More retirees weighed down by mortgage debt: | Australian Markets

Further issues round present retirement trends have emerged out of Colonial First State’s (CFS’) latest Rethinking Retirement report, which discovered the quantity of Australians retiring with mortgage debt has continued to rise.

While retiring debt-free stays prime of thoughts for almost all of Australians surveyed it might not grow to be their actuality, with the report indicating that 28 per cent of pre-retirees (these aged between 50 and 64 years previous) have a mortgage and 14 per cent of retirees are nonetheless paying off their mortgage debt.

The analysis additionally discovered that slightly below one quarter (22 per cent) of retired owners and 30 per cent of retired non-homeowners have been utilizing their pension funds to proceed paying off their debt.

CFS Head of Technical Services, Craig Day, mentioned mortgages are set to grow to be a fixture within the retirement planning course of, as present property market trends imply home consumers enter the market later, home costs proceed to rise and loan phrases lengthen.

“For those who don’t get to choose when they retire, one option is to use a lump sum from your super to reduce or pay off your mortgage. However, our research shows that only 15% of Australians plan on taking this option,” Day mentioned.

“The different option is to proceed paying your mortgage in retirement utilizing the income out of your super, corresponding to an account-based pension. We know that nearly one in 4 retirees are utilizing their pension funds to service some kind of debt.

“If the online earnings within super are much less than the home loan rate of interest, you could be higher off withdrawing a lump sum to repay your home loan or maintain in an offset account. If the online earnings within super are more than the home loan rate of interest, you could be higher off sustaining your present income stream and home loan steadiness.

“However, many people could not need to wager on future investment returns and would favor the peace of thoughts of being debt free in retirement. In these circumstances, utilizing your super to repay your mortgage will cut back the quantity of belongings you have got obtainable to fund your retirement and will lead to you receiving much less retirement income or your super financial savings not lasting as long.

“On the flip side, using super to pay off your mortgage could potentially increase your age pension entitlement as it would reduce your assessable assets.”

The report additionally steered partaking in financial advice boosted the retirement confidence of owners with a mortgage; 45 per cent have been assured they may retire debt-free with no advice, in comparison with 63 per cent with advice.