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ISSUE 16

SEPTEMBER 2017

Retirement Affordability Index September 2017

™

How much does your retirement tribe spend? Use this index to cut your household costs. www.yourlifechoices.com.au


Contents

Published by: Indigo Arch Pty Ltd Publisher: Kaye Fallick Contributing Editor: Debbie McTaggart Contributing Writer: Olga Galacho Designer: Word-of-Mouth Creative Email: admin@yourlifechoices.com.au Web: www.yourlifechoices.com.au Phone: 61 3 9885 4935 All rights reserved, no parts of this book may be printed, reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, recording or otherwise, without the permission in writing from the publisher, with the exception of short extractions for review purposes. IMPORTANT DISCLAIMER No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publication is distributed on the terms and understanding that (1) the publisher, authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, financial, professional or other advice or services. The publisher and the authors, consultants and editors expressly disclaim all and any liability and responsibility to any person, whether a subscriber or reader of this publication or not, in respect of anything, and of the consequences of anything done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no publisher, author, consultant or editor shall have any responsibility for any act of omission of any author, consultant or editor. Copyright Indigo Arch Pty Ltd 2017

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The landscape of retirement: where do you fit in? Compare your retirement status with the bigger picture

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A tale of three retirements: which tribe are you? In the world of retirement, which tribe is your benchmark?

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Are you spending too much? Check out the latest expenditure by category and tribe

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How price hikes affect retirement tribes If you’re feeling the pinch, find out if rising power prices are really to blame

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What the data means How this index is compiled to reveal the ‘reality’ of retirement

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Managing the costs of healthcare Leanne Wells explains why healthcare costs can vary so wildly

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As retirement progresses, your spending will change Tracking the change in spending across the three chapters of retirement

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Government update Stay on top of the news that matters most

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YourLifeChoices Retirement Affordability Index™ September 2017

4 6 8 14 16


The landscape of retirement: where do you fit in?

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o one has a crystal ball, but the most recent Intergenerational Report (IGR) noted that, whilst the balance between full and part Age Pension recipients may alter, the proportion of older Australians receiving such retirement support is unlikely to change over the next 40 years. As the report stated, “Future growth in retirement balances has potential implications for the size of Out of 23,781,100 Australians recorded by the ABS in June 2015, just over 9 million (38%) were aged 45 and over.

Australian government outlays on the Age Pension. In 2013-14, around 70 per cent of people of Age Pension age were receiving the Age Pension. Of these, 60 per cent were in receipt of the full-rate pension. As Australia’s super system matures and compulsory contributions increase, many Australian workers will retire with much larger superannuation balances. The proportion of retirees receiving any pension is not projected to decline.”1

38%

of population

Of these 9 million older Australians, 48 per cent (4.35 million) were no longer in the labour force, so % approximately half of 4.35 million could reasonably be 2 described as retired.

48

At which age are Australians retiring?3 45-49 50-54 55-59 60-64 65-69 70+

16% 18% 27% 46% 76% 91%

What is the main trigger for retirement?4

How do most Australians aged 65+ fund their retirement?1 Age Pension 70% Full Age Pension 60% Part Age Pension 40% Privately funded 30% (savings, investment, superannuation)

Non-discretionary factors: Health reasons 31% Work no longer available 25% Discretionary Achieved sufficient savings 27% Partner’s retirement 17%

References: 1 Intergenerational Report 2015, Page 67 2 ABS Retirement and Retirement Intentions, Australia, July 2014 to June 2015, Cat 6238 3 ABS Retirement and Retirement Intentions, Australia, July 2014 to June 2015, Cat 6238 4 YourLifeChoices Insights Survey 2017 YourLifeChoices disclaimer

YourLifeChoices Retirement Affordability Index™ September 2017

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A tale of three retirements: F rom the infographic on page three, we can see the ‘big picture’ of retirement reveals there are about 4.35 million retirees in Australia, of whom 70 per cent (aged 65 or older) are on a full or part Age Pension. Whilst such overview information is useful, when we are struggling with the daily sums and wondering what our real entitlements might be, we need more detail.

That’s where the YourLifeChoices ‘retirement tribes’ come into play. These six tribes, defined by household

(couple or single), home ownership (own home or renting) and primary source of income (private or Age Pension) offer a really helpful framework with which to benchmark your retirement income and your own expenditure against the average for your tribe. So check out these six tribes below, what their typical annual expenditure might be and where they spend the most.

Affluent couple

Constrained couple

Cash-strapped couple

18%

23%

4%

Weekly

$1,413

$812

$684

Monthly

$6,127

$3,520

$2,966

Annual

$73,524

$42,240

$35,594

Recreation – 20%

Food & non-alcoholic beverages - 20%

Housing - 29%

% Spend on housing

13%

13%

29%

% Spend on communication

3%

3%

4%

$1,591,106*

$160,695*#

Funded by full Age Pension and Rent Assistance

% of retiree population Spending

Highest spending category

Nest egg needed to achieve this annual income

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YourLifeChoices Retirement Affordability Index™ September 2017


which tribe are you?

How much does the Age Pension pay? Couple on an Age Pension A maximum couples Age Pension as of June 2017 was $34,819.20, which includes the Energy Supplement at $551.20 and the Pension Supplement at $2584.20. Many couples in this category may be on a part Age Pension so private income will make up the shortfall.

Single on an Age Pension A maximum single Age Pension as of June 2017 was $23,095.80, which includes the Energy Supplement at $366.60 and the Pension Supplement at $1713.40. Many singles in this category may be on a part Age Pension so private income will make up the shortfall.

Affluent single

Constrained single

Cash-strapped single

11%

29%

14%

Weekly

$809

$450

$430

Monthly

$3,506

$1,952

$1,863

Annual

$42,078

$23,426

$22,365

Recreation - 17%

Housing - 20%

Housing - 36%

% Spend on housing

15%

20%

36%

% Spend on communication

5%

4%

4%

$910,595*

Funded by full Age Pension and private savings

Funded by full Age Pension and Rent Assistance

% of retiree population Spending

Highest spending category

Nest egg needed to achieve this annual income

*Calculated using Industry SuperFunds Retirement Needs Calculator. Assuming a life expectancy of 22 years after retirement at 65, with investment returns of 4.2% and inflation @ 2.5%. Additional funds required over and above a full Age Pension, calculated as above.

#

YourLifeChoices disclaimer

YourLifeChoices Retirement Affordability Index™ September 2017

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YourLifeChoices Retirement Affordability Index TM September 2017 In our most recent Retirement Affordability Survey (September 2017) 62 per cent of respondents stated that they find the breakdown of expenditure for retirees 54+, by retirement tribe, to be helpful. This quarter’s figures are based upon the most recent 6530.0 - Household Expenditure Survey, Australia: Summary of Results, 2015-16 data, informed by the June 2017 quarter CPI. This analysis is conducted by The Australia Institute, in partnership with YourLifeChoices, in order to create the most current and relevant expenditure guidelines available for Australian retirees. Below you will find the costs, in a weekly, monthly and annual format so that you can review, compare and keep track of your own household expenditure. *To learn more about your own tribe, please see further analysis on pages 4-5.

Weekly expenditure for retirees aged 54+ Expenditure items Housing As a percentage of expenditure Domestic fuel & power As a percentage of expenditure Food & non-alcoholic beverages As a percentage of expenditure Alcoholic beverages & tobacco products As a percentage of expenditure Clothing and footwear As a percentage of expenditure Household furnishings & equipment As a percentage of expenditure Household services & operation As a percentage of expenditure Medical & health care As a percentage of expenditure Transport As a percentage of expenditure Communication As a percentage of expenditure Recreation As a percentage of expenditure Education As a percentage of expenditure Personal care As a percentage of expenditure Miscellaneous goods & services As a percentage of expenditure Total weekly expenditure Total monthly expenditure Total annual expenditure 6

Affluent couples

Constrained couples

Cashstrapped couples

Affluent singles

Constrained singles

Cashstrapped singles

Couple Couple Single Single Couple who Single who homeowners homeowners homeowner homeowner rent on Age rents on Age with private on Age with private on Age Pension Pension income Pension income Pension 177.39 104.84 198.56 119.19 87.97 156.43 13% 13% 29% 15% 20% 36% 41.75 31.35 33.10 30.19 27.03 22.94 3% 4% 5% 4% 6% 5% 232.99 164.10 148.39 117.05 82.28 73.73 16% 20% 22% 14% 18% 17% 49.16 23.94 38.71 23.66 13.27 17.94 3% 3% 6% 3% 3% 4% 31.24 17.73 9.37 20.78 9.01 7.43 2% 2% 1% 3% 2% 2% 73.97 32.10 19.53 40.48 18.79 14.99 5% 4% 3% 5% 4% 3% 41.52 29.37 15.87 37.46 21.17 11.25 3% 4% 2% 5% 5% 3% 138.70 98.86 34.23 79.64 35.27 20.87 10% 12% 5% 10% 8% 5% 183.36 119.03 56.59 97.13 49.54 33.41 13% 15% 8% 12% 11% 8% 39.15 27.75 30.02 37.89 19.56 15.26 3% 3% 4% 5% 4% 4% 287.04 97.48 63.38 133.69 50.29 30.35 20% 12% 9% 17% 11% 7% 0.57 0.21 0.00 0.12 0.11 0.01 0% 0% 0% 0% 0% 0% 29.29 17.77 12.35 18.25 9.62 8.53 2% 2% 2% 2% 2% 2% 86.86 46.84 23.43 52.72 25.66 15.99 6% 6% 3% 7% 6% 4% 1,413.94 812.32 684.50 809.19 450.52 430.10 6,127.08 3,520.07 2,966.19 3,506.51 1,952.24 1,863.75 73,524.90 42,240.80 35,594.24 42,078.14 23,426.90 22,365.02

YourLifeChoices Retirement Affordability Index™ September 2017


How does your spending compare? Expenditure items

Affluent couples

Constrained couples

Cashstrapped couples

Affluent singles

Constrained singles

Single Single Couple Couple Couple who homeowner homeowner homeowners homeowners rent on Age with private on Age with private on Age Pension income Pension income Pension

Cashstrapped singles Single who rents on Age Pension

Housing Rent, interest, home repairs and maintenance & body corporate fees As percentage of expenditure Domestic fuel & power Electricity, gas & oil As percentage of expenditure Food & non-alcoholic beverages Includes meals in restaurants As percentage of expenditure Alcoholic beverages & tobacco products Alcohol consumed at licensed premises As percentage of expenditure Clothing and footwear Dry cleaning, repairs & alterations As percentage of expenditure Household furnishings & equipment Outdoor furniture, floor and window coverings, linen and bedding, appliances, glassware, tableware and cutlery, tools & mobile phones As percentage of expenditure Household services & operation Cleaning and garden products, phone charges (including mobile), pest control & home cleaning services As percentage of expenditure Medical & health care Health insurance, doctor and dental fees, medicines and pharmaceutical products, prescriptions & hospital and nursing home charges As percentage of expenditure Transport Purchase, maintenance and insurance of vehicles, fuel & public transport fares As percentage of expenditure Communication Spending on telephone (including fixed line and mobile) Spending in internet services As percentage of expenditure Recreation AV equipment including TVs and pay TV, books, newspapers and magazines, camping and fishing equipment, sports equipment, internet charges, holidays & animal expenses As percentage of expenditure Education Primary and Secondary school fees (including school sport fees) TAFE and University fees (including HELP) Fees to all other private education institutions As percentage of expenditure Personal care Toiletries, cosmetics & hairdressing As percentage of expenditure Miscellaneous goods & services Stationery, watches and jewellery, interest payments on credit cards and all loans (excluding home loans), education, rates and charges on investment properties, accountant and tax fees & cash gifts As percentage of expenditure Total weekly expenditure Total monthly expenditure Total annual expenditure

YourLifeChoices Retirement Affordability Index™ September 2017

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How price hikes affect retirement tribes Recent price increases, especially in energy, have hit all Australians hard. Matt Grudnoff from The Australia Institute considers how our various retirement tribes have coped.

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The rise in the cost of living over the past 12 months has been mainly driven by housing and medical costs. This explains why renters, who spend a larger proportion of their income on housing (rent), experienced a greater increase in expenses. While the rise in medical expenses hit all retirement tribes, the effect on those with private incomes is larger because they tend to spend a larger proportion of their income on health, including private health insurance.

very six years the Australian Bureau of Statistics (ABS) takes a close look at where Australians are spending money. Last month it released its most recent data. We’ve used this data to analyse how our six retirement tribes choose to spend their money and, based on this information, we have adjusted our June 2017 Retirement Affordability Index. Although the consumer price index (CPI) continues to be relatively low, at just 1.9 per cent, the results for our retirement tribes reflected a different story. We have also seen a reasonable amount of difference in the impact upon the retirement tribes.

Offsetting the price increases are price reductions in transport (mainly cars) and recreation. These reductions are more beneficial to those on private

Affluent couples

Constrained couples

Cashstrapped couples

Affluent singles

Constrained singles

Cashstrapped singles

Couple Owner Private income

Couple Owner Age Pension

Couple Renter Age Pension

Single Owner Private income

Single Owner Age Pension

Single Renter Age Pension

Past year

1.3%

1.6%

1.6%

1.4%

1.5%

1.7%

Past quarter

0.2%

0.2%

0.2%

0.2%

0.2%

0.2%

Increase in retirement household expenditure

The impact on retirees The results reveal that renters continue to face the highest increase in prices, with single renters facing the biggest yearly increase of expenditure at 1.7 per cent. Close behind the renters are those who own their own homes and receive the majority of their income from an Age Pension. Couple owners have seen prices increase by 1.6 per cent over the last year. Those who are least affected by the increases in living expenses are those who own their own homes and receive the majority of their income from private sources, such as superannuation. Couples in this category are affected by increases in living expenses of only 1.3 per cent. 8

incomes, as they typically spend more on recreation and transport. Electricity prices have received a lot of attention recently. They remain largely unchanged because the price data, released by the ABS, covered the period up to 30 June and the hefty price increases, of 15 per cent and 20 per cent, occurred in July this year. The data for the next quarter should reflect these increases.

What’s really behind the energy price hike? So why are electricity prices going up? Politicians certainly have lots to say about this and if you turn on your TV, you will be bombarded by stories about electricity and gas prices. With furious finger pointing, the government has been

YourLifeChoices Retirement Affordability Index™ September 2017


blaming renewables, the states, and the perceived ideological hatred of coal. But beyond all the political fire and fury, what is really causing electricity prices to rise? And more importantly, what can be done to stop this rise? Despite what you might be told, renewables have played almost no role in the recent price hike. The Renewable Energy Target, along with other policies to encourage renewable energy, make up just five per cent of most people’s electricity bills. This proportion has been pretty steady over the last five years or so.

… what is really causing electricity prices to rise? And more importantly, what can be done to stop this rise? It is mathematically impossible for something that makes up just five per cent of your bill to increase your electricity bill by 15 per cent. Instead, the increase in electricity prices comes from an increase in the wholesale price of electricity. The wholesale price is what the electricity generators receive. Wholesale electricity prices have been low over the last five or so years, largely in part because the Renewable Energy Target has been encouraging new electricity generators into the market. More electricity generators means more competition and hence lower prices.

Recently, however, a number of important things have occurred to change this. First, a lack of any long-term policy signals from the Federal Government has discouraged investment in new electricity generators. The slowdown in new electricity generators has meant that when the Hazelwood Power Station closed, less new generation was available as a replacement. At the same time, the price of gas increased three or four-fold because the east coast gas market opened up to the world market at the end of 2015. A significant proportion of electricity generation comes from gas, and those generators are demanding higher wholesale prices as the cost of gas-fired electricity has increased dramatically.

Stopping the rise So what can be done to stop the rapid rise in electricity bills? Slowing the flow of gas overseas by restricting exports is one option. This will lower the gas price, which will then lower electricity prices. The other option is to create certainty in the electricity market, which will encourage renewables and other types of generators to be built. Extending the Renewable Energy Target beyond 2020 or introducing a Clean Energy Target, as recommended by the Government’s Finkle Review, will encourage investment in new renewable generation. This will then put downward pressure on wholesale electricity prices.

YourLifeChoices Retirement Affordability Index™ September 2017

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As long as the political debate on energy continues to produce uncertainty, electricity prices will continue to rise. So, how have retired people coped with rising electricity prices? Our YourLifeChoices Retirement Affordability Index survey recently asked how respondents reacted to the increase in electricity prices. Forty per cent of respondents said that they had cut back on nonessentials. Worryingly, almost 20 per cent said that they had to cut back on essentials. Of those who had to cut back on essentials, almost a quarter (24 per cent) said they had cut back on food, while six per cent said they had to cut back on medical expenses.

Two thirds of respondents said they had reacted to the electricity price rise by cutting back on their use of electricity. When asked about the main method of cutting down on electricity use, 40 per cent said they had turned off appliances, while about a third said they had cut down on heating, and almost a quarter said they had installed energy-saving devices. The recent rise in electricity prices is doubtlessly causing retired people to make significant and difficult adjustments to their lives. In the coming months, as more data is available, it will be interesting to see precisely how higher prices are affecting the lives and lifestyles of Australian seniors.

How do you manage your power usage? Rather than the proverbial ‘teaching your granny to suck eggs’, we asked YourLifeChoices members to share their tips for managing power usage. Here’s what you told us. Your tips: • Install solar panels. • Reduce electricity. • Be careful with power. While all these are great tips, it’s often the standard supply charges that make reducing power bills difficult. As the cost of installing solar panels may be prohibitive, your first step should be to compare your current charges against what is being offered by other energy retailers. To do this, you should compare: • the supply charge, (fixed daily amount) • the price (tariff) you are paying for energy (how many cents per kWh or MJ) • discounts offered • incentives on offer • contract period and payment options • price increase terms – can you fix the price for a certain period • any fees, including early termination fees or incentive payback terms. • any fees for a paper bill or credit card payments. Once you have decided on a new energy retailer, or decided to stay with your current provider, then you should look at how you use your power. These five simple tips may help reduce the energy you use.  10

Dress correctly Layering clothes helps you to manage your body temperature more easily. Drop the thermostat Every degree above 20 can add 10 per cent to your heating bill. Conversely, the opposite is true in summer. So set your thermostat to 26 degrees or above to save on cooling costs. Wash clothes in cold water You can save around $115 per year by washing your clothes in cold water. It’s also better for your clothes. Fix your fridge Ensure your door seals are tight and don’t overfill your fridge. To prevent the motor from overheating, there should be at least a 10mm gap between your fridge and any wall. Stop standby power waste Up to 10 per cent of your electricity could be used by gadgets and appliances that are on standby. Take care to completely turn off appliances, or install standby power controllers. YourLifeChoices disclaimer

YourLifeChoices Retirement Affordability Index™ September 2017


Retirement affordability: what the data means

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he data that we use to construct each Retirement Affordability Index™ is based on the Australian Bureau of Statistics (ABS) Household Expenditure Survey (HES). This is a survey of just over 10,000 households who record everything they spend money on in a two-week period. We can then break this sample down and work out what each of our tribes spends on average each week.

The Retirement Affordability Index™ uses ABS data, but the ABS does not have an official definition of retired. So for the purposes of our index we have defined a retired household as a household where all the adult members are over the age of 55, not in employment and not looking for work. This definition isn’t perfect, but it does come close to capturing what we think a retired household is.

The latest HES publication is for the financial year 2015-16. This means we have the spending patterns for each of our tribes up to June 2016. We have then used the Consumer Price Index (CPI) to update how much is spent in each of the expenditure categories so that the figures published today are current for June 2017.

There are some types of households that will be captured by this definition of retirement that might not be traditionally being thought of as retired. One would be households aged over 55 whose main source of income is the disability pension. This probably makes up about six per cent of single and couple households that have government pensions as their main source of income.

Using the CPI to update spending comes with an important qualification. Doing it this way assumes that people in each tribe continue to buy the same amount of the same things. For example, imagine that the price of bananas goes up. People could react in three ways. They could buy the same number of bananas as they did before the price rise and therefore spend more money on bananas. They could reduce the number of bananas they buy or they could instead substitute a similar product to bananas, say apples. By updating the data with the CPI we are assuming people continue to buy the same amount of each good and simply spend more in line with rising prices.

There are also a number of things that households spend money on that are not included in our expenditure categories. These include payments to superannuation accounts, income tax and mortgage repayments. Some retired households spend money on these but the averages are likely to be very small and are so their exclusion is not likely to make a large difference. But if your household is very different from the average and you do spend a significant amount of money in these areas, you should be aware that these payments are additional to all other spending. YourLifeChoices disclaimer

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Managing the costs of healthcare

Medical costs are a great worry to retirees, especially those facing failing health. Leanne Wells looks at the reality of health spending in retirement and whether there is cause for concern.

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s we age, health and care costs begin to present a gloomy picture. Not only are we more likely to fall ill and require medical treatment, but our health needs grow at a time when, according to YourLifeChoices Retirement Affordability Survey 2017-18, 81 per cent of us fear running out of money.

expenditure on this category, from $138 by a couple on private income to the $34 spent by the pensioner couple who are renting. While the affluent couple can afford to spend 10 per cent of their $73,524 annual expenditure on health, the cash-strapped couple can only afford to spend five per cent of their $35,594.

While we are living longer, an increasing number of Australians are likely to require treatment for the chronic conditions that afflict many, often as a result of modern diet and lifestyles.

There is, however, an upside for older Australians when it comes to primary healthcare, one that is largely provided by GPs in the community.

According to ABS figures, 50 per cent of Australians have at least one significant chronic condition, such as arthritis, cancer or cardiovascular disease. This climbs in later years, with three in every five people aged over 65 reporting two or more chronic conditions. Surgical expenses for such common procedures as hip replacements can typically add $5500 to outof-pocket costs, unless you are prepared to wait months for a public hospital operation. 

There is an upside for older Australians when it comes to primary healthcare, one that is largely provided by GPs in the community. Australians out-of-pocket health costs are among the highest in the developed world, according to Organisation for Economic Co-operation and Development (OECD) figures. Recently, the Breast Cancer Network Australia reported that a quarter of women who completed their survey faced out-ofpocket costs of more than $17,200, with a quarter of privately-insured women reporting out-of-pocket costs of more than $21,000. For single, older women whose resources are more likely to be meagre, such costs may mean waiting longer for the right treatment. The YourLifeChoices survey of the six retirement income tribes’ expenditure on healthcare, including health insurance, shows the striking range in weekly 12

Sydney University’s Family Medicine Research Centre has undertaken comprehensive surveys of GP activities and confirms that older Australians have increasingly relied on primary care health resources this century. Australians aged 65+ used about twice as many health resources as the average Australian. Since 2000, their use of services such as GPs, medication, imaging and pathology has risen by 18 per cent relative to the rest of the population. The positive aspect of patients being largely managed by GPs is that expensive specialist and hospital visits are bypassed and overall healthcare costs are reduced. This is important when 60 per cent of people aged 65+ have three or more diagnosed chronic conditions and one-in-four have five or more. Onethird of older patients visiting their GPs are living with chronic pain, which is nearly always treated with medication. The negative aspect of this is that older patients are taking more medications (just over five on average), which is known to increase the risk of adverse drug reactions. The positive and negative experiences of older Australians in relation to the health system were highlighted in the recently released ABS Survey of Health Care. The survey indicated that older people appear more satisfied, or less dissatisfied, with their healthcare compared to middle-aged people. While 27 per cent of people aged 45 to 65 felt they waited longer than acceptable to see a specialist, only 18 per cent of those aged 65 and over expressed the same experience. A similar response came with

YourLifeChoices Retirement Affordability Index™ September 2017


For many older people, especially those on a fixed income, the continuing rise in health insurance premiums poses a frustrating dilemma: the choice between coverage to avoid public hospital queues for elective surgery, or taking the chance with the public system to avoid the heavy drain on finite savings. Some good news for older Australians on modest incomes is that as well as being more likely to receive higher subsidies or rebates against the cost of insurance, medical services are often bulk billed, meaning they face lower out-of-pocket costs. waiting time to see GPs, with 20 per cent of those aged 45–65 expressing dissatisfaction compared to only 12 per cent of those over 65 years of age. A further surprise was that even though the over-65s are more likely to visit their GP, it was those aged 45–64 who were more than twice as likely to indicate that the cost of an appointment was a reason for not seeing a GP, even when they felt it necessary. One possible explanation is that GPs are more likely to bulk bill the 65+ patients because of their pensioner status. But it also shows that being older is not all bad news when it comes to healthcare. The good and the bad of ageing and healthcare are revealed more strikingly with experiences related to hospital care. The over-65s, who as a group are more likely to have had a hospital stay, report a significantly more positive experience when it comes to whether their GP or other carers seemed informed about their follow-up needs and medication changes. In the survey, 73 per cent said their doctors or carers were informed compared to 58 per cent in the 45–65 age group who said they were not. It could be argued that these figures reveal experiences with healthcare at the margins. Yet these experiences represent the perspective of millions of Australians, are shared with their families and friends, and influence what the rest of us think.

More importantly, the benefit of Australia’s community rating principle means that, despite their increased likelihood of conditions requiring expensive treatment, older Australians’ premiums remain the same as those of the young and healthy. However, for those referred to see a specialist outside hospital, there are high-cost barriers. The ABS survey shows that 45 per cent of those surveyed said that cost was a reason they did not see a specialist when they felt it was needed. Despite Australia’s aspirations for a universal health system, the lived (and sometimes dying) experience of many shows that we are moving towards a two-tiered health system, where those with the means get treated and those without have to wait. Leanne Wells is Chief Executive Officer of the Consumers Health Forum of Australia, the leading national advocacy organisation for health consumers. YourLifeChoices disclaimer

As we finalised this RAI, the Federal Government announced significant health insurance reforms. See our update on the proposed changes here.

YourLifeChoices Retirement Affordability Index™ September 2017

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As retirement progresses, your spending will change Living longer than previous generations comes at a price. Thankfully, as Olga Galacho explains, good planning now can ease your future spending headaches.

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hey say nothing is certain in life, other than death and taxes, and this is never more true than when it comes to how you will spend your money in retirement. While income shocks can happen at any stage of your life, the older you are, the larger their potential impact on your budgets. Although no one has a crystal ball to ascertain which unexpected costs will crop up later in life, YourLifeChoices current Retirement Affordability Index and survey do shine a spotlight on how retirees can anticipate their likely spending through the three chapters of retirement.

… the different phases of your retirement will determine how freely you can spend. Our ongoing analysis of the various retirement tribes reveals that one of the biggest influences on a budget is a retiree’s home-ownership status. Unsurprisingly, older Australians who have to rent and rely on an Age Pension have the biggest financial struggles in retirement. According to this latest Retirement Affordability Index, an affluent couple who own their home and have private income, spend just 13 per cent of their costs on housing. But a cash-strapped single renter on the Age Pension has to allow almost three times as much – 36 per cent – as a proportion of their budget to pay for housing. 14

Another major factor that influences living costs is whether the household is occupied by one or two people. A couple who own their home and are on the Age Pension have to set aside 13 per cent of their budget for housing costs, whereas a single aged pensioner who is a homeowner needs to carve out 20 per cent of their funds. The level of spending also varies widely depending on whether a retiree’s main source of income is from private investments or an Age Pension. For instance, an affluent single person with private income only has to set aside 14 per cent of their funds for food, whereas a single aged pensioner needs to put aside 17 per cent of their income to feed themselves. The circumstances that led to the retirement is another determinant of spending patterns going forward. A surprisingly low number of people clock off from work because they want to retire. Mostly, leaving a job for good is not a choice made willingly. YourLifeChoices data collected from our Insights Survey earlier this year reveals that health reasons are the number one reason nearly a third of retirees had to stop working. Just eight per cent retire because they have reached the official retirement age. Almost a quarter are forced to stop earning a crust because there is no work available with only 27 per cent reporting they retired because they had reached a level of financial comfort that did not require them to labour for longer. It’s worth noting that the different phases of your retirement will determine how freely you can spend.

YourLifeChoices Retirement Affordability Index™ September 2017


In the last Retirement Affordability Index, the founder of My Longevity, David Williams, citing statistics from the Australian Institute of Health and Welfare, described the three chapters of retirement and how spending categories evolve as we age: • the disability-free years • some disability but independent • dependent It is these three stages, as well as the circumstances for retiring and the income available that determine how spending changes as retirement progresses. If an individual retires due to a lack of work or ill health and has little or no savings, relying on an Age Pension will ultimately mean that years in retirement, regardless of the three stages, will largely be spent trying to make ends meet and cover costs. However, should there be disposable income to hand, then retirees in the first stage of retirement are more likely to travel, pay off the mortgage, renovate, update an older vehicle and generally spend more on their lifestyle. As health issues arise and the second stage is entered, then medical costs will most likely increase. Also, any discretionary spend is more likely to be

used to maintain a level of independence so there is a need to make changes to accommodation and pay for services that enable people to stay at home. And when someone enters the dependent stage, then the bulk of their expenditure will be on healthrelated bills. This, unfortunately, is the big sting in the tail for those with increasingly longer lives. Their spending habits will morph from lifestyle ‘wants’ into essential ‘needs’; keeping up with medical and pharmaceutical bills, occasional hospital admissions and towards the end, nursing home fees. Making an effort to understand the effects of each chapter in your longevity, will ultimately enable you to take more control and plan more effectively. However you approach it, planning for how you will fund your needs in what is likely to be a long life is key to avoiding the mistaken belief that your old age will mirror your parents’ experience. Retirement is no longer a set-and-forget proposition. In particular, understanding the true costs of aged care well before it is needed, may help you plan sufficient savings for this later stage of your life. YourLifeChoices disclaimer

YourLifeChoices Retirement Affordability Index™ September 2017

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Government update Retirement affordability requires a full understanding of your entitlements and changes to the rules. Here’s the latest government update to help clarify these for you. New look Human Services website Anyone who is familiar with using Humanservices.gov.au will have noticed that it has a new look. This means that finding the information and pages you used to visit may take a little longer than usual; however, there is one change that you may find useful. The online payment and service finder enables you to input a few simple details, from which you will be given an indication of payments and services that you may be eligible for, as well as an estimate of the rate at which such payments may be made. Humanservices.gov.au

Australian Marriage Law Postal Survey – key dates Most Australians who are going to vote in the samesex marriage survey will have already returned their postal votes, so what happens from this point forward? When will we know the result? For those who are interested, here are the remaining key dates: • Friday 20 October (6pm) – final day for requesting replacement survey forms or a secure access code to use online and telephone options • Tuesday 7 November – survey closes • Wednesday 15 November – results will be published on ABS website. Marriagesurvey.abs.gov.au

Age Pension paper claim forms still available Despite the push to have customers make claims and update details online, for those without computer access, paper claim forms are still available. And if you need some assistance to complete your claim form, you can receive this over the phone or at a Centrelink Service Centre. Should you need to update your details, you can actually do this in writing, over the phone or online. Humanservices.gov.au

Reinstatement of Pensioner Concession Cards Pensioners who lost their Age Pension entitlement and Pensioner Concession Card (PCC) as a direct result of the asset threshold rebalancing that took 16

place on 1 January 2017, should soon receive a reinstated PCC in the post. The cards will be issued on 9 October and should take about 14 days to reach recipients. Concessions associated with the PCC will not be backdated. Humanservices.gov.au

Indexation for part Age Pension thresholds If you’ve previously just missed out on a part Age Pension due to your income or assets being too high, then the indexation of thresholds may mean that you now qualify. Details of the new thresholds can be accessed by clicking the links below: Income thresholds Asset thresholds And if you don't qualify for an Age Pension due to your assets, but consider your income to be limited, then you may be eligible for a Commonwealth Seniors Health Card, with indexed thresholds applicable from 20 September 2017. YourLifeChoices disclaimer

YourLifeChoices Retirement Affordability Index™ September 2017

YourLifeChoices Affordability Index September 2017  

How much does your retirement tribe spend? Use this index to cut your household costs

YourLifeChoices Affordability Index September 2017  

How much does your retirement tribe spend? Use this index to cut your household costs