Do you have a “modest” or “comfortable” lifestyle?

Modesty and comfort are both in the eye of the beholder to a certain extent. But have you ever wondered how your retirement plans (or retirement reality) stack up against everyone else?

Each quarter, the Association of Superannuation Funds Australia (ASFA) release their Retirement Standard benchmark, which calculates the amount of annual income, in today’s dollars, required to meet either a modest retirement lifestyle or a comfortable retirement lifestyle. As at June 2016 a couple aiming for a modest retirement require an annual net income of $34,216, while a couple aspiring to a comfortable lifestyle must be able to generate $59,160 per annum.

For retirees aged around 85, a modest lifestyle for a couple equates to $34,598 per annum and a comfortable lifestyle requires income of $54,460.

According to ASFA, an Australian couple will need to save $130,000 more for a comfortable retirement following changes to the Age Pension and increases in the cost of living; ASFA now estimates that Australians will need a super balance at retirement of $640,000 for a couple and $545,000 for a single, an increase of $130,000 and $115,000 respectively from 2014 estimates.

Back to the question though: what is modesty and what is comfort?

According to ASFA: A modest lifestyle – is better than the Age Pension, but still only funds fairly basic activities. These activities currently allow around $160 per week for food, $78 per week for health and around $100 for transport. Around $35 per week is allocated to household goods and services and just under $17 per week for communications (the free library internet service is looking good!) Just over $110 per week is allocated to leisure. It might involve owning an older, less reliable car.

A comfortable lifestyle – is one that enables an older, healthy retiree to be involved in a broad range of leisure and recreational activities. It allows funding for private health insurance, a reasonable car and regular holidays (domestic and occasionally international). Based on current figures, there is an additional $40 per week allocated to food expenditure, an extra $50 per week for household goods and services and a total of just over $300 per week for leisure activities. Crucially, however, both of the definitions (and allocations of money) above assume that the retired couple owns their own home.

Comfortable retirement:

  • One annual holiday in Australia,
  • Regularly eat out at restaurants. Good range and quality of food
  • Owning a reasonable car
  • Afford bottled wine
  • Good clothes
  • Afford regular haircuts at a good hairdresser
  • Take part in a range of regular leisure activities
  • A range of electronic equipment
  • Replace kitchen and bathroom over 20 years
  • Private health insurance

Modest retirement:

  • One or two short breaks in Australia near where you live each year
  • Infrequently eat out at restaurants that have cheap food. Cheaper and less food than a ‘comfortable’ lifestyle standard
  • Owning an older, less reliable car
  • Afford cask wine
  • Reasonable clothes
  • Afford regular haircuts only at a basic salon or pensioner special day
  • Take part in one paid leisure activity infrequently. Some trips to the cinema
  • Not much scope to run an air conditioner
  • No budget for home improvements. Can do repairs, but can’t replace kitchen or bathroom
  • Private health insurance

Age Pension

  • Even shorter breaks or day trips in your own city
  • Only club special meals or inexpensive takeaway
  • No car or, if you have a car, it will be a struggle to afford repairs
  • Homebrew beer or no alcohol at all
  • Basic clothes
  • Less frequent haircuts or getting a friend to cut your hair
  • Only taking part in no cost or very low-cost leisure activities. Rare trips to the cinema
  • Less heating in winter
  • No budget to fix home problems like a leaky roof
  • No private health insurance

To find out more, please always feel welcome to contact us at any time.

General Advice Disclaimer

This article contains general advice only, which has been prepared without taking into account the objectives, financial situation or needs of any person. You should, therefore, consider the appropriateness of the information in light of your own objectives, financial situation or needs and read all relevant Product Disclosure Statements before acting on the information. Whilst every care has been taken to ensure the accuracy of the material, Paradigm Strategic Planning or Sentry Advice Pty Ltd will not bear responsibility or liability for any action taken by any person, persons or organisation on the purported basis of information contained herein. Without limiting the generality of the foregoing, no person, persons or organisation should invest monies or take action on reliance of the material contained herein but instead should satisfy themselves independently of the appropriateness of such action.

Paradigm Strategic Planning Pty Ltd is an Authorised Representative of Sentry Advice Pty Ltd AFSL 227748

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