Baby Boomers stand to lose the house
Super reform may have come too late for baby boomers who expect to lose the house in order to fund their retirement. Forecasters are expecting a wave of family homes to hit the market as boomers cash in their properties and downsize to fund themselves into old age.
According to the 2012 RaboDirect National Savings and Debt Barometer (NSDB) released yesterday, boomers will need nearly double the amount of money than they expect to fund their retirement dreams. With less than a fifth saying that recent moves to increase super contributions gave them confidence that they will be able to reach their financial goals.
Findings point to a trend of baby boomers relying on downsizing the family home to fund their retirement (or at least pay off the mortgage.)
The survey of 2,322 Australians ages 18 to 65 also revealed the extent of the gap between the average current superannuation pot ($180,467) for Baby Boomers and what they anticipate they will have at retirement ($316,666.)
When you consider that the average amount that people feel they would need to live comfortably for 20 years in retirement is actually $749,824 and that improved longevity and medical developments mean people can expect to spend more years in retirement, the financial outlook starts to look pretty bleak.
The NSDB also found that almost a third (29%) of the Baby Boomer generation expect to still have a mortgage when they retire with many banking on super to repay this debt. In fact a third of all boomers surveyed expected downsizing to hold the key to clearing their current mortgage and allowing them to enjoy their retirement mortgage-free.
Stress around post retirement mortgage debt is also high with more than half of Baby Boomers saying they are "quite" or "very" concerned about the prospect of retiring with a home loan.
While findings paint a bleak picture for retirees, forewarned is forearmed. Many Baby Boomers are already living on a tight budget. 72% are reducing their power usage to save money and 68% are doing their own odd jobs rather than employing a tradesman.Despite high levels of concern amongst Baby Boomer mortgagees, 16% do not know what the rate is on their mortgage.
If that sounds like you, do your future-self a favour and take a few minutes to see how your home loan stands up against some of the best deals in the market. A difference as small as 1% on your home loan rate can translate to tens of thousands of dollars in the medium term. Get your home loan in order, it could just be the most financially rewarding ten minutes you ever spend.