In Everyday money on Monday 20th Jun, 2022

Retirement looming: how to set yourself up if you are asset rich and income poor

Jun 20, 2022
Planning for an extended retirement is one thing. Being able to afford it is another. Image source: Getty

Today’s retirees, and those coming up to retirement, have a lot to look forward to.

We’re lucky enough to have the healthiest and wealthiest retirees in history. Just a generation ago, most retirees relied on the Age Pension, and could only expect to survive ten or 15 years beyond the end of their working lives.

Today, the picture looks very different. Somebody in their sixties has an active retirement of 25 or 30 years to plan for.

Here’s the problem – planning for an extended retirement is one thing. Being able to afford it is another.

The Age Pension provides a basic level of income support for older Australians. But it doesn’t allow for many of life’s little luxuries.

Superannuation can make a big difference to standards of living in retirement. But the introduction of the Super Guarantee in the 1990s came too late in many people’s working lives to make a big difference to their final payout.

And even those with a nest egg have seen the returns on fixed interest investments drop to nearly zero over the last decade.

Asset rich, income poor?

Earlier this year, Australia’s median house price ticked over the million-dollar milestone.

That might seem far-fetched if you bought your family home in the 1970s or 1980s, and obviously not every house carries a $1 million price tag.

But even in the ‘cheaper’ cities and many regional areas, a house now typically costs upwards of $700,000.

The 75% of retirees who own their home outright could be sitting on a pot of gold. But they could also be struggling to make ends meet.

The property poverty trap

It costs money to own a home. There are rates, insurance and utility bills to pay.

It costs money to maintain a home. Over time, roofs leak, plumbing needs replacing, floor coverings wear out. Kitchens and bathrooms have a finite lifespan.

For a retiree on a limited income, keeping on top of it all can be a huge burden.

Some of the most disadvantaged people in our community are older, single women. Many have the security of home ownership, but not the income to maintain a home.

Australian retirees have more than $1 trillion tied up in the value of their homes, but that doesn’t always help pay the bills. In fact, many retirees who own their home are struggling to make ends meet.

Thanks to the spiralling cost of living, older Australians are increasingly using credit cards and consumer debt just to pay for the essentials.

One option to free up some capital is by taking advantage of the current high property prices, and sell the family home. But most retirees are adamant – they want to stay living in the home they love.

Another option is to have a confidential discussion with Boomer Home Loans about how you could use the savings you’ve accumulated in your family home over decades to get your finances back on track, and your focus back on having a great retirement.

Boomer who?

Boomer Home Loans is a new company, but you’ll be talking to a team of experts with a depth of experience in banking, accounting, business and financial services.

Boomer offers a range of products specifically developed to help homeowners aged over 55 access the capital in their homes in a sensible and conservative way.

Let’s take a look at how Boomer’s reverse mortgage could help a retiree make improvements to their home, and safeguard their financial future.

Faye, 70, is retired following a long career in accounting. She’s single and owns her home, worth $577,000. But she’s finding her Age Pension and small super pension don’t stretch as far as they once did, and although she’d like to spend $75,000 to make sure her home will meet her needs later in life, she simply can’t afford it. She also worries that she’s had to draw down on her savings, and is concerned that she doesn’t have much of an emergency buffer.

How Boomer can help:

By lending Faye 30% of the current value of her property, Faye will be able to fund her home improvements, top up her income, and set aside enough cash to give her some comfort. Faye isn’t required to make any regular repayments on the loan, as interest is capitalised, but should she choose to pre-pay any amount, that sum remains available for future withdrawal.

Should Faye decide to sell her home in the future, the loan will be repaid at that time, with Faye receiving the balance of the sale proceeds.

We’re all different!

Your circumstances might be quite different to Faye’s – in fact we all have a different vision of what our perfect retirement might look like.

But we’re all facing the same pressures when it comes to rising living expenses, low investment returns and uncertain financial markets.

While Boomer Reverse (the name of Boomer’s reverse mortgage loan) was just right for Faye, another of Boomer’s loans might be just right for you.

Why not find out how you can free up some of the savings in your home to fund a more comfortable lifestyle?

You can make a start by calling the friendly Australian-based call centres on 1800 552 100, or visiting boomerhomeloans.com.au

Information in this article is general only and does not take into account your personal circumstances.  You should seek professional advice before making any financial decision.  All Boomer loans are subject to eligibility criteria and have their own fees, interest rates, terms and conditions which change from time to time. Boomer Home Loans Pty Ltd Australian Credit Licence 532798.

There’s a new Sun Rising for Aussies over 55.

Created by Australians for Australians, Boomer Home Loans is the first specialist lender for Aussies over 55. And we’re here to listen and help you make the most of what you’ve got so you can continue to live well now and throughout your retirement years.

Find out more

Would you consider a Boomer reverse mortgage?

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