Retiring renters could be $500,000 short

Renting retirees seem to have been left out of government policy settings when it comes to retirement income, with new Milliman research finding that a retiree without a home should be prepared to find an extra $500,000 in superannuation savings to fund the same lifestyle as a homeowner.

The findings showed that a 65-year-old “urban renter” retiree would be forced to spend an extra $15,000 per year more than the “nationwide” retiree, with nearly half of their budget allocated to rent. By age 85, the urban renter would be spending more than $20,000 a year above the expenditure of nationwide retirees who own their homes.

Urban renters, which require more than double (one million as opposed to $500,000) the funds of nationwide retirees, also face arbitrary policy settings which favour homeowners, for example low levels of subsidy.

With one quarter of retirees expected to still be paying off a mortgage or renting in retirement and recent trends show declining home ownership, Milliman suggested super funds delve a little deeper into their membership to understand their circumstances before offering advice.

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The consulting firm said in some cases, Australians might be better off diverting savings towards home ownership rather than superannuation.