If you’ve made plans for a comfortable retirement, now might be a good time to revisit and possibly revise them. Fresh data from the Association of Superannuation Funds of Australia (AFSA) shows the cost of funding a comfortable retirement has jumped.
ASFA figures indicate the increase in the cost of a comfortable retirement as 3.7 per cent over 12 months. According to the research, one of the big drivers of the increase was rising premiums for house and car insurance.
What’s more, upward pressure from insurance companies on the comfortable retirement cost is likely to increase in the next year. So says major insurer Suncorp, whose brands include AAMI and GIO. Suncorp is forecasting general insurance premiums to rise this financial year “by mid-to-high single-digit amounts.”
Comfortable retirement harder for Age Pension retirees
Such news is not good for any retirees, but it will likely hit those on the Age Pension particularly hard. According to the latest YourLifeChoices’ quarterly Retirement Affordability Index report, Age Pension retirees have already suffered cost-of-living increases well beyond the inflation rate.
Report data shows renting Age Pension retired singles have seen their expenses rise by 18.4 per cent since June 2021. For equivalent couples the data, provided by the Australia Institute, showed a 17.4 per cent increase.
Both of these figures are higher than the Consumer Price Index (CPI) increase for the same period – 16.1 per cent. That certainly makes a comfortable retirement difficult to attain.
The Australia Institute’s senior economist Matt Grudnoff has described the imbalance as “insidious”. Inflation is disproportionately affecting retirees at the bottom of the pile, he said.
Insurance increases add insult to injury
Suncorp’s forecast of higher-than-inflation rises in home and car insurance comes on top of already record increases. Insurance premiums as a whole have grown by a record 14 per cent over the past 12 years.
While home and car insurance account for most of that increase, health insurance costs have added further pressure to retirees. Homeowners receiving the Age Pension have had an average 5.7 per cent increase over the past 12 months.
ASFA CEO Mary Delahunty said increasing costs for essential goods and services makes a comfortable retirement difficult for retirees. “Retirees are managing an increasingly difficult landscape where the costs of essential goods and services keep rising,” she said. “Health, home, and transport are vital to their well-being, yet the expenses tied to these necessities are steadily increasing.”
Ms Delahunty said the current landscape highlighted the importance of future retirees ensuring sufficient contributions are made to their superannuation. “For Australians to have the retirement they deserve, it’s crucial that they have access to adequate superannuation savings,” she said.
The uncomfortable retirement truth
There’s unlikely to be any short term respite from increases to car and house insurance premiums, Suncorp says. Repairs to ageing infrastructure such as water pipes and more climate change-induced severe weather events will exacerbate costs, it said.
With that in mind, a superannuation ‘health check’ through a registered financial adviser might be a wise option right now. It may just give you your best shot at a comfortable retirement.
Do you believe you have enough for a comfortable retirement? Are increasing insurance costs affecting this? Let us know via the comments section below.
Also read: Retirement age for Aussies jumps
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If the value for Inflation (CPI) is say 3% and everything is going up by 5% or more, then that would point to the method they are using to calculate CPI is Flawed, and needs to be updated.