The Rising Cost of Living in Retirement – stretching your retirement dollarWritten on the 30 May 2022 by Parkside InvestorPlus In the recent Federal Election, there were several focus areas on both sides of the camp – one in particular, was the rising cost of living. We have all felt rising costs – most notably, fuel and even everyday staples like fruit and vegetables. And with inflation running at 5.1% there are more cost increases coming. Even if you are still in the workforce, with wages growth sitting at 2.4%, your ‘dollar buying power’ has effectively fallen by 2.7% (with inflation at 5.1%). If you are still in your working phase of life, you may be able to cope and somehow compensate with the hope that inflation will be brought under control and your wage grows at a higher rate (remember interest rates are also on the rise). However, if you’re in your retirement phase or fast approaching it, for many Australians, any cost of living increases simply puts pressure on their standard of living. There are many publications/articles that say if you plan to keep enjoying your current lifestyle when you retire, our experience then you’ll need to save enough to provide you with at least 70% of your current annual income. Moderate or Comfortable Income in Retirement?The Association of Superannuation Funds of Australia (ASFA) reports regularly on the annual cost for singles and couples to achieve either: A ‘modest’ retirement - which is better than relying on the Commonwealth Government Age Pension alone, but only allows for the basics (grocery, utilities, and some leisure activities). A ‘comfortable’ retirement - which enables a good standard of living with enough to spend on a range of leisure activities and household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment and some travel. The estimated income required for each of the above is as follows:
However, in most cases, couples are looking at $80,000 - $100,000/year as their retirement income to truly maintain the lifestyle they’ve become accustomed to. How to Stretch your Retirement DollarWith the rising cost of living, settling for a comfortable annual income (for couples) as per the table above could prove to be a challenge. And even if you were able to draw $100,000 as an annual income from your super, could whittle away it’s earning power. So, how can you stretch your retirement dollar to ensure you continue to live a lifestyle that you’ve been used to and secondly, and more importantly, you don’t run out of money too soon. Here are 6 simple steps you can undertake to ensure your retirement savings go the distance.
If you’re approaching retirement or if you’re already retired, and you’re concerned about maintaining a comfortable standard of living in an environment of rising costs, come and see us at Parkside Investor Plus for a review of your current situation, (02) 9899 4899. Author:Parkside InvestorPlus About: As advisers, we act as a fiduciary sitting on the same side of the table as our clients, providing peace of mind, greater control and visibility. |