Renting as a retiree comes at a high cost

Retirees who rent their homes could need more than a million dollars to enjoy a comfortable retirement, according to a new report.
All
Retirees who rent could find themselves needing more than $1 million in super, according to research by the Association of Super Funds of Australia.

A new report, released by the Association of Super Funds of Australia (ASFA) has revealed just how tough retirees who rent their homes are finding it.

The Retirement Standard report for the December 2016 quarter found that a retiree who rents may need more than $1 million to have a comfortable retirement.

The cost of living for retirees who rent increased in the last quarter of 2016, and according to ASFA, a single retiree who rents in Sydney would need $1.045 million to enjoy a “comfortable retirement”.

In Brisbane and Melbourne, that figure is $940,000, while in Adelaide it’s $848,000. 

For retired couples however, that amount is even more.

To afford to rent and enjoy a comfortable retirement, a couple will need more than $1 million worth of superannuation to live in each of the major capital cities in Australia. In Sydney, a couple would need $1.166 million in super, while in Brisbane they would need $1.112 million and in Melbourne $1.115 million.

Compared to retirees who own their home, those who rent will need hundreds of thousands of dollars more in superannuation to have a comfortable retirement.

If you’re a renter and you wish to a live a more “modest lifestyle”, then you’ll still need more than $250,000 in superannuation to live in each of the major capital cities in Australia. You’ll need as much as $320,000 as a single in Sydney or $450,000 as a couple.

According to ASFA statistics, one in 12 (8%) Australians over the age of 65 live in private rentals.

Another 8% are still paying off their mortgage.

Between the 2006 and 2011 census, there was a 44% increase in the number of renters over the age of 55.

This means there are hundreds of thousands of renting retirees who may find their superannuation balances falling short of giving them a comfortable standard of retirement.

ASFA CEO Dr Martin Fahy said compulsory super contributions of 9.5% fell well short of what retirees who rent needed to have a comfortable standard of retirement.

“All estimates assume people are enjoying reasonable health, so any serious illness or disability makes the situation even more challenging, as does rental instability and associated costs,” he said.

“Housing affordability and availability is a significant and increasing concern for many Australians and particularly impacts older Australians grappling with the private rental market.”

Sydney is of particular concern in ASFA’s report, with statistics showing that the city has a lower rate of home owning residents at the age of 60 than the rest of Australia.

The statistics released by ASFA match those released by organisations such as the Housing for the Aged Action Group, who have been at the forefront of the housing affordability issue for older Australians in private rentals.

Last year nearly 20% of HAAG clients spent more than 70% of their income on rent. More than 80% of the organisation’s clients were classed as having “housing stress”, meaning more than 30% of their income was being spent on rent.

HAAG co-manager Fiona York said one of the organisation’s biggest concerns was the number of older people who were struggling to afford private rentals, putting them on the edge of homelessness.

“Their major problem is that they have become part of the growing number of Australians who have not attained home ownership due to things such as low wages, illness, family changes etc,” she told Starts at 60.

“Affordable rental housing is in increasingly short supply, is insecure and may not be able to be adapted as people‚Äôs needs change. Compounding this  there has been less and less expenditure on public housing. ”

So, how can you ensure you have enough superannuation to enjoy a comfortable standard of retirement as a renter?

Well, Dr Fahy told Starts at 60 the key was to engage you super as early as possible and work out what additional contributions you may need to make to ensure you have a comfy retirement.

“Get the balance suggested by age 67 and then have it managed in a balanced retirement income stream from a superannuation fund,” he said.

“The numbers (your super contributions) all depends on what the person has to start with, what their salary is, whether they already make salary sacrifice contributions and what their other financial assets are.”

Tell us, are you a renter? Do you struggle to afford your rent? Do you have enough super for a comfortable retirement?

 

  1. Moira  

    Hi—-I watched A Current Affair last night on the Department of Housing houses and how they are being vandalized and some people (I think the majority of people know they have a secure place to live depending on the wages they are bringing in and look after the place) The other smaller % should be given 2 weeks notice. But, in saying all that it makes me wonder what the people retiring are going to do if they don`t own their own home and are relying on their super to have a good retirement. Would it be right to say that the Govt are trying to wind back the aged pension ??

    • Moria, all good for you to say “all should own their home” reality such a medical circumstances and the dreaded divorce laws that are heavily biased against males that you have no idea about.

  2. Sue B  

    I don’t have any superannuation.

    I live in a ‘large’ country city (50-60,000). I pay a modest amount of rent, for a private rental. I’m on the Housing list, but it could be quite a long time (10 years) for a 1 bedroom unit (I live in a 2 bedroom unit, so don’t know how they can expect me to live in a 1 bedder). I receive the DSP (the same amount as the Age Pension, so no difference there). My pension includes Rent Assistance.

    I pay all my bills every fortnight. I receive 18% discount on my electricity account just for paying the account before the due date – better than what you can earn from the banks – over $360 in the last year alone. All my other accounts are paid on a fortnightly basis – phone, car, contents, health insurance.

    After I’ve paid all my bills, etc, and allowed for spending money & food for the fortnight, I can ‘usually’ put around $200-250 per pay away. Around $100 goes into my Global Wallet (Virgin Australia pre-paid Visa Debit Card attached to my membership) for my car costs of fuel, servicing, batteries, tyres, registration & NRMA, and sometimes the excess on my glasses/dental work. I don’t usually go out of town on big jaunts because I can’t drive for too long without experiencing lots of pain.

    I cannot comprehend that if I can put around $150 per fortnight away for ‘little luxuries’, why can’t others?

    Some say ‘why do you have so much left at the end of the fortnight?’ I reply that I don’t drink alcohol, smoke or gamble. If you add up these costs, then you will find that if you cut them out, you too could save so much each fortnight.

    Rather than going to pubs/clubs for meals, go around to your friends & have a good home cooked meal or BBQ. So much less expensive & you have quality time with your friends.

    If you don’t want to stay @ home, then find a Men’s Shed, a craft group, a walking group or what ever you’re into to get you out of the house. I’m sure that if you ask your local council they can let you know where you can find them.

    For those who live in the bigger cities, please don’t make any sarcastic/nasty comments. It’s your choice where you live. I live where I can afford it. I have family all around NSW from Urana, to Dubbo, to Sydney, to the South Coast, so I have to travel to see them, but the phone is a great way to stay in touch.

    • Maureen  

      I agree with you Sue, it is all about how you handle your money.
      I live in W.A and haven’t heard about an electricity discount for fortnightly direct debits I shall certainly enquire. Our electricity with Synergy has sky rocketed.
      We do still live in the lucky country anyone who wants to whinge should tale a look at how others have to survive.
      I pay may Rates in one hit up front as that gives me a discounted price.
      Always looking to make my money go further.
      Thank you for your response to this article it was both informative and constructive.

  3. Judith  

    The dsp finishes at retirement age.

  4. Joy Anne Bourke  

    You are joking all of you. I Rent at $600 p/f that is probably a lot more then you pay.
    The problems I have are as follows:
    I get 18% on my electricity and pay $25 a fortnight.
    My phone which I need if I have to call an ambulance $35
    Scripts – since I cannot take Generic as they make me violently ill due to the compound make up. So my scripts do not cost $5.30 each but more like between $8- $14 each extra.
    I try to say a little to pay for licence which I just paid $165 for 5 years – in Qld there is no incentive for people like Sydney if they have a clean licence for 5 years get their licence for 5 years half price.
    Then registration – Sydney pensioners get free if they pay third party and if needed inspection. Qld only get $100 off normal registration. This is a struggle for me to save anything long term, plus I also pay $30 f/n for a Wellness program for my Poodle. Don’t tell me I should not have a dog. I love my Dog and with depression and anxiety he helps me so much, yes he is spoiled.
    I enquired about a Housing place 5 yrs ago and was told it would be over 10 yrs. Yet I know that Refugees and Immigrants get houses within 3-6 months. HOW DOES THIS HAPPEN???????

Leave a Reply

Your email address will not be published. Required fields are marked *