For me, the thing that stands out most is the huge chunk that housing costs take out of your budget if you do not have private income. They are quite shocking statistics that demonstrate the brutal reality of many retirees in Australia today.
The housing hole
As the data demonstrates, a homeowner couple receiving private income (that is, self-funded retirees) spends 13 per cent of that income on housing. For a couple renting and living on the Age Pension, almost a third (30 per cent) of their income goes towards keeping a roof over their head. It’s worse still for single pensioners, with 38 per cent of their income spent on housing.
Importantly, that imbalance still exists if we look at the actual dollar figures involved.
The homeowner couple is based on income of $90,000 a year; 13 per cent of that equates to $11,700. For the pensioner couple who rent, the data assumes yearly income of $45,000 (presumably including rental support); 30 per cent of that equals $13,500 ($250/wk) which doesn’t equate to current rental rates, so where are they living? Or is this excluding rental assistance?
Despite receiving half the income, the renting pensioners are still spending more in dollar terms for housing than those earning twice as much who own their own home.
Hidden realities
Away from housing, spending breakdowns are similar in percentage terms. However, because the dollar amounts differ greatly, percentages can mask the impacts on lifestyle quality.
For instance, every household type was found to spend 1 to 2 per cent of their income on clothing and footwear. Yet the reality behind that can be the difference between buying brand new clothes or scavenging second-hand stores.
In terms of recreation, it is unsurprising that affluent homeowners – both couples and singles – spend far more of their income here than others, and that renting pensioners spend the least. What the data doesn’t say, however, is how that money is actually spent. Affluent homeowners presumably enjoy far more holidays, which is likely to be an unaffordable luxury for renting pensioners. Their recreation activities are likely restricted to far more modest, local or home-based activities.
Perhaps a lack of holidays and other recreational activities is why spending on alcohol and tobacco is far higher among renting pensioners. For them, almost as much of their income is spent on these as recreation.
Other lifestyle differences include spending on transport – likely the difference between private vehicles and public transport – and medical/health, where many people on the pension may not be able to afford private healthcare or, worse still, are forced to forgo regular or preventative care that would have out-of-pocket costs, since Medicare and healthcare cards don’t cover absolutely everything.
Getting the numbers right
The inflation spike in recent years has had an unfortunate side-effect for many retirees: their numbers are now outdated.
Using publicly available figures from just a few years ago, many people assumed they would need at least $37,000 a year debt free on which to comfortably retire as a single, and $50,000 for a couple. That is despite the pension being only around $29,000.
Inflation has blown out those numbers – you now need closer to $50,000 as a single and $73,000 as a couple. Where does that additional money come from to plug that sizeable gap?
It’s crucial for the government to consider Age Pension amounts that reflect the true cost of living. But everyone – singles and couples alike – also need to make strong plans for retirement, which allow for major fluctuations like this. Because things can and will change in future, and we need to be able to deal with them.
Helen Baker is a licensed Australian financial adviser and author of On Your Own Two Feet: The Essential Guide to Financial Independence for all Women. Helen is among the 1 per cent of financial planners who hold a master’s degree in the field. Proceeds from book sales are donated to charities supporting disadvantaged women and children. Find out more at www.onyourowntwofeet.com.au
Disclaimer: The information in this article is of a general nature only and does not constitute personal financial or product advice. Any opinions or views expressed are those of the authors and do not represent those of people, institutions or organisations the owner may be associated with in a professional or personal capacity unless explicitly stated. Helen Baker is an authorised representative of BPW Partners Pty Ltd AFSL 548754.
Hi, I think the supermarkets price increases have been the most regular in your face effects of inflation.
Prices dictate my spending pattern and I just refuse to pay for goods that I used to enjoy.
The banks reducing savings accounts percentages is just another example of shareholders over customers.
In the court of public opinion they are seen as very poor organisations which is a big drop in what were revered and trustworthy businesses.
I’m a single renter, and until July 2025, I’ve been given a reprieve on my rent (same as when I moved here in 2023). I really don’t know how I’ll fare next year, when over the past 12 months, the basic rent for a 2 bedroom unit has risen by an average of $70 per week! This will put me into rental crisis, making it unaffordable, especially on the current rate of pension. I don’t see the payment going up by $140 per fortnight in the near future.
NSW Housing has already taken nearly 8 years to find me an appropriate property, but there’s still absolutely nothing on the horizon! There’s just no stock, and they need to house those who are currently homeless, first.
I look after my budget and have been doing so for over 30 years. I can’t squeeze any more out of it, and keep my head above water, considering the price of food, electricity, insurances, & fuel.