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Home ownership in the retirement equation

Financial Planning  |  28/06/2017  |   3 min read

We’ve said many times before that your super is only one contributor to how well you will live in retirement. Your health, access to the age pension and other government benefits, income from other sources and part-time work, and home ownership are other important parts of the story.

With housing affordability becoming one of Australia’s biggest issues, the Council of the Ageing (COTA) has said that retirees could face a housing crisis within 15 years unless urgent action is taken, thanks to rising prices and rents, mortgage debt and the scarcity of suitable homes.

This is important because people entering retirement with on-going mortgage or rental payments will need substantially more income from super and other sources than those who own their homes.

The Association of Superannuation Funds of Australia (ASFA) says that a retired couple who own their home in Sydney will need around $60,000 annual income, compared to $80,000 for a similar Sydney couple who rent.

In its 2017 Rental Affordability Snapshot, Anglicare reported that of all rental properties listed on 2 April. Only 1.62% were ‘affordable and appropriate’ for single retirees living on the age pension.

Having a super benefit in additional to an age pension entitlement improves the situation for retired people.

COTA Chief Executive, Ian Yates, said older Australians, especially women whose super benefits are usually much lower than for men, are particularly disadvantaged by the lack of affordable housing that meets their physical needs.

“They are increasingly falling through the cracks in the growing housing affordability and supply challenge. We are already starting to see rates of home ownership by older Australians decline and this is forecast to drop even further over the next ten to 15 years.

“This is placing extra pressure on the rental market and many are juggling increased expenses like energy as they struggle to pay their rent,” he said.

His remarks capture a much wider demographic than those already retired and are backed up by Swinburne University researcher, Dr Andrea Sharam, who noted in a recent report that Australians who don’t have a foothold in the property market by age 45 have probably ‘missed the boat’ in terms of home ownership.

“Single mothers and divorcees are particularly at risk if they pass the 45-year threshold, with dire consequences for their retirement,” she said.

The data is suggesting that retirement planning should become a priority for people at a much earlier stage than has traditionally been the norm. The vast majority of Equip members who have sought financial advice is still predominantly those aged 55 or more.

Whatever your age, think about whether taking some early action on getting professional advice and help you with this. An initial appointment with an Equip planners doesn’t cost much and might be the best investment you’ll even make.

Check your retirement income with the Equip calculator