Retirement Costs In Australia – Can You Afford Them?

As you can see, there are big differences between modest and comfortable lifestyles. What are those lifestyles exactly? Before diving into the detail of retirement costs, let’s first understand the types of lifestyle defined in the report.

Comfortable VS Modest Lifestyles

Let me explain the lifestyles by giving you practical examples of living. I extracted those examples from the ASFA report, but described them differently.

Examples of the comfortable lifestyle

• Your house may start having some issues in retirement. You will then renovate the kitchen and/or the bathrooms. 
• Likewise, you will replace the appliances like dishwasher and washing machine as they get older and having major problems.
• You will keep going to the same hairdresser as the one before retirement.
• You would not mind turning on the AC when feeling hot.
• You will sometimes dine out at restaurants. A couple of wines together, of course.
• No problem for watching Netflix, as you will have an unlimited data plan of the Internet.
• You would take multiple domestic trips in a year. You may also travel overseas, perhaps once in several years. 
• You will drive a middle-class car, something like Toyota Corolla or non-luxury SUV.
• Top-level private health care is a must for you.

Obviously, these are not luxury living but certainly comfortable living. Average Australians would be happy to have such a lifestyle after retirement.

Examples of the modest lifestyle

• For the housing issues, you may not have enough money to renovate the kitchen or the bathrooms. You will still be able to cover the repairs though.
• You will be limited in replacing appliances and holding household items. 
• You will look for cheaper haircuts than those before retirement.
• You will keep a close eye on the utility costs, and try to reduce the costs if one bill goes beyond its average.
• When you don’t feel cooking, you may pick up some take-out meals. Occasionally, you would dine out at budget restaurants. 
• You will have an affordable plan for communications that may limit calls, text, and Internet data.
• You may take only one holiday in Australia. Going overseas may be over the budget.
• You will hold a basic private health insurance with limited gap payments.
• You will drive a basic car, something like Hyundai i20 or Mazda 2. 

With this lifestyle, you may feel tight. As a result, you will keep an eye on the expenses every month. Nevertheless, the modest lifestyle isn’t too bad for the average class of Australians. 

Why Do We Need Over $60K Per Year?

Getting back to the ASFA report, a couple would need A$60,977 per year and  A$43,317 for a single person to have a comfortable lifestyle. These numbers assume that you own your house.  Without mortgage repayments, spending $60K a year is not low at all for most of the Australians.

Why do you need that much? Here are the breakdowns of the key retirement expenses:

• Housing: insurance, rates, water, home repairs, home improvements, utilities
• Communication: bundle (calls, text, mobile data, broadband)
• Health: insurance prescriptions, over-the-counter supplements, co-payments/out-of-pocket
• Food: groceries and other fresh food
• Recreation: TV, movies, streaming service, social activities, travel, food, etc

You may be still wondering why these expenses roll up to over $60K/year. Let’s look into the detail of the expense breakdowns in the following sections.

Key Retirement Costs – Housing

The housing expenses include building and contents insurance, council rates, water charges, home improvements, and home repairs and maintenance.  The table below shows the budgets for housing, along with the lifestyles.