Boomer homeowners could pull up to five times their existing income

Cash-poor retirees in Melbourne and Sydney could be sitting on a goldmine.

Aussie hundred dollar bills

Baby boomer homeowners living in homes in some of Australia’s more affluent postcodes could easily receive three to five times their existing superannuation income, says new analysis from Household Capital.

Cash-poor retirees in Melbourne and Sydney could be sitting on a goldmine. They may not have enjoyed a full working life of superannuation contributions, but they have certainly benefitted from homes bought 40 years ago, which have compounded in value to be among the world’s most expensive residential properties.

Actuarial analysis of property values in some blue-chip suburbs reveals how Australian homeowners aged over 60 could release a fortune in income from their properties that could be used for retirement income, or as inheritance.

More than 255,000 Australian pensioners live on taxpayer-funded incomes while owning homes worth more than $1 million, according to analysis of social security data by the Australian National University (ANU).

Almost 30,000 age pensioners live in homes worth more than $2 million and receive more than $680 million in pension payments annually, reports Macrobusiness.

According to Household Capital, in the Sydney harbourside suburb of Vaucluse, the median property value is $4.7 million and the average super balance of those over 60 is about $200,000.

By using a reverse mortgage product, more than a quarter of those aged over 60 living in Vaucluse could draw down about $1.4 million of the value in their house.

In Brighton, Victoria, the median property price is about $2.4 million and the average superannuation balance of an over 60 is just over $282,000. Again, more than 25 per cent of baby boomer property owners could pull $722,000 in addition to their superannuation.

“There is a huge unmet need for retirement funding,” said Household Capital founder and CEO Josh Funder.

“Most Australians can double their available funding at retirement through reverse mortgages.”

A reverse mortgage enables borrowers to access the equity in their home as a lump sum, regular income stream, cash reserve or a combination, with any repayments needing to be made only when the property is sold.

According to Household Capital, a reverse mortgage allows retirees to draw 15 per cent of household equity when they hit 60 years of age and they can increase withdrawals by one per cent a year for the next 20 years, or a cap of 35 per cent.

Former superannuation minister and chairman of Household Capital, Nick Sherry, told the Australian Financial Review that releasing home equity should be encouraged in order to top up the retirement savings of asset-rich cash-poor retirees.

Are you sitting on a goldmine? Would you consider releasing the equity in your home in order to live a better retirement?

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    COMMENTS

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    Horace Cope
    10th Jan 2020
    10:48am
    "Are you sitting on a goldmine? Would you consider releasing the equity in your home in order to live a better retirement?"

    First question: Our house is now worth 18 times more than we paid for it but that's not a "goldmine", that's inflation.

    Second question: We would never consider a reverse mortgage and that is a personal decision, not to be confused as telling others what they should do.
    older&wiser
    10th Jan 2020
    11:25am
    Agree with you. I bought my first little shack in an area people laughed at me. Even the bank were reluctant to give me a loan. I sold to move interstate, but sold for 5 times what I paid for it. BUT sold when interest rates were around 17%, so you have to add on the interest cost to initial purchase price. I now own a very small but comfortable for me, little house in an ex farming area. My house looks like a doll's house compared to the huge 'have to have everything' monoliths around me. And agree about reverse mortgages. My neighbors, not terribly financialy savvy, took out one, went river cruising in Europe, sailing around Arctic, etc. Ended up having to sell their much loved home and move to a small unit, which they hate. Their kids did not know about the loan, but had to get them out of it. No matter what the name, they are nothing but a disaster.

    10th Jan 2020
    10:54am
    That's exactly why it is an excellent policy to have all the pension paid to become a debt to be repaid from the estate. It is simply stupid to pay these people a pension and then not get anything back.
    Horace Cope
    10th Jan 2020
    2:49pm
    Sorry, can't agree with your suggestion because it's very discriminatory. People with nothing will pay back nothing, people with modest homes may not be able to leave enough to bury themselves and people with multimillion dollar homes won't have their estate affected too much at all. Do you have a problem with poor people?
    Triss
    10th Jan 2020
    3:29pm
    You have a real down on age pensioners, BigBear. If you think the age pension should be classed as a debt then all pensions must be classed as a debt as many of them, because people are living longer, have become totally taxpayer funded.
    Anonymous
    10th Jan 2020
    4:04pm
    You should not be tax payer funded and live in a million dollar plus house.
    Triss
    10th Jan 2020
    5:16pm
    BigBear, people are not living in million dollar plus houses they are, through no fault of their own, living in million dollar post codes. 0Also they’re not million dollar houses until they are sold.
    ex PS
    11th Jan 2020
    8:01am
    Well said Triss. Where and how you choose to live is a personal choice, the government should keep their noses out of it.
    Home owners are allready means tested in order to receive their Pension Entitlement, people living in modest homes or any home actually should not be penalused because their locality has become popular with the Yupies.
    What next, will we have lical Commisars watching us and repirting to the government that we are not living the frugal life expected of citizens supported by the State.
    I suspect that most calls for further Asset Testing of the family home are driven by envy.
    Farside
    12th Jan 2020
    9:15am
    A dollar is a dollar and those people with too many of them should be precluded from receiving government social security. Simple.

    It matters little if your dollars are in investments, motorhomes, yachts or property as they all contribute to net wealth. It is nobody's fault if land values increase anymore than it is their fault for winning a lottery or watching investments decrease. These are all choices. If someone cash poor chooses to live in a shack on land that may have increased to $1million or more then they should not expect to have their hands out expecting social security to supplement their chosen lifestyles and subsidise their estates.

    The mechanism proposed by Big Bear is worth considering and would likely be popular with many part-pension recipients.
    Anonymous
    12th Jan 2020
    12:45pm
    Repeated usual rubbish from BB, good comments from Horace, Triss and ex PS. If any benefits are to be given as loans, then ALL Tax Deductions throughout your life (Personal & Trusts in particular) must be returned on demise from the Estate. Then again, an ongoing (not at death) Wealth Tax would be needed to stop tax evasion to avoid efforts (by asset shifting) against paying that.

    Homes, if not inherited, are bought from hard savings from after-tax income through the blood, sweat and tears of home owners and the Govt fortunately has already said it is out of bounds in the Retirement Income Review, so keep your sick ideas to yourself, BB.
    In fact, Universal Age Pension should be paid to ALL without any Assets or Income Test, just to make it fairer for those who managed to save and get a home, and who spend heaps on ongoing maintenance and other costs.
    Knight Templar
    10th Jan 2020
    11:01am
    What a nonsense citing Vaucluse and Brighton. Hardly working class suburbs. The number of people in receipt of aged pensions living in those suburbs would be quite small. Vaucluse and Brighton have been elite, expensive and unaffordable suburbs since at least the First World War. They have never been within the financial reach of most workers.
    Rae
    11th Jan 2020
    9:28am
    Quoting the unaffordable rich people's area home prices and then the average superannuation is a bit deceptive.

    Besides I though super was supposed to pad out retirement and not be a form of privatisation of retirement income production.

    Most of the problem is due to poor performance of fund managers and fees and charges to the tune of 43 billion a year including a lot of unnecessary insurances to feed that industry from worker's pockets.
    Daveh
    10th Jan 2020
    11:05am
    2 things (a) if you do a reverse mortgage your kids do not get an inheritance like us baby boomers got from our parents (b) why are you forgetting about the National Welfare Fund introduced in the 1940's and amalgamated into general revenue (tax) under Menzies. The fund was to pay the old age pension. I wish the pollies would stop making excuses and explain why there is no money in the fund and what they did with it.
    Sceptic
    10th Jan 2020
    11:29am
    Incredible. "your kids do not get an inheritance like (sic) us baby boomers got from our parents." That is a very broad assumption. I am not a baby boomer as I was born a year before WWII. I do, however, know something that Daveh apparently does not. Certainly, among the older baby boomers, their parents went through a depression and then the war, which in most cases was not conducive to amassing assets to leave an inheritance to their baby boomer children.

    My youngest child born in 1963 is classed as a baby boomer and due to most of my life being post-war is in a position to indeed benefit from an inheritance assuming that I do not live long enough to spend all of my assets.
    Greg
    10th Jan 2020
    12:45pm
    In the 40's, haha, any monies from back then would be far, far smaller then now and all gone by now.
    Rae
    11th Jan 2020
    9:34am
    Unfortunately a lot of any inheritance received was lost to several banking crises and interest rate glitches. Just the 89 to 92 alone took billions from hard working business and farming families. The past 40 years haven't been great unless you managed a lot of debt at the exact right time. I suspect this lot of excessive debt will wipe away gen X when it falls over in the next few years. Somewhere between $188 trillion and $240 trillion world wide is not sustainable. The entire planet couldn't pay it back.
    Mariner
    10th Jan 2020
    11:40am
    Was recently in Melbourne and had a look at the house we bought in 1978 for $42500; it was recently sold for $1.16 million. If I had stayed there we would now be living in a million dollar house, really just inflation and the geography of closeness to the city. In 1978 my wage was $140 a week take home with overtime, a beer was 40c, daily paper 10c and a good meal in the pub $1.50. I now live in a unit worth less than $400'000 in the country. The amount of pension has nothing to do with where you live, I moved and my place is worth less so what? Endlessly complaining about oldies living in expensive houses just because they chose to stay put and the location became popular is getting tiresome. Leave the people alone, or put an inheritance tax on places over $1.5 million, just DO NOT force people to leave their neighborhood.
    ex PS
    11th Jan 2020
    8:12am
    A fact conveniantly forgotten by those people who are driven by envy.
    They have no problem accepting extra payments to help them pay their rent or extra Pension Entitlements forvthe priveledge of not having to look after the maintenance of the houses they rent owned by others.
    Some people just can't resist the temptation to use any opportunity to take from others.
    Envy is a terrible thing., when are people going to realize, the government taking from others is not neccessarily going to benefit you.
    Mez
    15th Jan 2020
    1:11pm
    An inheritance tax on homes over 1.5 million dollars would be fair all around but how it is assessed would be an issue, no doubt as I stated in my comment.
    don
    10th Jan 2020
    11:43am
    I wonder why they bring this up again after printing Noel Whitiker's response to this a couple of years ago where this thought bubble created so much misery with people taking reverse Mortgages and then losing their houses and ending up in debt.? and no where to stay.
    Mez
    15th Jan 2020
    1:12pm
    Sounds like the reverse mortgage was taken out to pay a gambling addiction!
    TinTin
    10th Jan 2020
    1:03pm
    This Baby Boomer didn't receive any inheritance from my parents. They were always battlers and only just making ends meet. Admittingly, they ended up living in a government house because they sold their house to return to live in England and then returned to Australia after a few years because they missed their four sons here in Australia. Therefore my three brothers and I, plus the one in England didn't receive any inheritance. Fortunately, I really didn't need any financial help simply because I've done alright for myself, working long hours creating Graphic Design and Leadlight design and production.
    Sooty from Marketing
    10th Jan 2020
    1:11pm
    The LNP changes to the Pensioner Assets Test was based on lies to steal part pensioners income. Will the LNP legislate changes to the Reverse Mortgage Scheme for the next Budget Emergency? Who knows, but be assured no politician will be adversely affected.
    And no I don’t like concept of the reverse mortgage scheme.
    etc1
    10th Jan 2020
    3:12pm
    Can all retired people keep writing about the National Welfare Fund introduced in the early 1900's until the Govt tells us where the billions of dollars of our contributions are. I have been paying into the National Welfare Fund ( or whatever it is called now) since 1960.This money is ours and what people have when retired should not matter. The pension should be paid to all. We paid our contributions into the National Welfare Fund to have a small amount of money returned to us in our last final years before death. Why are the Govt trying to brainwash non retirees that the pension is a hand out. What a discussing Govt etc we have. The truth about the National Welfare Fund must come out!!
    Triss
    10th Jan 2020
    5:19pm
    I remember doing that a few years ago and getting no reply but I’m game to give it another go.
    Rae
    11th Jan 2020
    10:14am
    Yes and all retirees should receive a universal aged pension like most of the civilised world.
    And certainly all the other wealthy countries pay their retired workers.
    Anonymous
    12th Jan 2020
    12:47am
    Quite correct, all of you.

    It is time to write to the Treasurer's Retirement Income Review, deadline of 3rd Feb 2020 (check their web site for instructions) and submit your case to scrap the existing Broken Age Pension system, which tries to ignore the tax contributions (7.5% of tax rates) all of us paid, and implement Universal Age Pension for all with NO tests other than Age (say 65 yrs) and Residency (say 15 yrs). Yes, tell them to become civilised!
    JoJozep
    10th Jan 2020
    4:00pm
    Leon, your doing it again. How about quoting the opposite advice about using home equity?

    The CEO of the publication origin is named Josh Funder. Any thoughts of significance to raising millions if not billions in funds? Who's pocket is he lining? He says he's a Rhodes Scholar (Read bullshit artist), who I guarantee, won't be around when you lose your hard earned property. Anyone can pick a bullshit topic and become a Rhodes scholar in that topic, refer Abbott and Hawk, though Hawk did alright by his knowledge. Abbott was a climate denier, total idiot. (Note, not one word from Abbott in past 6 months that I know of regarding bushfires).

    Getting back to raising equity by reverse mortgage. Where is the explanation of how much interest you pay into the fund compares to interest earned from extra super? At the end of the period, your house will have accumulated in value, who gets this? It's not clear. If it's devalued substantially, who pays for the money already paid out. I bet it won'r be Mr. Funder.
    Are there additional management fees? I bet there are. We have to pay Mr. Funder remember. Are there capital gains tax on this figure?

    What about pensioners? Pensioners have been warned to keep their assets and income to a minimum, so they can draw the highest adjusted part pension (full pensions are only paid basically to the unfortunates with nothing). You can only put a limited amount into super, before the taxman calls and cuts your pension (and drastically I might add). So if the equity house value becomes zero in ten years, are you still locked into your super, especially an annuity type.

    I would be very, very cautious about entering this type of deal. Are we assuming our descendants deserve nothing? Didn't we get some help from our parents through their hard work and effort after the WW11, Didn't they save all their lives and lived through the worst depression in the 1930's (caused by money hungry rich bastards by the way to protect their assets). So unless you have no dependents, no grandchildren, no new life to mind and look out for, probably you could go ahead with the scheme.

    It's only money after all, worth something before you kick the bucket, not after.
    Farside
    12th Jan 2020
    8:51am
    Anyone can become a Rhodes Scholar ... I don't think so. For a start there are only nine scholarships in Australia each year and a total of 90 globally. Cannot think too many on this site could satisfy the eligibility criteria.
    casey
    10th Jan 2020
    4:12pm
    Had a few acres close in, the council rezoned it and my rates rose to an unbelievable level. They also told me I would be responsible for the cost to seal the dirt road adjoining the property. I sold up and downsized to the country. Now they say I am over the assett limit for an age pension. Can't win either way.
    Mez
    15th Jan 2020
    1:19pm
    Oh no!
    That is really sad and grossly UNFAIR!

    12th Jan 2020
    12:41am
    Leon, the data MUST be fudged, as no way they know the value of homes pensioners live in. If they simply look at median or average values of homes where people live in, them those numbers are a huge and wrong assumption of what pensioners homes are worth.

    Also, it is sickening how these lefty (ANU) and right-wing (financial companies) are constantly trying to target the homes of pensioners with their ulterior agendas, the less air / publicity they get the better.
    Farside
    12th Jan 2020
    8:32am
    any reason why you believe the Valuer General would not share property information with the federal agencies? Certainly would not be difficult to match the properties on the list and their values with Centrelink recipients.
    Anonymous
    12th Jan 2020
    12:31pm
    The article does not mention any federal agencies putting out such analyses, so not sure where you got that from.
    The lazy lefty research types in ANU would not have access to individual Pensioner details -but yes, if they get any federal funding for such stupid research it should be scrapped.
    The right-wing Financial company mentioned used median values - stupid assumption that pensioners are at that level.
    Farside
    13th Jan 2020
    1:37pm
    the agencies are not likely to share data matching residential property values with pension claimants.
    hyperbole
    12th Jan 2020
    8:34am
    same old conversation why bother even commenting!!
    Incognito
    12th Jan 2020
    1:10pm
    I thought the same thing, we have been their done that. Just click bait for YLC.
    Mez
    15th Jan 2020
    1:01pm
    It appears that it is also GROSSLY UNFAIR to be taxpayer funded when you are living in a multi million dollar house so for that reason alone, there should be a bank assessment done by Centrelink and there should be a ceiling limit in much the same way as the Work Bonus scheme is arranged whereby your pension is decreased by $1.00 for every $10.00 you earn over the ceiling limit of $300.00 Centrelink allows you to earn per fortnight with affecting your regular pension.
    I would add that there should be 3 bank quotes done, one of which would be the government's like it is done when applying for sickness or income protection benefits from one's super payments and assessed somehow as a result.


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