When you’re approaching retirement, one of the more important things to estimate is your regular expenses once you say goodbye to the workforce. A super industry body has been outlining what budget an average Australian may need to fund a standard of living when they stop working. You may also use this as a tool for you to assess what your own preferences and needs will be.
Retirement Standard from The Association of Superannuation Funds of Australia
The ASFA has been providing a comprehensive picture of retiree’s spending patterns and requirements through ASFA Retirement Standard since 2004. It’s a budget analysis of what expenses seniors may have on a regular basis when they are already retired.
Here are the common terms the Standard uses to represent three categories:
- retirement based solely on the Age Pension,
- modest retirement, and
- comfortable retirement.
Generally, a retirement based on the Age Pension presents a lifestyle on a tight budget, with limited spending on essential items only. An Age Pension will provide approximately $24,554 for singles annually and $37,014 for couples combined. This is lower than the modest retirement standard.
A modest retirement requires cutbacks in house repairs, a good automobile, leisure, occasional overseas trips and holidays, and other discretionary expenses that form day-to-day life. For a couple aged 65 – 85 under the modest category, an estimated cost of around $40,739 annually will suffice. Singles may spend about $28,170 per year.
A comfortable retirement comes with enough money to pay for many of the aforementioned areas. For couples aged 65 – 85 under the comfortable category, it’s estimated to cost around $62,562 per year. Singles might spend $44,224 annually.
The ASFA has also estimated the budget for retirees beyond 85, which is slightly less. More money is allotted for health, in-home care, and cleaning services. Less money for leisure and transport as older retirees are less mobile.
You better decide on what services and activities are truly important for your absolute happiness. Can you cut back on restaurants, alcohol, subscriptions, and holidays? Your age and lifestyle are also the biggest factors in estimating where your money will go.
Track all areas of your regular expenses
A regular expenses budget is a good tool to track spending and relatively simple to create, with available templates online. Prepare a monthly budget of your food, household items, utilities, phone, internet, transport, and insurances.
Do you donate to charities? Do you have a subscription you’ve forgotten about that appears in your bank statement every month? These are some areas that you might overlook when creating a retirement budget plan.
Perhaps you need to do an annual audit to keep track of these and other costs. This may include items that need regular updating, like clothes, club memberships, or other expenses such as credit cards.
You can also look at your credit and debit arrangements and adjust them where you can easily track your spending on your statements.
Funding your day-to-day expenses in retirement
With retired Australian homeowners, there’s a resource waiting to be unlocked in your home. ASAG provides assistance for you to access some of the value of your home through ASAG Reverse Mortgage.
This solution can help you afford the retirement standard you fall in, fund your day-to-day expenses while you retain ownership of your home. Contact us to know your options.
If you liked our “The Cost of Regular Expenses by Retirement Standard” and found it helpful, check this space for more updates on equity releases and reverse mortgages.