• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

SuperGuide

Superannuation and retirement planning information

  • SuperGuide Premium
  • Account
  • Log In
  • SuperGuide Premium
  • Account
  • Log In
  • How super works
    • Super for beginners
    • Super rules
    • Employers guide to super
    • Super contributions
    • Super and tax
    • Accessing super
    • Super news
    • Women and super
    • Super tips and strategies
    • How-to guides
    • Super quizzes
    • Superannuation Q&As
    • Superannuation glossary
  • Super funds
    • Best performing super funds
    • Super fund rankings
    • Best performing pension funds
    • Pension fund rankings
    • Super fund average returns
    • Super investing strategies
    • Comparing super funds
    • Choosing a super fund
    • Choosing an investment option
    • Super fund fees
    • Insurance and super
    • Super fund profiles
  • SMSFs
    • SMSFs for beginners
    • SMSF administration
    • SMSF checklists
    • SMSF compliance
    • SMSF investing
    • SMSF pensions
    • SMSF strategies
    • SMSF Q&As
  • Plan your retirement
    • Retirement planning for beginners
    • When should I retire?
    • How long will I live?
    • How much super do I need?
    • Will I get the Age Pension?
    • How much will I spend in retirement?
    • Financial advice
    • Retiring overseas
    • Preparing for retirement
    • Retirement planning strategies
    • Retirement calculators and reckoners
  • In retirement
    • Income in retirement
    • Super lump sums
    • Super pensions
    • Age Pension
    • Working in retirement
    • Life in retirement
    • Senior concessions and services
    • Aged care
    • Estate planning
    • Super death benefits

Home / Plan your retirement / Retirement planning for beginners / Location the missing ingredient in retirement planning

Location the missing ingredient in retirement planning

February 1, 2020 by Barbara Drury Leave a Comment

Reading time: 3 minutes

On this page

  • Spending higher in cities
  • Regional variations in the cost of living
  • The psychology of wants vs needs
  • Adding location to the retirement income mix

It’s often said that location is everything where property is concerned, but it also makes a big difference to how far your money stretches in retirement.

According to the Australian Bureau of Statistics (ABS), more than 67% of Australians live in a capital city. Better job prospects and education offerings are two major factors that attract working age adults and families to the city, and for good reason.

The 2019 Household Income and Labour Dynamics in Australia (HILDA) Survey found median household incomes in mainland capital cities were all well above incomes in regional areas. Median incomes for households in all mainland capital cities were above $45,000 while median incomes for regional households in all states were below $45,000.

Not only do city slickers earn more, they spend more. This has big implications once people retire and their focus shifts from wealth accumulation to drawing on their savings.

The desire for a cheaper and simpler lifestyle is undoubtedly part of the motivation driving older Australians to make a sea or tree change. ABS figures show the proportion of people living in capital cities declines from 67% to 63% for people over 45.

Spending higher in cities

Research by actuarial management consultancy Milliman, based on real-life spending of 300,000 Australian retirees, found big differences between city and country living. The spending gap is 7.3% for retirees aged 65–69, growing to almost 11% for those in their early 80s.


Advertisement
SuperGuide Premium is ad-free

But Milliman also found wide variations in retiree spending patterns between states. Canberrans are the biggest spenders, forking out 15.9% more than the national average. While retirees in rural South Australia spend the least, at 10.5% below the national average.

The table below shows the average retirement spend in capital cities and regional areas versus the national average.

Locationvs average national spend
Brisbane 1.37%
QLD regional-8.05%
Sydney 5.35%
NSW regional-6.36%
Canberra15.88%
Melbourne 5.14%
VIC regional-8.13%
Hobart-8.45%
Adelaide-1.91%
SA regional-10.51%
Perth 4.66%
WA regional-7.63%

Source: Milliman Retirement Expectations and Spending Profiles 2019

The location effect is not limited to the urban/regional divide; the ‘latte’ dividing lines within capital cities can also have a big effect on retiree spending. For example, Milliman found that retirees in the affluent Sydney suburb of Mosman spend 50% more than their fellow Sydneysiders in Auburn.

Once again, to anyone who knows Sydney that comes as no surprise.

Whether regional variations in spending are due to higher costs in affluent areas, higher incomes providing higher retirement savings and more expensive lifestyles, or a bit of both, is a moot point.

Compare super funds

Read more...

Advertisement

Regional variations in the cost of living

We all suspect intuitively that it’s cheaper to live in the country than the city. You can’t leave the house in a major capital city without paying for parking, road tolls or entertainment. Whereas in the country you’re hard-pressed to find a parking metre let alone an A-reserve seat.

And that’s before you factor in the cost of housing, rent or moving into aged care, which are more expensive in the city than the country and more expensive in some cities and suburbs than others.

Even so, some goods and services are more expensive in more remote areas due to the higher cost of transportation and service delivery.

That said, it is undoubtedly easier to live on a constrained income in some locations than others.

The 2019 HILDA study found the median family income for retirees was below $35,000. Elderly single women were the worst off with median incomes below $30,000 reflecting their lower superannuation balances and higher rate of dependence on the Age Pension.

The psychology of wants vs needs

The cost of living in certain locations also has a psychological and behavioural component, otherwise known as keeping up with the Jones’s.

Advertisement

If your neighbours or friends all have luxury vehicles in their driveway you may feel under pressure to do the same even if a Corolla is more in line with your budget. In some areas, messing around in boats requires a cruising yacht while in others a tinnie will do.

In other words, location and local lifestyles may blur the perception of wants and needs.

The Milliman findings about spending patterns in Mosman vs Auburn show that although Mosmanites spend 50% more than retirees in Auburn, the proportion of discretionary and essential spending is around 50:50 in both locations.

Adding location to the retirement income mix

When it comes to retirement planning, the amount of money you have saved in and out of super is only part of the equation. Just as important is the amount of money you spend.

General retirement planning advice tends to be based around averages. Pre-retirees are shocked into action, or paralysed into inaction, by headlines declaring you need a superannuation balance of $1 million (or another nice round number) to live well in retirement.

As an antidote to this approach, ASFA’s Retirement Standard focuses on retirement spending with sample budgets for modest and comfortable standards of living. It also estimates the superannuation balance you will need to fund a modest or comfortable retirement lifestyle. While providing a helpful planning tool, once again it relies on national averages.


Advertisement

The thing is, none of us is average. The question of how much you need to retire on is personal. The answer will depend on a range of factors including your lifestyle, your health and how long you live, whether you are single or a couple, whether you own your home and where you live. To paraphrase a former Prime Minister, location doesn’t explain everything, but it does explain something.

Want to plan your retirement but not sure where to begin?

Become a SuperGuide Premium member and access independent expert guidance on how to plan your retirement, including how much super you need, how long you are likely to live for, whether you could be eligible for the Age Pension, the implications of retiring at different ages, how to prepare for retirement and much more.

Includes performance rankings for 235 super funds and 166 pension funds, more than 600 articles, how-to guides, checklists, tips and strategies, calculators, case studies, quizzes and a monthly newsletter.

Find out more


Learn more about how the home affects retirement in the following SuperGuide articles:

Home ownership and super are far more entwined than you might think

December 11, 2020

Reverse mortgages: What are they and how do they work?

December 2, 2020

Video: Home equity release for retirees

December 1, 2020

Your home: The foundation of retirement planning

November 24, 2020

What matters is the home: Review finds most retirees well off, some very badly off

November 23, 2020

What is the Pension Loans Scheme, and how does it work?

September 2, 2020

Saving for retirement outside super

February 5, 2020

How does the First Home Super Saver (FHSS) Scheme work?

January 14, 2020

Making downsizer super contributions: 10 things you need to know

December 16, 2019

Learn more about how to plan your retirement in the following SuperGuide articles:

What should my retirement plan contain, and can I write it myself?

February 18, 2021

How to use the MoneySmart Retirement Planner

January 21, 2021

Countdown to retirement: Tips to help kickstart your retirement plans

June 1, 2020

How to plan for your retirement

January 4, 2020

How to plan your spending through the 3 stages of retirement

August 10, 2019

How to navigate the different phases of retirement

August 9, 2019

How to select a retirement income calculator

August 1, 2019

Starting a pension from your super

July 1, 2019

How do I apply for the Age Pension?

July 1, 2019

Super advice: How to find a suitable financial adviser

March 15, 2019

Related topics

Plan your retirement Retirement planning for beginners

IMPORTANT: All information on SuperGuide is general in nature only and does not take into account your personal objectives, financial situation or needs. You should consider whether any information on SuperGuide is appropriate to you before acting on it. If SuperGuide refers to a financial product you should obtain the relevant product disclosure statement (PDS) or seek personal financial advice before making any investment decisions. Comments provided by readers that may include information relating to tax, superannuation or other rules cannot be relied upon as advice. SuperGuide does not verify the information provided within comments from readers. Learn more

© Copyright SuperGuide 2009-21. Copyright for this article belongs to SuperGuide Pty Ltd, and cannot be reproduced without express and specific consent. Learn more

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

How super works
Super for beginners
Super rules
Employers guide to super
Super contributions
Super and tax
Accessing super
Super news
Women and super
Super tips and strategies
How-to guides
Super quizzes
Superannuation Q&As
Superannuation glossary
Super funds
Best performing super funds
Super fund rankings
Best performing pension funds
Pension fund rankings
Super fund average returns
Super investing strategies
Comparing super funds
Choosing a super fund
Choosing an investment option
Super fund fees
Insurance and super
Super fund profiles
SMSFs
SMSFs for beginners
SMSF administration
SMSF checklists
SMSF compliance
SMSF investing
SMSF pensions
SMSF strategies
SMSF Q&As
Plan your retirement
Retirement planning for beginners
When should I retire?
How long will I live?
How much super do I need?
Will I get the Age Pension?
How much will I spend in retirement?
Financial advice
Retiring overseas
Preparing for retirement
Retirement planning strategies
Retirement calculators and reckoners
In retirement
Income in retirement
Super lump sums
Super pensions
Age Pension
Working in retirement
Life in retirement
Senior concessions and services
Aged care
Estate planning
Super death benefits
Advertisement
Compare super funds

Footer

Important: Disclaimer

All information on SuperGuide is general in nature only and does not take into account your personal objectives, financial situation or needs.

You should consider whether any information on SuperGuide is appropriate to you before acting on it.

If SuperGuide refers to a financial product you should obtain the relevant product disclosure statement (PDS) or seek personal financial advice before making any investment decisions.

Learn more

About SuperGuide

SuperGuide is Australia’s leading superannuation and retirement planning website. Learn more

Superguide Pty Ltd ATF Superguide Unit Trust as a Corporate Authorised Representative (CAR) is a Corporate Authorised Representative of Independent Financial Advisers Australia, AFSL 464629

  • Contact us
  • Advertise on SuperGuide
  • Careers

Before using this website

  • New to SuperGuide?
  • Terms and Conditions of Use
  • Financial Services Guide
  • Privacy Policy and Privacy Collection
  • Copyright Policy
  • Editorial Policy and Complaints
  • Disclaimer

  • SuperGuide Premium
  • Subscriber feedback
  • Sitemap