As reported by Kirsten Robb in Fairfax Media, Swinburne University has recently released a report highlighting the increasing number of people who are approaching, and in retirement, who are life long renters. The general expectation for a century has been that you work throughout your life to own your own home. This is so that in retirement you don’t need to worry about having a roof over your head until the day you die. That for many is not an option and becoming increasingly so.
Swinburne research reports that 426,000 Australians over the age of 50 are living in rented accommodation. That number is projected to almost double by 2050. Therefore if you were born after 1980 it is far more likely you will be a life long renter than if you were born before that.
The Swinburne report was skewed towards changes to the tax and welfare system to redistribute wealth from the haves to the have nots. However it raises an important issue. How will people who do not own a home fund retirement? The answer for those who do not want to rely on the government for help is to ensure you have adequate retirement income to pay rent and your other bills. If you want to live where the average rent is $500 per week then you will likely require an extra $1/2M in retirement investment assets. These assets can be in superannuation or outside superannuation. The important thing is you need to allow for CPI increases over time. Whatever you invest in needs to be able to provide at least CPI increased investment returns.
Many will say if I had $1/2M in extra investments I would be buying my own home now. If you are Sydney person $1/2M may only give you a start. Especially if you work somewhere that is an expensive area to rent near. It is a fairly daunting experience to borrow $1M at 50 years of age and know that to pay the loan off you will have to work to age 75.
You can retire and live comfortably as a non home owner if you have a realistic plan. You don’t need to dive into debt at a late stage of life. Be aware that lifestyle changes may mean you should relocate to be near family at some point. Selling and buying a home in Sydney can easily cost in excess of $100,000 in stamp duty and agents commission. Owning your own home has non financial benefits but so does good health. Owning or renting should be part of a well research and balanced life time financial plan. The right answer, or answers, vary based on individual circumstances and there is no one size fits all solution. It all starts with discussing the issues with people who may know a little more than you do about some of the issues. Click here to find out more about our aged care planning service that we provide or call us on (02) 8525 3700.