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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