Will your home fund your retirement?

Recent research by global bank HSBC suggests that Australians are overly optimistic about their ability to leverage their homes to fund their retirements. But is this really the case?

HSBC’s Generations and journeys report is the 13th instalment in a longitudinal series, the Future of Retirement, which benchmarks retirement aspirations and actualities.

And while it may be useful to compare Australian responses with those of 18,000 people across 17 countries and territories, as with all statistics, it’s important to dig down to the true reliability of these responses.

So, with 26 per cent of the 1003 Australians surveyed expecting to leverage property to fund their retirements, we need to understand that this high percentage – when compared with other nations – is likely linked to the higher rate of home ownership in Australia, compared with Europe, Asia and North America. If more people own homes, more might use their homes as an asset in retirement, right?

The ‘in country’ comparison between workers who say they may use their homes – the above-stated 26 per cent – with the 8 per cent of retirees who say they did, is also rather spurious, as we are most likely to be comparing very different lifestyles, financial histories and opportunities.

Younger retirees and those currently working may believe they have higher debt, a reduced chance of receiving an (increasingly restricted) Age Pension and may be more likely to view their property as an asset rather than the ‘home for life’, in the way older generations did.

HSBC’s findings are also distinctly at odds with the much more realistic ME Bank data reported by YourLifeChoices last week.

HSBC claims that 48 per cent of non-working Australians claim an Age Pension, however, last time we checked the most recent Intergenerational Report, it confirmed that recipients of a full or part Age Pension will remain at 80 per cent of retirees for the next 40-plus years. (To be fair to HSBC, it may have assumed full Age Pension entitlement, but it doesn’t state this.) In the ME Bank report, 64 per cent of respondents felt they would need a full or part Age Pension which is much more closely aligned with Federal Government projections, but still short of the mark by about 16 per cent.

So, it’s perhaps best to be wary of such top-line survey results, when planning your own retirement income. They may be inaccurate, or need more context to be properly understood and assessed.

But do be aware that if a higher proportion of retiring Australians do decide to downsize, this will have a profound effect on the real estate market in general, and house prices in particular. A flood of boomer properties may see prices plunge to a new low. And once again, when it comes to retirement planning, you may not get what you had anticipated.

What about you? Did you or will you access the wealth in your home for retirement? Do you feel this is a good move? And what effect will 25 per cent of retirees have on the housing market if they do downsize in the next 10 years?

If you are planning to downsize, check out our handy guide which tells you everything you need to know to make the decision and make it happen.

Written by Kaye Fallick

LOADING MORE ARTICLE...