There are many reasons why you might consider owning a home in retirement to be the best option for you, however, renting also comes with its upsides depending on the lifestyle you want.
Above all, being secure, comfortable, and happy in retirement is the utmost important thing.
Someday you’ll reach a point in life where you look forward to the day you get to retire and do whatever you want. While that moment remains to be one of the best things you can look forward to, the road is filled with many decisions you have to make. One such decision involves choosing between renting or owning a house.
This guide aims to answer these questions and give you a better idea of what kind of costs will be waiting for you in retirement.
The first thing to be aware of is how much money you are going to need for other areas of your life and then decide if renting or buying matches your lifestyle and financial situation better.
How Much Money Do You Need to Retire Comfortably in Australia?
According to the Association of Superannuation Funds of Australia (ASFA), there are two broad categories of lifestyles in retirement – comfortable and modest. Of course, anyone would choose the former over the latter, but not everyone can afford to.
A comfortable retirement budget means you will likely be able to afford a good car, top-tier private health insurance, travel, and other more luxurious lifestyle factors.
On the other hand, if you opt for a more modest lifestyle in retirement, you may be entitled to the Age Pension, but you’ll only be able to afford a basic lifestyle. Typically you’ll have just enough funds available for the small luxuries in life.
How Much Do You Need to Live On While Owning a House?
For many people, owning a house seems like the more comfortable and secure option.
However, you need to consider just how much you’ll be needing to live comfortably while owning a house. To do this, you need to map out your retirement plan, but even that won’t be easy. Consider seeking help from a financial adviser on the Central Coast to help you figure out all the essential details.
To give you an idea, here’s a benchmark for comparing figures:
- A couple of about 65 years of age – $40,194 per year is needed to live modestly.
- A couple of about 65 years of age – $61,786 per year is needed to live comfortably.
- For singles of about 65 years of age – $27,913 per year is needed to live modestly.
- For singles of about 65 years of age – $43,787per year is needed to live comfortably.
How Much Do You Need to Live On While Renting?
Now, this is when things can get complicated. While renting offers you a lot of flexibility, especially if you want to travel during retirement, it can be a little difficult to map out your retirement plan this way.
Weekly rent can be costly and due to inflation, you can also expect your rent to increase over the course of your retirement. Plus, housing prices on the Central Coast have had a huge jump in the last few years as Sydney-siders opt for a sea change.
However, you may be able to capitalise on this price increase and boost your retirement savings by selling your home and making a downsizer contribution to your superannuation fund.
According to a survey conducted by National Seniors Australia, quite a number of people worry about running out of savings and investments in retirement.
This is obviously of huge concern for many retirees but especially, if you are renting and have to source your rent money from your retirement fund.
While renting may afford you the ability to live in a more desirable location than if you owned property, the cost of your rent still needs to be factored into your retirement planning. Plus, if you own your home, you can always rent it out while you travel or move houses and this may cover some or all of your rental expenses.
The problem is that rental costs vary depending on the location, making it hard to estimate just how much you need to live on while renting.
Retirement Planning in the Central Coast
People treat their finances differently in retirement but one thing that everyone should have in common is to create a retirement financial plan.
It’s really up to you to decide which lifestyle would suit you best, but ensure that you take your finances into consideration so you can enjoy a financially secure retirement.
Planning for your finances and retirement can be quite a daunting task if you do it alone. You’ll need someone to help you keep track of what you need to do. Central Coast Financial Planning Group is here to help you achieve financial success and security in life.
DISCLAIMER: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group and Sydney Wealth Advisers are subsidiaries of Coastal Advice Group which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.