April 3, 2024

More Australians set to retire in debt

Most of us dream of retiring with our homes fully paid off and enough savings to enjoy a comfortable lifestyle. Unfortunately, according to research from AMP, this is a dream that’s becoming out of reach for an increasing number of Australians.

Despite rising super balances, more Australians are set to retire in debt, leaving older Australians exposed to the risk of interest rate changes and pushing the dream of debt-free home ownership further away.

According to research released from AMP, Australians over 50 are expecting to retire with more debt than ever before.

The worrying statistics

According to the research, almost 9 out of 10 Australians aged 50 and over believe they’ll still be paying off a mortgage when they retire. And 1 in 3 aren’t confident their nest egg will provide for an adequate lifestyle.1

According to the data, 1 in 9 expect to have more than $250,000 in unpaid debt when they retire. More than 2 in 5 said they’d choose to sell and downsize to reduce their debt, reflecting concerns about not being able to afford a comfortable lifestyle in retirement.

This is consistent with ABS data showing that average household debt levels have quadrupled over the past 20 years for older Australians aged 55 and over, rising from $62,000 in FY03-04 to $242,000 in FY21-22.2

Rising household debt is a cause for concern

The rising cost-of-living pressures, inflation and a national housing affordability crisis, are creating an extremely difficult financial situation for older Australians to navigate. Many are facing the reality of missing out on the financial security of owning their home when they retire.

Australians are living longer and levels of outstanding debt on assets like the family home mean many are facing, what the AMP refers to as a ‘looming debt cliff’ once they hit retirement.

How can you buck the trend?

A reputable Financial Adviser can help you plan for your retirement, so you can minimise debt and maximise the savings and assets that bring financial security. Our expert Financial Advisers can steer you towards the comfortable retirement that you deserve. Call us today on (02) 9739 6555 to find out more about what we can offer.

1 https://corporate.amp.com.au/newsroom/2023/december/majority-of-homeowners-face--debt-cliff--heading-into-retirement

2 https://www.abs.gov.au/media-centre/media-releases/average-household-debt-grows-73-cent#:~:text=Average%20household%20debt%20grew%20by,Bureau%20of%20Statistics%20(ABS)

Please note, the above information does not constitute financial advice and does not take into account your current circumstances or goals. Please speak with a Financial Adviser before acting on any information found here or throughout the 5 Financial website.

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