Rent hits ur­ban re­tirees

Money Magazine Australia - - IN BRIEF -

As home af­ford­abil­ity re­mains a prob­lem in the ma­jor cities, more peo­ple may end up rent­ing in re­tire­ment. That will mean they will need more money to fund their re­tire­ment. How much more? Well, ac­cord­ing to re­search by the con­sul­tancy Mil­li­man, a re­tiree rent­ing a one-bed­room unit in Syd­ney would re­quire more than $500,000 in ex­tra su­per sav­ings to fund the same life­style as a home­owner.

The anal­y­sis shows that a 65-year-old “ur­ban renter” re­tiree spends about $15,000 a year more than the na­tion­wide re­tiree, with nearly half of their bud­get al­lo­cated to rent (even af­ter Cen­tre­link rent as­sis­tance).

And this will con­tinue to rise. “While re­tirees spend less on most cat­e­gories of ex­pen­di­ture (ex­cept health) as they age, rental costs tend to con­tinue ris­ing. By age 85, ur­ban renter re­tirees are spend­ing more than $20,000 a year above the ex­pen­di­ture of na­tion­wide re­tirees who own their home,” says Mil­li­man.

The find­ing raises sig­nif­i­cant ques­tions about gov­ern­ment poli­cies, which tend to favour home­own­ers. Renters re­ceive rel­a­tively low lev­els of sub­sidy (Cen­tre­link rent as­sis­tance) while the of­ten sub­stan­tial value of the fam­ily home is ex­empted from the age pen­sion means test, says Mil­li­man.

“It also un­der­lines the im­por­tance of su­per funds delv­ing deeper into their mem­ber­ship to un­der­stand their cir­cum­stances be­fore of­fer­ing gen­eral ad­vice. In some cases, older Aus­tralians may be bet­ter off di­vert­ing sav­ings to­wards home­own­er­ship rather than su­per­an­nu­a­tion,” says Mil­li­man.

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