Townsville Bulletin

Retire with assurance

HOW TO RETIRE FROM WORK IF YOU STILL HAVE A MORTGAGE TO PAY

- ANTHONY KEANE

CARRYING home loan debt into retirement was once rare, but soaring property prices and mortgage sizes are making it a reality for a rising number of seniors. Studies have found that about half of homeowners aged over 55 still have mortgage debt, while one in five people expect to retire with a home loan.

New data from the Australian Institute of Health and Welfare shows the proportion of mortgagefr­ee homeowner households has dropped from 43 per cent to 29 per cent in the past three decades.

Author and financial adviser Helen Baker says rising living costs such as utilities and private health insurance, plus an explosion of gadgets that people now buy, have left less money to repay home loans.

“We also have multi-generation­al living as people live longer, which means expanding the home and increasing the mortgage,” she says.

Retiring with mortgage debt can be dangerous, especially if it eats too much into your income. But financial specialist­s say there are ways to take control.

DOWNSIZE AS A SOLUTION

Baker says mortgage debt in retirement can be “like a ball and chain around your ankle” and people need a solid plan to pay it off as quickly as possible.

“Do they rent out a room or have a granny flat where they generate income to meet those repayments? she says. “Do they have investment­s that earn more than the current mortgage interest rate to make it serviceabl­e? Do they sell the property to extinguish debt and downsize to something debt free?”

Many seniors are asset rich but income poor, and some will be better off downsizing.

FACTOR IN MENTAL STRAIN

Creationwe­alth senior financial

adviser Andrew Zbik says there can be both financial and psychologi­cal costs of having a mortgage in retirement.

“You don’t want to put yourself into poverty by refusing to downsize,” he says. Zbik says some property investors may comfortabl­y retire with mortgage debt, as can seniors with other income from share dividends and superannua­tion.

“It comes down to your cashflow needs,” he says.

Gerry Incollingo, managing director of financial services firm LCI Partners, says some people plan to pay off their home loan with their superannua­tion, but should remember they will need their super for retirement income too.

PAY MORE WHILE YOU WORK

“A property you live in, unlike an investment property, carries no tax benefit to having debt attached to it, so I recommend paying off a personal residence as fast as you can regardless,” Incollingo says.

“If it is looking likely that you will be retiring with mortgage debt, I would try to find ways to minimise that risk before you retire. Pay a little more off your mortgage each week, sell another item of value such as a car to put it on your mortgage.

“If that can’t be done, speak to a financial adviser to work out the best strategy to pay it off. Depending on how big the debt is, you can wipe it off with your super if you have a lot of super, but keep in mind you also need your super to live off in the future.”

Incollingo says people should examine refinancin­g their mortgage to get a cheaper interest rate, and can also consider renting out their home while renting a cheaper property for a while. This can help pay off a home loan faster, but can also create capital gains tax issues when the home is later sold, so seek profession­al advice.

You don’t want to put yourself into poverty by refusing to downsize

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 ??  ?? Author and financial adviser Helen Baker says rising living costs and increased borrowings have left less money for paying off home loans.
Author and financial adviser Helen Baker says rising living costs and increased borrowings have left less money for paying off home loans.

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