Chances are if you’re struggling to pay off your home before you enter retirement, you will spend the rest of your life trying to rid yourself of debt… and even then you probably won’t succeed.
That’s the news from the latest ING Direct research, which suggests thousands of Australians aged between 65 and 80 years still owe an average of $158,500 on their mortgage.
Apparently, the increase is because house prices are so high and the younger generation are leaving it until much later in life to buy their first home (the average age of a first home buy is now 31 years).
“We’re seeing more Australians carrying over into retirement with debt,” ING Direct’s Tim Newman.
But if you borrowed in your mid-30s you might not have considered just how those loans would be paid back, and that means downsizing to release equity is the only way your debt could get paid.
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Other ways you might consider reducing your debt as you head towards your twilight years is by using your superannuation to make a lump sum payment towards the outstanding mortgage amount, but this is seen as putting unnecessary pressure on the Age Pension system.
According to the Association of Superannuation Funds of Australia (ASFA), single retirees will need almost $24,000 to live a ‘modest’ lifestyle, while couples will need a little more than $34,000. This figure is said to take into account home maintenance, improvement and insurance, among other things, but it does so assuming your home is fully paid for.
The outcome is worse if you haven’t got property at all though, as achieving a comfortable retirement could prove more difficult.
Property Investment Professionals of Australia chairman Ben Kingsley says when planning for retirement you should budget for discretionary spending and all provisions for the maintenance and upkeep of property.
Are you still paying off your mortgage or are you debt free? Do you have any budgeting tips?