Index shows retirement planning more important than ever

Perhaps the biggest issue the Retirement Affordability Index highlights is how renters are forced to spend a much bigger proportion of their expenditure on keeping a roof over their head. Which has flow-on effects for every other aspect of retirement.

Diverging housing costs

While affluent couples – who can afford to buy larger homes in more expensive areas – spend 13 per cent of their outgoings on housing, that almost triples to 30 per cent for cash-strapped couples renting. For singles, the difference is even more pronounced – 16 per cent versus 37 per cent.

This is because home ownership costs less over time as mortgages are paid down. Renters, meanwhile, see their housing costs continue to increase as rents rise. And in recent years, those rises have been steep.

Meanwhile household services & operation expenses are more heavily geared towards homeowners, especially affluent Australians – presumably covering council rates, strata, maintenance and renovations.

Yet even when combining this category with housing, homeowners are still better off than renters:

  • Affluent homeowners spend a combined 16 per cent as couples and 21 per cent as singles. For pensioners, it’s 18 per cent as couples and 25 per cent as singles.
  • Renters spend a combined 32 per cent as couples and 39 per cent as singles.

With renters forking out more for housing and associated expenses, less remains in the kitty to fund other things.

Healthcare inequality

The Index shows homeowners spend a higher proportion of the expenditure on medical & health care than renters.

Cash-strapped singles and couples allocate 5 per cent to medical bills. Everyone else spends between 8 and 12 per cent.

Far from homeowners being unhealthier, it is indicative of poorer healthcare outcomes and access to medical services for renters. They may be less able to afford private health insurance, or preventative and allied health services.

With less disposable cash and poorer health outcomes, it’s therefore unsurprising that renters also spend proportionately less across other categories like recreation, household furnishings & equipment, and miscellaneous goods & services.

What does this mean?

I think there are a few clear takeaways here:

  • Build your wealth early. And, crucially, get your own home early. The financial impacts of renting in retirement, combined with its insecurity and the risk of homelessness, are very real.
  • Have a plan for how to live independently, should you outlive your partner or you separate. Cost-of-living pressures are greater on singles than couples, due to the lack of economies of scale (that is, two people = two incomes, but not necessarily double the costs).
  • Scrutinise when is best to retire. The age of retiring before 60 is over – you would need to be in an exceptional position. There is a willingness to work longer, to stay mentally, physically and socially active. However, later retirement likely reflects the fear of not having enough: to fund the basics, to travel and enjoy an active lifestyle, or as is increasingly the case, to help adult children and grandchildren get onto the property ladder.

Helen Baker is a licensed Australian financial adviser and author of On Your Own Two Feet: The Essential Guide to Financial Independence for all Women. Helen is among the 1% of financial planners who hold a master’s degree in the field. Proceeds from book sales are donated to charities supporting disadvantaged women and childrenFind out more at

Disclaimer: The information in this article is of a general nature only and does not constitute personal financial or product advice. Any opinions or views expressed are those of the authors and do not represent those of people, institutions or organisations the owner may be associated with in a professional or personal capacity unless explicitly stated. Helen Baker is an authorised representative of BPW Partners Pty Ltd AFSL 548754.

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