Retirees on struggle street

Almost 40 per cent of recent Australian retirees are struggling to make ends meet, according to a new report, and a dramatically escalating number of older Australians are retiring with a mortgage.

As Treasury considers the hundreds of submissions to its Retirement Income Review, such reports must also weigh heavily in its consideration.

Submissions from a big number of authoritative organisations, including YourLifeChoices, identify key failings in the current system, including: an inadequate Age Pension rate and rent allowance, a taper rate that does not encourage older Australians to fund their own retirement and an income test that penalises people who wish to continue working past the Age Pension age.

An Industry Super Australia survey – involving 730 industry fund members aged over 47 – revealed that 38 per cent of recent retirees were either living on a very tight budget with only enough for essentials or were not making ends meet – an eight per cent jump from a similar report conducted in 2010.

In 2019, 20 per cent of retirees told Industry Super their ‘golden years’ were not as comfortable as they had expected.

YourLifeChoices’ most recent Retirement Affordability Index, which tracks quarterly changes in retirees’ living costs and is compiled in partnership with The Australia Institute, found that a couple needed $76,208 per year to enjoy a very comfortable retirement and $43,818 for an adequate retirement.

The Industry Super Australia survey found that retirement was thrust on almost 45 per cent of workers and that many Australians nearing retirement were struggling with anxiety, which might explain the increasing number of older Australians retiring with a mortgage.

An MLC report, The Roof over Retirees’ Heads, found that the proportion of homeowners who still have a mortgage as they enter retirement had jumped 23 per cent in a decade to 36 per cent.

Jason Marler, head of actuarial at MLC Wealth, said: “Anyone who is still servicing a debt in their retirement years is likely to have [less money to spend] on living essentials such as food, clothing, utilities, healthcare, transport, travel and other activities.

“Research shows that carrying debt into retirement is one of the key detractors of life satisfaction. Emotionally, owning a home provides an anchor to the community, local activities and relationships.”

Curtin University’s Professor of Economics Rachel ViforJ also urged extreme caution on entering retirement with a mortgage.

“We have a much more volatile economic environment,” she said. “The assumption that house prices are going to go up over time so it’s okay to be carrying debt into retirement is not a wise assumption.”

Yet, an increasing number of retirees are turning their backs on seeking financial advice. In YourLifeChoices’ 2020 Insights Survey, 45 per cent said they had not visited a financial professional to discuss their retirement income – compared with 44 per cent in the previous year and 42 per cent in 2015.

In the 2020 survey, 50.6 per cent said they felt sufficiently financially literate to manage their affairs without professional advice compared with 57.7 per cent five years ago.

Did you enter retirement with a mortgage? Or do you plan to? Do you have high hopes that the government’s Retirement Income Review will deliver effective change?

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Written by Janelle Ward


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