Are Unexpected Expenses Affecting Your Retirement?

According to the Australian Bureau of Statistics 2015-2016 Household Expenditure Survey, Australian households combined spend roughly $3.8million every three minutes – that’s about $666 billion a year. While the large majority of this could be attributed to common living expenses such as rent or mortgage repayments, groceries, phone plans and other household bills, there is a  significant discrepancy between what Australian’s claim they will save and what truths are reflected in their personal banking accounts. So where are Australians spending all their hard-earned dollars?

ME Bank conducted a survey in 2016 asking people what forces were at play when they spent the money which they had pledged to save. Approximately 41% of people selected the top reason they ‘broke their budget’ as ‘unexpected expenses’. Even more concerning was the study released by the Financial Planning Association earlier this month which claims that Australian’s spend, on average, around $437 a year on gifts for their significant others, $361 a year per child and $115 a year per pet – almost $1,000 per year, non-inclusive of the additional annual gifting costs for parents, siblings, friends or colleagues.

As individuals move closer to their retirement, budgeting becomes even more crucial, and with so many Australians failing to follow through on a healthy savings regime due to inadequate planning for future expenses, it becomes evident that further education and assistance is required for Australians to secure a comfortable retirement. With no savings to fall back on, retirement might not be as luxurious as Australians had dreamed. ASIC’s MoneySmart website states that the average Aussie couple would need at least $61,061 net funds each year to enjoy a ‘comfortable’ retirement – comfortable, a word which does not factor in outlandish expenditure, such as for regular travel or extracurricular activities.

With average Centrelink Age Pension rates covering barely half of this, Australian couples need to chip in about another $30,000 a year from their personal savings to achieve ASIC’s definition of a ‘comfortable’ retirement. Over a twenty-year retirement, that equates to $600,000 of surplus funds required just for retirees to afford a basic lifestyle with food on the table and a roof over their head – a figure which leaves very little wiggle room to follow up on personal aspirations. In our experience as wealth managers, the figure posed by ASIC’s MoneySmart is less than ‘comfortable’, with the majority of our clients preferring to retain an income that is closer to their pre-retirement earnings. In order to achieve this, a considerable shift in spending habits and a professional revision of one’s investment portfolio to ensure that existing capital is being appropriately utilised, may be necessary.

It is evident that family budgeting and retirement planning is an ongoing concern for our country. At Nexus, we aim to educate our clients about their spending habits and seek to work together to plan for the future so that they can live the kind of retirement lifestyle they deserve.

  • Australian Bureau of Statistics Household Expenditure Survey 2015-2016
  • ME Bank, Savings for a holiday or car are the top financial goals for 2017, December 2016.
  • Financial Planning Association, Gifts that Give: Research Report 2019, August 2019
  • ASIC’s MoneySmart, How much is enough?, August 2018

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