If you believe some reports in the media, retirees are to blame for many of our economic woes, from spending and hoarding cash to preventing Millennials and Gen Z getting onto the property ladder.
But this trope doesn’t match the reality, as YourLifeChoices’ latest Retirement Affordability Index shows. The biggest stresses on retirees’ budgets are largely out of their control.
We can clearly see that the Age Pension is barely keeping up with the cost of living. Single renters on the Age Pension have an extra $4.32 to play with once a big 4.2 per cent inflation hike is taken into account (or $7.05 if you’re a couple).
Meanwhile, homeowner couples on the Age Pension only have an additional $6.27 once their inflationary increases are taken into account.
And the cost pressures are far from discretionary spending. Insurance, for example, has gone up by a massive 16.4 per cent in the past 12 months. Owning a car is especially important for a lot of retirees to keep their independence, car insurance is hardly a want, as opposed to a need.
At least car insurance can be managed by shopping around. In the case of home insurance, some parts of the country simply cannot afford to cover their property, whether that’s due to bushfire or flooding risks. And no amount of shopping around will help. It’s either a case of severely cutting back elsewhere or cutting insurance altogether and crossing your fingers that you’ll make it through the next flood or bushfire unscathed.
And then there are the people who aren’t homeowners and who are renting (despite the trope of cashed-up Boomers with multiple homes). Rents have jumped by 7.8 per cent in the past year – the highest jump in 15 years. It accounts for 37 per cent of single renters’ expenses and 30 per cent for couples. That plus groceries accounts for more than 50 per cent of renters’ costs.
Finally, there’s health insurance – again, an “essential” must-have for a lot of older Australians, especially given the average wait time for elective surgery keeps getting pushed out further and further. According to the Australian Medical Association, the median wait time has gone up by nine days in the past 12 months. It’s probably also not a shock that, at Compare Club, we’ve seen a massive jump in the number of over-65s enquiring about taking out health cover for the first time.
Add in the annual increases of the Medicare Safety Net for medical and pharmaceutical expenses, and you can see there’s not much room to cut much more from budgets. In a piece of soon-to-be-released research I recently conducted, the majority of over-55s were spending up to 75 per cent of their income on bills. It’ll just take another interest rate hike or a natural disaster in a hitherto untouched area to push older Australians from surviving to struggling.
Even the more affluent Australians among us are seeing the same squeezes on the cost of home upkeep, medicines, fuel, groceries and insurance. Homeowners with a private retirement income have seen their annual expenses go up by $1,578 for singles and a whopping $2,641 for couples.
If there’s a silver lining, it’s that we can see inflation easing in some major expenses. Electricity prices dropped by 1.7 per cent in the last quarter and there are still a lot of very attractive offers from retailers available in the market.
If, as predicted, the government extends the coal price cap in the budget, and the electricity reference prices end up dropping from 1 July, then financial pressure from energy bills could ease. That’s very necessary, as Compare Club’s research shows more than 90 per cent of over-65s get anxiety over their energy bill.
Travel-related expenses also dropped over the past quarter, while there were significant drops in the price of meat as well, and general food inflation is currently slowing.
Older Australians aren’t immune to the cost-of-living challenges in 2024, as the latest Retirement Affordability Index shows. And their pressure points of food, housing and insurance don’t look too different from the rest of the country. Yes, there’s a growing inequality gap between the older haves and have-nots, but that’s also the same for the rest of the population. As the old saying goes, we’re all in this together (or at least most of us are, at any rate).
What cost-of-living pressures are you experiencing? Have you had to make difficult choices around insurance, food, or health care? Let us know in the comments.
Also read: Is Indexation failing aged pensioners?
I too cannot agree with this BS that all “Baby Boomers” are wallowing in cash. We didn’t get 10 & 15% super all our working lifes, many of us worked hard to pay off mortgages often having to work two jobs at times. I wonder how this generation would have handled 17% interest on their mortgage payments. We saved up each year for a holiday to take our kids away for a week in summer holidays, up or down the coast, NOT overseas trips and cruises, couldn’t afford them. We cooked meals at home, didn’t stop in to a fast food chain shop cos it was convenient, brewed instant coffee at home instead of slipping into cafes. I had a very modest super payout when I retired and still need to plan carefully how we spend our remaining “fortune”!! Sure, I may be considered “Asset Rich” because we own our home, but if we sell, we still have to buy another place which negates any profit anyway. Many of our kids need to dig in and do the hard yards like we did and yes, I am a “Grumpy Old Baby Boomer”!!
Most of us baby boomers are not particularly well off. Our main asset is our house and not all baby boomers even own one of those.
There is however a cohort of baby boomers who invested their money mostly in housing and are making windfall profits. This cohort who took advantage of the huge tax concessions unfairly available to investors is being used by the media and others as representative of baby boomers when in fact they are a relatively small proportion of the total.
In other words the greedy rich proportion are getting all we baby boomers a bad name with younger generations.
We baby boomers as a group are the wealthiest generation in the history of Australia. This fact cannot be denied.
However, our expectations are much higher than previous generations, such as the silent generation or the greatest generation. Where I grew up the suburban streets were surrounded with these 2 generations, and my memory was how modest and frugal they were. Nothing was thrown away and everything was repaired. Eating out of home was only for special occasions and you dressed up in your Sunday best (That is your one suit or good frock you owned). The only take out food was fish and chips or Chinese take away once per week.
I even know 2 couples of the greatest generation who sold their car once the husband retired onto the aged pension because they did not need it for work and public transport was half price. Even shopping was done on public transport or by walking, using string bags and shopping jeeps. Holidays consisted of using your free rail pass to visit relatives in the country or in a neighbouring state. Overseas travel or cruises were out of the question once retired for the greatest generation. I even knew a widow who lived into her 90’s and died in the 1990’s who never owned a TV set.
This is how these generations lived, something we baby boomers would not accept.
Having said all that, life is not easy for boomers who are living off the aged pension and really difficult if you are also renting.
However If you a self-funded retiree with plenty of assets such as Superannuation, Rental properties, a holiday home, a share portfolio or family trust, then this really is the good life. I know quite a few boomer retirees who regularly travel to Thailand. Indonesia, Vietnam, Japan, New Zealand and the pacific islands for holidays, and maintain a car which is fewer than 10 years old.
Previous generations of retirees would not even have had a passport.