Isolated price rises, and low interest rates, putting pressure on retirees

Nest egg, superannuaiton, SMSF, retirement
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Low interest rates, combined with rising costs in some areas, is putting pressure on retirement budgets.

Costs for retirees were largely stable over the March 2019 quarter, according to the ASFA (Association of Superannuation Funds of Australia) Retirement Standard. The cost of the ‘comfortable’ retirement was up 0.1% for couples and down 0.1% for singles compared to the previous quarter. At the ‘modest’ retirement level, costs rose 0.2% for couples and there was no change for singles.

However costs in some areas increased “strongly”, according to ASFA, with medical and hospital expenses up 1.3% for the quarter and 4.1% for the year. There were also increases in food costs, including vegetables up 7.7%.

There were price falls in fuel (-8.7%), domestic travel (-3.8%) and international travel (-2.1%).

But combined with low interest rates these rising costs in some areas is putting pressure on budgets, said ASFA CEO Dr Martin Fahy.

“While for many, the overall cost of retirement was largely unchanged over the most recent quarter, prices have been going up at a greater rate for a number of items.”

“The relatively low rate of inflation has brought interest rates for bank deposits to historical low levels, placing pressures on the household budgets for retirees relying on income from term deposits and similar investments.”

ASFA calculates that retirees could be down $800 a year in income on a $200,000 term deposit compared to May 2015, as average term deposit interest rates fell from 2.7% to 2.3%.

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