Choosing where to live in retirement is a crucial decision for older Australians, influencing financial stability and lifestyle quality. With most retirees living in private homes, trends show a shift in homeownership, an increase in renting, and interest in alternative housing options. Thoughtful planning ensures living arrangements match future needs and personal goals.
Deciding where to live in retirement is a pivotal decision for older Australians, shaping their financial security, independence, and quality of life. Currently, 95.9% of retirees live in private dwellings or self-care units, while 4.1% reside in cared accommodation such as nursing homes or aged care facilities[i]. Homeownership remains common but is gradually declining, with 68.1% of older Australians owning their homes outright in 2022, down from 72.3% in 2018. Meanwhile, renting and alternative housing options, like shared equity schemes, are becoming more prevalent. To make the right choice, it’s crucial to evaluate how these arrangements align with your retirement goals and lifestyle needs.
Here are key factors to consider when planning for your retirement living arrangements:
Staying in your current home
Many Australians choose to remain in their homes during retirement, often because of an emotional connection to the place they’ve built their memories. However, staying put may require renovations to accommodate changing needs. For instance, you might need to install ramps, replace steps, or modify bathrooms for accessibility. Planning ahead is crucial to ensure that such changes are affordable when they become necessary.
Additionally, consider the support you might need for daily tasks like cleaning and grocery shopping. Government programs like the Commonwealth Home Support Programme can assist retirees who wish to live independently[ii]. While these services are subsidised, you may need to contribute financially based on your circumstances.
For homeowners considering accessing home equity to fund their retirement, advice from a financial professional is vital. Home equity funding, such as reverse mortgages, can be complex and may affect family members or your eligibility for government benefits.
Downsizing for retirement
Downsizing is a popular choice for retirees seeking to simplify their living arrangements while potentially freeing up cash. Moving to a smaller home can reduce maintenance responsibilities and lower costs for utilities, insurance, and other upkeep. It can also mean living closer to essential services, family, or desired amenities like public transport and healthcare facilities.
However, downsizing involves costs that should be factored into your decision. These include expenses like real estate agent fees, legal fees, stamp duty, moving costs, and the price of buying and selling homes within the same market. Additionally, selling your home may impact your eligibility for the Age Pension due to Australia’s assets and income tests.
Before committing to a downsized property, ensure it meets your lifestyle and budgetary needs. The Australian government allows downsizers aged over 55 to contribute up to $300,000 from the sale of their home into their super fund, which can aid financial planning[iii].
Renting in retirement
For retirees who rent, planning for future affordability is key. Rental costs are a significant ongoing expense, and retirement income may not stretch as far as in working years. If private rentals become too costly, you might explore options through church or community organisations, which sometimes provide affordable housing tailored to retired Australians. These arrangements may include eligibility tests.
Centrelink also offers Rent Assistance for qualifying retirees, helping to alleviate some financial pressure. For specific advice on tenancy rights or to address concerns about renting long-term, contact your state or territory’s tenants union, such as Tenants’ Union of NSW or Tenants Victoria.
Residential care and retirement villages
Moving into residential care or a retirement village can provide increased security and access to support aligned with your evolving health or lifestyle needs. Government-subsidised aged care facilities offer options spanning independent living and higher levels of medical care[iv].
Private retirement villages are another alternative, offering independent or semi-supported environments[v]. These communities often cater to retirees’ needs, blending amenities like social clubs, medical access, and age-appropriate support services. However, fees in retirement facilities can be complex, including entry fees, ongoing maintenance charges, and exit fees. Before moving into a privately run facility, consult a solicitor experienced in reviewing retirement village contracts to ensure you understand all associated costs.
For retirees considering a retirement village, the layout, community culture, and proximity to amenities should factor into your decision. Many modern villages include options for “aging-in-place,” allowing residents to access higher levels of care as needed without relocating.
Alternatives to moving
If selling or moving doesn’t appeal to you, there are alternative ways to make use of your home while improving your financial situation. These might include renting out part of your home, converting it for dual occupancy, or exploring options like reverse mortgages. Keep in mind, these approaches come with their own risks and complexities.
No matter which option you choose, retirement housing decisions impact not only your finances but also your lifestyle and independence. Consulting a financial adviser, solicitor, or government advisor can provide clarity and help ensure informed decisions. They can assist with navigating government benefits like the Age Pension, handling contracts with retirement villages, and understanding the long-term financial implications of actions like downsizing or accessing home equity.
If you would like more information on your retirement living arrangement options, or if you require further assistance with financial planning strategies, contact our office today.
DISCLAIMER: All information on Focus Wealth Advisers is general in nature and does not take into account your personal objectives, financial situation, or needs. You should consider your personal circumstances and seek professional advice before making any decisions based on this information.
[i] ABS (2024) Disability, Ageing and Carers, Australia: Summary of Findings
[ii] Department of Health and Aged Care (2024) About the Commonwealth Home Support Programme (CSHP)
[iii] ATO (2024) Downsizer super contributions
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