War-driven inflation pushes estimated retirement cost up nearly 200 million won from a year ago; Australians hope to retire at 62 but expect to work until 66

People relax at Bondi Beach in Sydney. [Getty Images]
People relax at Bondi Beach in Sydney. [Getty Images]

High oil prices and surging inflation triggered by the Iran war have pushed the estimated cost of retirement in Australia up by nearly 200 million won in a single year.

Bloomberg reported Sunday that an annual survey of 2,000 Australians by Colonial First State (CFS), the country's largest pension and asset manager, found that Australians now put the price of a comfortable retirement at A$1 million (about 1.08 billion won). That marks a jump of A$183,000 from the same survey conducted 12 months earlier.

Inflation is a key driver behind the sharp rise in retirement cost estimates. Australia's trimmed mean consumer price index — a measure that strips out items with the most extreme price movements — came in at 3.4 percent in April, well above the Reserve Bank of Australia's target band of 2 to 3 percent.

"The cost of living keeps rising, inflation has surged significantly, and there are other factors Australians are dealing with, such as supporting family members," said Marisa Forde, CFS executive general manager of retirement and growth, explaining the forces behind the rising retirement cost estimate.

The survey found that Australians hope to retire at 62 but expect they will need to keep working until 66 because of financial pressures. Women were notably more anxious than men about life after retirement: 62 percent of women said they worried about living expenses in retirement, compared with 48 percent of men.

"Statistically, women are more likely to have interrupted work patterns," Forde said, adding that the gender pay gap translates into greater financial uncertainty in retirement. Australia's pension system is funded by contributions drawn directly from workers' wages — starting at 3 percent and rising to 12 percent — meaning those who earn more and work longer accumulate larger pension balances.

Because women are more likely to take time out of the workforce for childcare and to work part-time or in casual roles, they retire with lower pension balances on average. The median balance for men aged 60 to 64 stands at around A$220,000 (about 240 million won), while the median for women in the same age group is about A$163,000 (about 170 million won) — a gap that helps explain why women are more worried about their financial security in retirement.

Separately, the Association of Superannuation Funds of Australia estimates that a single person needs A$630,000 (about 680 million won) to retire comfortably at 67, while a couple needs A$730,000 (about 790 million won). Australia has long been regarded as having one of the world's best retirement systems, backed by a pension pool worth A$4.5 trillion (about 4,864.5 trillion won). But the survey suggests that inflation is fueling anxiety about that system's resilience. With an estimated 2.5 million Australians expected to retire over the next decade, analysts say the country needs a clear strategy to sustain its pension base.


kate01@heraldcorp.com