Spiralling house prices a super trap for retirees

WHICH came first — the chicken or the egg? The same could be said about superannuation and inflated house prices. Well, sort of.

Is super artificially pushing up house prices? Or are high house prices eating into superannuation? The answer is yes, to both. More Australians than ever are retiring with large mortgages. Unlike previous decades, current and upcoming retirees will be carrying big debts when they leave paid employment.

And one of the reasons is that they have had to sacrifice their pay rises over the years for compulsory superannu- ation payments. Which, of course, means they have had less to spend and less to use to repay debt.

Or, is it because they’ve gone into greater debt than previous generations?

Either way, superannuation is artificially propping up the housing market.

The main purpose of super is supposed to be to provide a living during retirement, yet, despite a working life of super savings there are going to be thousands of households retiring and using their lump sumps to pay off their debt.

There will be nothing left in many cases to fund their retirement. So, guess what? It will be back to drawing on the age pension. And despite all the fearmongering about wiping out the pension, there is not a government alive that would risk the voter backlash.

There will also be many more non-home owning retirees in the decades ahead too, as rising prices continue to get out of reach for many people.

Most estimates about how much we need to live on in retirement are based on modest housing costs. Well, think again. Retirees living in rental accommodation will not be paying modest rents. They will be paying full whack.

And full whack will mean digging deep into their super balances just to keep a roof over their head.