modest!) lifestyle, what can you do now to save more in anticipation of increases closer to retirement?

Some options to consider include putting aside more into your super — even just an extra $50 every month will add up over time. You could also look into salary-sacrificing at your workplace. And if you’re thinking about moving to a smaller home now that the kids have flown the coop, you can put away up to $300,000 from the proceeds of your home thanks to the downsizer contribution (eligibility criteria apply). Even better, that figure can double to $600,000 as a couple.

Step #4: Protect yourself with the right insurance

As we get older, we need to stop thinking about ourselves as being invincible like in our younger years. Taking your assets and health for granted isn’t an option if you want to enjoy a comfortable lifestyle in retirement. Getting the right level of insurance cover — such as for home and contents insurance, car insurance, life insurance and funeral insurance — can be a smart weapon in your retirement-planning arsenal. Not having insurance or enough insurance in place could mean that any money you might have wanted to stash away into your super, or another type of investment, might instead be spent on fixing or replacing your home and contents, or car, in the event of an unforeseen problem or event.

Are you prepared for retirement? You might think you have enough stashed away, but a solid plan could also consider some safeguards.