How To Gain Financial Freedom In Retirement

  • Written by Mark Nunan

Planning for retirement? Retired already? Discover how you can gain financial independence during your golden years.

Hitting retirement is a joyous milestone - a just reward for a lifetime of hard work. A time to do more of what you enjoy because you earned it!

That is all nice in theory, yet many people reach retirement age and discover it is a time of unease and undue stress, because, for many different reasons, they do not retire in a comfortable financial position.

The same is true for many people who are of retirement age that own their own house. All of their life savings are tied up in their most treasured asset - their house - and they carry the stress of having to make big decisions to fund a comfortable and enjoyable retirement. 

Australia is still the lucky country, and we are so fortunate to have the security net of a government-funded Age Pension. On July 1 2021 the age to qualify for an Age Pension increased to 66 years and 6 months for people born from 1 July 1955 to 31 December 1956, inclusive.

However, not everyone qualifies for the Age Pension, as you also need to meet residence rules, an income test and an assets test. You can find more information at the Australian Government’s Services Australia website.

Does your Superannuation cover what you need?

Superannuation is often not enough to cover a comfortable and fulfilling retirement - especially with Australians living longer. The average lifespan of a woman living in Australia is now 85 years, and for men, the average lifespan is now 80.9 years (ABS 2020).

The Superannuation Guarantee was introduced in 1992, with a mandatory 3 per cent contribution rate (or 4% for employers with an annual payroll of over $1million).  

If you were 40 years of age in 1992, and only started contributing to a superannuation fund at that time, then retired at 55, your superannuation nest egg is only 15 years old. For many people, this will not result in a sufficient amount to retire upon.

Covid-19 contributing to increased cost of living

Many Australians believe that Covid-19 has had an inflationary effect on the cost of living, which puts more pressure on retirees to make their retirement funds stretch further.

A global survey by Ipsos in 2020 has highlighted that a majority of people across 26 countries say Covid-19 has contributed to an increase in the overall cost of food, goods and services.

In Australia, 56% of respondents to the survey said the overall cost of food, groceries and household supplies had increased. Utility costs, such as electricity, heating, TV/internet services were also perceived to have increased in Australia, according to 40% of Australians surveyed.

Downsizing - not all it is sized up to be

If you own your home, ‘downsizing’ to a smaller house or apartment, for example, is a way to unlock the value in your home and put more cash in your pocket for your retirement. 

While downsizing has many positives - including lowering your household bills and reducing the expense and effort of maintenance and upkeep - it is not all roses. 

Moving out of your home into another abode, the place you may have owned for 20-30 years, is a big and costly decision. Not only is there a monetary cost to selling your home, with agent fees, marketing costs, conveyancer, solicitor and auction fees, there is also an emotional cost. The cost of leaving behind the memories your house has vested in it - of raising children, pets, good times and otherwise. And you are also leaving behind your neighbours, your community and many of the relationships that make you feel connected.

If you want to learn more about downsizing, and whether it is the right choice for you, download this free guide to learn more about downsizing, upsizing and rightsizing.  

Household Loan - so you can stay at home

A Household Loan is a financial service product that is a type of Reverse Mortgage, which allows you to release some of the equity in your home, without you moving out of your home.  

The Australian Government’s Retirement Income Review - Final Report - released in November 2020, highlights home equity release products as a viable and important source to “substantially improve retirement incomes for many people”.

The same report laments that “Few retirees use the equity in their home to support their standard of living in retirement.” 

Household Loans are a home equity solution available for people aged 60 or older, who own their own home and meet other eligibility requirements.

A Household Loan can be used for a range of retirement funding needs, including but not limited to paying for household renovations or repairs, medical care, dental care or being the bank of mum and dad. 


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