Day: April 11, 2022

We look at how much money you might need each year and ways you can still budget for your social life.

Australian retirees generally need a certain budget each year to live a modest or comfortable lifestyle, and industry figures recently revealed the highest annual increase in those budgets since 2010ⁱ.

The Association of Superannuation Funds of Australia (ASFA) put that increase, in part, down to a range of unavoidable price hikes on things such as petrol and council ratesⁱⁱ.

If you’re in or approaching retirement, that mightn’t be welcome news, particularly if you’re prioritising bills, trying to reduce debt, helping the kids out (if you have any) and enjoying an active social life.

On the flip side, knowing how much you might need and what you may like to do could go a long way.

So, how much money do you need?

According to September 2021 ASFA figures, individuals and couples, around age 65, who are looking to retire today, would need the below annual budgets to fund certain lifestylesⁱⁱⁱ.

Figures are based on the assumption people own their home outright and are relatively healthy^iv. You can also see how these budgets compare to the current maximum Age Pension rates being paid by the government^v.

	Comfortable lifestyle	Modest lifestyle	Full Age Pension rate
Single (annual budget)	$45,238	$28,775	$25,155
Couple (annual budget)	$63,799	$41,446	$37,923

Note, a comfortable retirement lifestyle is said to enable an older, healthy retiree to be involved in a broad range of leisure and recreational activities, whereas a modest lifestyle involves just basic activities^vi.

How much are you likely to spend on recreation anyway?

According to figures, singles and couples around age 65, living a comfortable lifestyle in retirement, would spend about $189 and $285 of their weekly budget respectively on leisure and recreation, whereas singles and couples living a modest lifestyle would spend about $97 and $153 respectively^vii.

This takes into account recreational activities like^viii:

• • Movies, plays, sports and day trips

 

• • Lunches and dinners out

 

• • Club memberships

 

• • Takeaway food and alcohol

 

• • Streaming services like Netflix and Stan

 

• Domestic vacations (and for those living comfortable lifestyles, international ones too).

What activities are on your to-do list?

Considering the above figures, it may be worth thinking about what you enjoy doing or what you’re likely to want to do more of with extra time on your hands.

These things may include:

• • Sport – golf, tennis, cycling, yoga, pilates

 

• • Hobbies – fishing, sailing, photography, drawing, woodwork

 

• • Club associations – Rotary, Leagues, Surf Life Saving/

 

• • Tournaments – trivia, bridge, chess

 

• • Eating out – restaurants, beach barbecues, picnics, food fairs

 

• • Travel – interstate breaks, overseas holidays, road trips, caravanning

 

• • Entertainment – cinemas, concerts, events, stage shows

 

• Volunteering – hospitals, soup kitchens, animal shelters.

Making your money go further for the fun stuff

The good news is, not all things will come with a price tag, so it will be possible to do a variety of things that don’t necessarily cost money.

In the meantime, here are a few simple things that you might consider to keep costs down in retirement.

• • Make use of your Senior’s Card for transport concessions and discounts on other goods and services

 

• • If a restaurant isn’t in your budget one week, pack a rug, basket and esky, and head out for a picnic

 

• • If you enjoy dining out, research cheaper deals on sites like Groupon and Scoopon

 

• • Have your friends over for a card night or take turns hosting simple dinner parties where people BYO

 

• • If you want to get away, look out for cheap flights or consider a road trip. There are lots in Australia

 

• Find cheap accommodation on Airbnb, HotelsCombined, lastminute.com or consider listing your own place to earn some money while you’re away.

If you would like to discuss your plans for retirement, please don’t hesitate to give us a call.

©AWM Services Pty Ltd. First published Feb 2022

i, ii ASFA media release – Living costs for Australian retirees rise at fastest pace in a decade – November 2021

iii, iv, vi ASFA Retirement Standard – September 2021

v Services Australia – Age Pension – How much you can get – 2 February 2022

vii, viii ASFA Retirement Standard – Detailed budget breakdowns – September 2021, page 3

If you’re still in the honeymoon period, not wanting to have these conversations may make total sense (unless of course, you’re about to wire some overseas lover you’ve never met in person your life savings).

If you have been together for a while though or are edging on making a big financial decision together, having the money talk could make a big difference to whether you go the distance.

Understandably, it may not be the easiest topic to broach, so here’s a bit of a checklist as to what you might discuss, depending on what you have planned going forward.

1 Your views on cash management

Talk to your partner about your views around spending and saving. Kicking off with a light-hearted conversation, without judgement, can often be a good place to start.

You might even want to share some examples of things in the past that may have influenced your current views and behaviours.

2 Sneaky spending habits if you have any

More than one in four Aussies has lied or been lied to about money by a partner, with hidden debt and secret spending two common contributing factorsⁱ.

With that in mind, if there are a couple of common transactions you make that you know you haven’t always been forthcoming about, now may be a good time to get that out in the open.

3 Your income, expenses, assets and debts

Your financial situation is an important one to talk about because even if you’re both earning a decent income (and potentially have some assets behind you), big expenses and potentially thousands of dollars of debt between you may impact any plans you have in the short and longer term.

The average credit card balance for instance is around $2,876 in Australiaⁱⁱ, not taking into account other loans people may have taken out, such as car loans, student loans and through buy now pay later services.

4 Whether you’ve been paying your bills on time

If you’ve got a credit card, personal loan, mobile phone plan or utility account, there’s more than likely a credit reporting agency out there that has a file with your name on it. This file, also known as a credit report, will summarise how good you’ve been at paying your bills and making your repayments on time.

If you have a chequered history, your report mightn’t read particularly well, and this could affect your ability to borrow money for a range of things, which may include a house for the two of you. Meanwhile, if you’re unsure how your report reads, you can request a copy from one of the reporting agencies (Equifax, Experian, illion or the Tasmanian Collection Service).

5 What’s on your bucket list now and down the track

If one of you has plans to travel, buy property, get married or have children and the other doesn’t, this could raise issues (or perhaps opportunities) for further discussion.

Depending on how important these things are to you or your partner, it may be worth nutting this out early on, or if you don’t come to a solution, knowing that it’s something you’d like to raise again at a later date.

6 What a joint budget and savings plan might look like

Committing to something that you both think is fair could go a really long way here. If you’re not sure where to start, a good first step might be drawing up what money is coming in, what money is needed for the mandatory stuff and what may be left over for your social life and savings.

While not everything has to be shared, if one person’s saving more and the other’s spending more, arguments may arise, so try to come to an agreement that works for both of you.

7 Your contingency plan if one of you isn’t earning an income

Approximately one in five Aussies has no emergency savings to keep them afloat when faced with unforeseen circumstancesⁱⁱⁱ, so it’s probably worth talking about whether either of you have an emergency stash of cash, personal insurance, or anything that may help you get by through a tough period.

If you don’t have a plan b, now might be the time to talk about how you can create one together. It might not be a nice thing to think about, but an emergency fund may also be invaluable if the relationship ends, as this could provide you with greater options than if you’re dependent on someone.

8 How you’ll divide costs and or repayments

You may decide to tackle this 50/50 or proportionate to each other’s income. That is something you’ll want to nut out before you take on a big financial commitment together, like renting a property together for example.

You might also want to take into consideration anything additional either of you bring to the table, like caregiving, domestic duties such as cooking and cleaning, or other forms of income or assets.

9 Potential risks that may arise if you merge your money

If your partner defaults on a repayment, you may be liable for the amount owing, even if your relationship ends. On top of that, ignorance isn’t an excuse, so if you sign papers you don’t understand, you’re no less liable for any loans or guarantees you may have signed off on.

With that in mind, it’s important both of you understand your responsibilities and consider whether you want to put anything you might agree to in writing.

©AWM Services Pty Ltd. First published Feb 2022

i Finder – Debt deception: 2.7 million Australians have lied to their partners about money – Feb 2021

ii Finder – Australian credit card and debit card statistics – Dec 2021

iii Finder – Saving hard or hardly saving: Millions of households have no emergency savings – June 2021