Despite an increasingly beneficial superannuation system that guarantees all working Australians will have savings when they retire, many of today’s working 30 and 40 year olds are likely to end up worse off in retirement than their parents and grandparents were when they retired, Mr Adam Coughlan, general manager – retail at Australian Unity Investments (AUI) says “Many working Australians, who expect to be self-funded retirees because of their superannuation guarantee contributions, will not be able to support themselves because of the debt they will take into retirement.
“My concern is that we are coming to a point where, for many, mortgage debt in retirement could be greater than superannuation savings.
“People that increase their mortgages to fund lifestyle expenses, and carry debt on their mortgage into retirement, are likely to be worse off than their grandparents were in retirement, and may end up relying on the government pension, despite having superannuation savings.
“Such people could well be worse off than the people who retired 20 or more years ago who did not have the benefit of a guaranteed superannuation payout but, on the other hand, retired debt free.”
Mr Coughlan says younger Australians may be lulled into a false sense of security through the example of their parents who recently retired or are about to retire.
“Typically, the people retiring now, who own their own home, have seen their house possibly double in value in the last eight years. They are retiring with property worth hundreds of thousands of dollars, no mortgage to speak of, and a useful accrual of superannuation savings.
“These are golden times for retirees simply because of the recent property boom, which has put more money in the hands of older Australians than they ever expected to get. But it is not going to last forever.
“Markets change over time and younger Australians cannot bank on the same circumstances when they retire. “When people retire over the next decade or so, they could well see their home worth little more than it is now. “This, coupled with an increasingly longer and more active life in retirement, and a carefree attitude to debt, will mean many people at retirement age will be forced to work much longer, whether they want to or not.
“Compare this with their grandparents, who may have lived during the depression, or at least knew about it from their own parents and, as a result, took a frugal attitude to savings and spending.
“They may have retired without the superannuation benefits of today’s generations, but they would have had some savings, backed by a mortgage free home, no other debt and much more modest lifestyle expectation in their retirement,” he said.
Australian Unity Investments is the funds management arm of financial services, health and retirement living services provider Australian Unity. It has over $6.5 billion in funds under management. Its approach to product development is to use its established in-house expertise in property and mortgages while also forming joint ventures and strategic alliances with other organisations with specialist expertise.
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For more information please contact:
Adam Coughlan
Ph: 03 8682 4476
E: acoughlan@australianunity.com.au