Why most women will struggle to have a comfortable retirement

Retirement costs are spiking and most Australians’ super balances are falling short.  So is yours on track for a comfortable retirement?

Recent data from the Association of Superannuation Funds of Australia (ASFA) says that a couple who retire in their mid-60s will need just under $63,000 a year to retire comfortably, and a single person will need around $44,000. 

However, only around a quarter of Australian’s that are retiring today have enough money to meet ASFA’s prescribed standard for a comfortable retirement. 

So what’s a comfortable retirement? ASFA says a comfortable retirement is about “participating in a range of leisure activities”, owning a reasonable car, having private health insurance, good clothes and electronic equipment as well as occasional domestic and international travel. 

An important point to note is that ASFA deputy CEO Glen McCrea describes this lifestyle as “not opulent.” This $63,000 is not to live lavishly, but rather to comfortably get by. 

“People aren’t buying luxury watches or flying first class – it’s about having your life, going to the club, having a drink a catching up with your friends,” says Mr McCrea.

The report breaks down the spending for a couple comfortable in retirement, with the main expenses per week being $283.16 on leisure, $212.77 on food and $197.24 on health.

Looking at these numbers you can easily see that you won’t exactly be rolling around in luxury even if you reach this saving goal, which raises alarm bells about how many Australian’s don’t look set to reach it. 

These figures are also assuming you own your own home.  If you reach retirement age with a mortgage or rent hanging over your head, the financial strain will be even more significant. 

Vanessa Stoykov, the CEO of financial education media company Evolution Media Group, told News.com.au the sobering reality of the situation. 

“If comfortable is $62,000 a year as a couple and you’re 65 and want to live until you’re 85, which is not out of the question, that’s 20 years of $62,000 you have to find. That’s $1.2 million.”

Ms Stoykov describes the difference between Australian’s current average balances and what they’ll need for retirement as “a massive gap” and the data backs it up. 

ASFA recommends Australians aim to have $219, 000 in their super by the age of 45, although currently even at age 50 a man averages only $111,115 and a woman even lower at $87,634. 

Ms Stoykov also makes the important point that many women are left in worse off positions than men, this is due to factors such as the gender pay gap and employment imbalance, with women having lower levels of workforce participation. This is a particular issue for divorced women.

“There are a lot of examples of women who’ve been divorced and have no super, a lot of the time they have to sell the family home to cashflow their living”, says Ms Stoykov, adding homelessness for women due to a lack of retirement savings is not uncommon. 

“The average balance for women is $270,000 in retirement and for women it’s $157,000 because of the broken work patterns and women raising children.” 

Canstar finance expert Steve Mickenbecker reaffirmed this.

“A 60-year old with an average super balance now has little chance to catch up and the future looks likely to be a part pension initially and eventually full pension, and a significantly lower standard of living.” 

“For women, the magnitude of the gap is worse, with average super balances 15 to 20 per cent lower than men.” 

Ms Stoykov urges you to take control of your super: “The more power people take into their super the better. Take care of yourself and don’t expect the government can.” 

Here’s where the prices are rising:

• Petrol prices climbed a substantial 8.7 per cent in the March quarter.
• Food prices were up by 0.4 per cent, with a return to eating out as lock-down conditions eased and as farmers restocked after the drought. Beef and veal were
  up 3.7 per cent.
• Fruit fell (-1.6 per cent), partially offsetting the rise in the price of food, due to favourable growing conditions leading to increased supply.
• Takeaway foods (+0.6 per cent) and restaurant meals (+0.5 per cent) rose as the continued easing of lock-down restrictions saw more consumers dining at restaurants, allowing restaurants to pass through input cost increases.
• The pattern of electricity price changes varied across the States, but the average fall was 0.9 per cent in the quarter with a 11.2 per cent drop over the year.
• Alcohol rose 1.0 per cent as prices returned from festive season specials alongside the pass through of the excise tax increase for beer and spirits.
• Telecommunication charges increased by 0.4 per cent, with new phones in the market replacing older discounted phones and with new higher priced NBN plans coming
  into force.

Table 1: Budgets for various households and living standards for those aged around 65 (March quarter 2021, national)

Table 2: Budgets for various households and living standards for those aged around 85 (March quarter 2021, national)

The figures in each case assume that the retiree/s own their own home and relate to expenditure by the household. This can be greater than household income after income tax where there is a drawdown on capital over the period of retirement. All calculations are weekly, unless otherwise stated. Annual figure is 52.2 times the weekly figure.