How Australians are faring in saving for retirement

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May 13 2019
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Nearly 5.5 million Australians struggle to meet their future needs in retirement. How do your savings stack up?

The state of play for retirees

Research conducted by Roy Morgan suggests the average gross wealth (total assets excluding owner-occupied home) is $299,000. The average debt level for the same group is $27,000, reducing the net wealth of soon to be retirees to $272,000.

Household Capital chief executive officer Josh Funder believes funding for retirement is a significant issue for a majority of Australians.

“Roy Morgan’s figures tie in with our research; for many Australians, compulsory super started too late into their working lives,” Mr Funder said.

More than 5.5 million so-called Australian Baby Boomers (those people born between 1946 and 1964) have entered or are about to enter retirement.

“As subsequent waves of Baby Boomers approach retirement, inadequate funding looms as a major socioeconomic problem that must be addressed,” Mr Funder said.

Where has all the money gone?

For most Australians, the majority of their wealth is tied up in their family home. At retirement, the family home plus superannuation may be worth seven figures, but this is locked away.

“In fact, there’s nearly $1 trillion in untapped home equity owned by Australian retirees. Given that most retirees wish to stay in their own home as they age, this untapped savings is a valuable resource that could be used to improve retirement funding,” Mr Funder said.

New options on the market

With so much capital being left in the family home, Mr Funder believes Australians need to utilise their home equity, albeit in an efficient, responsible and sustainable way.

“Clearly, a new and innovative approach is required to meet this major unmet community need and delivered in the context of financial advice and long-term retirement planning,” Mr Funder said.

Drawbacks of reverse mortgaging

According to the ASIC, there are a few drawbacks to new options on the market, like reverse mortgages.

By taking out a reverse mortgage, individuals can face financial difficulties later in life because of interest rates, increasing debt and the effects of compound interest if the value of the property does not rise.

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About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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