You are wealthier than your super

The cost of living keeps increasing and everyone is feeling the pinch, particularly retirees on a fixed income. Older Australians across the country are worried about how they’re going to make their retirement savings last. For those servicing debt from their retirement income, the increases in interest rates only compound their worries. 

When measuring retirement wealth, most Australians look to their super...however, that’s not always happy viewing. Women aged 60-64 retire with a median superannuation balance of $146,900, compared to men who retire with $204,1071 (source: KPMG, The Gender Superannuation Gap, August 2021). Fear of running out of money in retirement, coupled with the rising cost of living, sees many retirees  giving up a comfortable lifestyle simply to afford the essentials.

ABS data shows outright home ownership among Australians approaching or in retirement is dropping dramatically. In 2001, 65.1 percent of those aged 55-64 owned their home outright; by 2021, this  rate had dropped to just 40 percent. The number of Australians carrying mortgages into retirement had nearly tripled over the same time period.

Retirees servicing debt - whether a mortgage, a line of credit or credit cards - will find increasing rates an additional burden at a time when other costs are soaring. Is the solution to plunder your super savings to repay the bank?

A super alternative 

While retirees today may not have significant super savings, more than 80 percent own their own home. Most retired homeowners have seen their home value markedly increase - in fact, Australian homes increased 190.5 percent over the 20 years to May 2022. (Source: Core Logic). 

Although there has been a small drop in values since the interest rate cycle turned, many retirees have a substantial source of retirement funding in the roof over their head, even if they are still paying a mortgage. 

For most older Australians, home equity represents a larger store of wealth than superannuation and this can be the right way to both pay out debt and free up your retirement cash flow to fund a comfortable retirement.

5 good reasons to use home equity to repay debt

Accessing your home equity through a Household Loan to repay a mortgage or other debt makes sense because:

• Regular repayments are not required, which frees up your retirement cash flow
• There is no default risk - you cannot lose your home (subject to borrowers meeting contractual obligations)
• You retain your home’s title and full ownership, which means you benefit from future growth in your home’s value
• As well as freeing up your retirement income, you may be able to access an additional fortnightly or monthly income stream to enhance your retirement lifestyle
• Our Household Loan can be repaid, in part or full, at any time without penalty.

To learn more about the benefits of getting rid of your debt and living a less encumbered retirement visit our refinancing a home loan page.