Retirement and the rising cost of healthcare
Retirement | 26/10/2017 |
7 min read
First launched in 2004, the ASFA Retirement Standard has provided a useful comparison tool for retirement living standards and the income required to achieve them.
The latest update has identified $60,063 a year for couples and $43,695 for singles as the baseline for a comfortable retirement. For a more basic retirement the numbers are $34,911 and $24,270. Both sets of numbers assume you own your own home and are debt free.
But are those calculation realistic? And what do they actually mean to the average retiree when the price of healthcare continues to exceed inflation?
Prices are up
According to the Australian Bureau of Statistics inflation data electricity prices rose 2.6% in 2016, council rates climbed 4% and medical costs increased by 4.8%
Those numbers are putting increasing strain on household budgets across the age spectrum, and pensioners are not immune. ASFA CEO Dr Martin Fahy said the income necessary for a comfortable retirement had increased by 26% between 2006 and 2017.
“The categories of expenditure that really impacted the budgets are not altogether surprising,” he said. “Over the period, electricity costs increased by 124%, health costs by 60%, property by 83%, and food costs by 24%.” Price changes for less essential items tended to be lower and in some cases prices fell, bringing the overall cost increases down.
The healthcare gap
While the ASFA standard remains the best benchmark for retirement income needs in Australia, the increasing cost of health care in old age can be obscured by falling prices in other non-critical categories.
To put that in context, health care costs jumped 4.1% in the June quarter 2017 due to the lift in private health insurance premiums
This is part of a broader issue relating to insurance costs and healthcare, but it’s especially sensitive for retirees with limited incomes and a greater need for these services. While the pension card offers retirees discounts on various health care services and products, it doesn’t replace medial insurance, or the increasing need for medical assistance.
What can we do?
We all know that inflation leads to long term price rises, but when we see sudden spikes in areas like healthcare, energy and property it can cause serious distress to family budgets. While there’s no easy solution, anyone approaching retirement needs to look at their living expenses and see if the goal posts have moved.
The ASFA standard can help, but it doesn’t take individual circumstances into consideration. Speaking with a financial planner can help you factor inflation, insurance, and the increased need for medical services into your retirement plans.
Speak to an Equip financial planner about your retirement goals, and discover ways to increase your future balance. Book an appointment online or call 1800 065 753.
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