Report shows super funds may be failing members in predicting retirement costs.
Your postcode can significantly impact the cost of living in retirement, but many super funds ignore this, offering one-size-fits-all recommendations on super that may ruin your post-work years.
According to financial consultancy Milliman’s Retirement Expectations and Spending Profiles (ESP) report, which analysed 300,000-plus retirees’ real-world annual expenditure, superannuation funds don’t personally figure on the costs required for retirees to live in some areas.
“Where the median 65-69-year-old retiree lives can affect their annual spend by more than $10,000,” says Milliman.
The report revealed that the Stonnington region in Melbourne is home to Australia’s biggest spending retirees, with the average annual household expenditure required to live there sitting at around $56,711 – two-thirds higher than the national average of $33,943.
A retirement in the Caboolture region in Queensland could almost be entirely funded by the Age Pension. It’s home to the lowest spending retirees, who have an average annual expenditure of around $26,286 a year – 26 per cent lower than the national average.
And while Stonnington is home to big spending couples, data shows that the average super balance needed to sustain their spending habits would be just over $403,000 which is still lower than industry forecasts. Most of this, however, is spent on leisure or discretionary items.
Caboolture retirees spend 60 per cent of their annual budget on essential goods and services whereas Stonnington retirees spend around 44 per cent. Also, Caboolture retirees spend 19 per cent of their total expenditure on food, nearly twice as much as Stonnington retirees (10 per cent).
These results question whether super industry recommendations accurately reflect the reality of retirement costs in some areas. Super fund members aren’t receiving personally tailored advice to suit where they live – or intend to retire – that might stretch their retirement savings further.
The Milliman report highlighted the problems of using the Consumer Price Index as a benchmark, because falling prices of some discretionary goods and services could distort the true impact of non-discretionary costs, such as food, electricity and gas, which are rising much faster than inflation.
Read more at www.financialstandard.com.au
Do you think you’d be better off living somewhere else? Did your super fund make accurate recommendations based on where you live?
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