Rising retiree debt threatens retirement security

13 December 2023
| By Jasmine Siljic |
expand image

Growing debt levels and mortgages are key barriers to retirees achieving financial confidence, emphasising the value of accessible finance advice.

New research from AMP has shown that nearly nine out of 10 Australians aged 50 and over expect to still be paying off their mortgage once they reach retirement.

One in nine also believe they will have over $250,000 in unpaid debt when they retire, and one-third are worried their superannuation will not provide an adequate lifestyle.

AMP noted this parallels data from the Australian Bureau of Statistics (ABS), which found that average household debt levels have quadrupled over the past two decades for Australians aged 55 and over.

Household debt grew from $62,000 in FY2003–04 to $242,000 in FY21–22, the ABS recorded.

The financial services firm described this as a “looming debt cliff”, which a majority of Australian home owners will face.

“For as long as we can remember, the Australian dream has been debt-free home ownership, which provides the financial foundation and security for a comfortable retirement,” remarked Ben Hillier, AMP’s director of retirement.

However, the growing number of Australians retiring with household debt leaves more retirees exposed to interest rate fluctuations and remains an obstacle to financial security.

Hillier continued: “Rising retiree debt needs to be acknowledged as an issue by industry, government and regulators so that we can work together to provide Australians with greater financial confidence in their retirement. 

“Central to this is providing easier access to more affordable financial advice, which, encouragingly, is being addressed by the Quality of Advice Review.”

A key part of the government’s final QAR reforms includes enabling super funds to provide wider advice services to their members relating to investment decisions and drawing on retirement income.

Hillier also encouraged greater industry innovation of solutions to unlock the full value of a retiree’s balance sheet to maximise income. This should take into account home equity values, super balance and household debt. 

Looking at recent research, conflicting trends regarding retirement confidence have emerged. A report from TAL and Investment Trends earlier this month discovered that Australians are more optimistic about how they will fund their retirement.

Meanwhile, the 2023 MFS Global Defined Contribution Survey contrastingly found that inflation continues to erode retirement confidence, again highlighting the importance of seeking advice.

Read more about:


Submitted by Anthony Asher on Thu, 12/14/2023 - 08:16

No doubt true, but most of it is still because over 45’s have been upgrading their houses with 30 year mortgages. Money in the house (unlike super) is exempt from the asset test so allows for a bigger Age Pension. This is what advisors will (and should) tell them. Government should either stop the banks from offering mortgages that go beyond a reasonable retirement date or include part of the house in the asset test - or both.
First time home buyers could be exempt from mortgage restrictions. The future will be different because there are growing numbers who cannot get buy their homes until later in life.

Add new comment

The content of this field is kept private and will not be shown publicly.

Recommended for you

sub-bgsidebar subscription

Never miss the latest developments in Super Review! Anytime, Anywhere!

Grant Banner

From my perspective, 40- 50% of people are likely going to be deeply unhappy about how long they actually live. ...

5 months 3 weeks ago
Kevin Gorman

Super director remuneration ...

6 months ago
Anthony Asher

No doubt true, but most of it is still because over 45’s have been upgrading their houses with 30 year mortgages. Money ...

6 months ago

Moving the goalposts on Australia’s 2030 climate target, as recently indicated by the Coalition, will “corrode” investor confidence, according to a leading network of ins...

3 days 15 hours ago

The Australian Bureau of Statistics has released its latest labour force figures....

3 days 19 hours ago

The Australian Financial Complaints Authority has released its data for the second half of 2023....

3 days 19 hours ago