$1m super needed to cover the rent
Non-homeowners in capital cities face affordability crisis
The Association of Superannuation Funds of Australia (ASFA) retirement standard provides useful benchmarks for annual budgets needed to fund either a modest or comfortable standard of living in retirement.
Calculations are made on a range of costs including housing, energy, food, communications, household goods and services, clothing and footwear, transport, heath and leisure.
The modest and comfortable standards both assume retirees, whether single or a couple, own their own home outright and enjoy reasonable health.
Currently around 75% of households with the household head aged 65 or over own their home outright, 8% are still paying off a mortgage and around 8% are renting privately.
Housing affordability is a particularly serious challenge in Sydney. Around 65% of its residents are homeowners by 60 compared with just under 80% for the rest of the country.
So to provide better estimates of what retirees without their own homes will need, ASFA has produced comfortable and modest budgets for singles and couples living in capital cities. These show Sydney retirees, whether single or a couple, relying on the private rental market for accommodation need more than a $1 million lump sum to be comfortable. So do all retiree couples living in other capital cities.
Single retirees renting outside Sydney slip under the $1 million indicator but even single retirees renting in Adelaide, Hobart and Perth need around $850,000 to have a comfortable lifestyle.
These figures are roughly double what homeowners need. They have been calculated on the assumption that retirees will live to 92 and do not take into account the additional costs associated with regular moves, which is the reality for many people in the private rental market. Any health-related issues or disabilities add further costs.
The message is clear: Australians need to invest in their future with significant additional contributions to their super if they do not own a home. Super provides tax settings to help maximise their contributions over the long term. It is a sobering fact that housing affordability challenges seem likely to continue, so having a good super balance in retirement is even more important for non-homeowners.
MARTIN FAHY, CEO, ASFA