End-of-career home owner is six time better off
LOS ANGELES: The average home-owning retiree is now worth almost $1.7 million – six times more than a retired renter – according to a new report warning that superannuation alone will not be enough to spare more Australians from a financially precarious retirement.
The findings were included in the Melbourne Institute’s latest Household, Income and Labour Dynamics in Australia (HILDA) survey, which has tracked nearly 9000 households and 16,000 individuals for more than two decades.
While superannuation balances have steadily grown over the past two decades, the survey showed that in 2023 housing remained most retirees’ major source of wealth.
Among the two-thirds of retirees who owned their home outright, the average survey respondent had housing wealth of $1.14 million in 2023, up from $638,000 in 2003. On top of that, they had an average superannuation balance of about $500,100, taking their total wealth to $1.66 million.
Between 2003 and 2023, the share of retirees who owned their home outright declined to 66 per cent from 75 per cent, while the proportion still servicing a mortgage rose to 17 per cent from 13 per cent.
Retirees with a mortgage had an average superannuation balance of $409,592, housing wealth of $872,668 and total wealth of $1.48 million, once their outstanding debts to the bank were considered.
Report co-author Kyle Peyton said renters were much worse off in retirement than people who owned and, by definition, did not have any housing wealth.
The average retiree living in a rental had just $277,132 in superannuation, though the estimate was not reliable due to a small sample size.
“These groups tend to face greater financial vulnerability due to the absence of housing wealth,” Peyton said.
“Looking ahead, these disparities are likely to grow, as declining home ownership among younger Australians makes retirement without housing wealth increasingly common – placing even greater importance on the role of superannuation in ensuring retirement security.”
Since 2003, the share of retirees living in rentals doubled to 12 per cent from 6 per cent, and Peyton warned that figure was likely to rise further.
“A key reason for this shift is that younger generations – especially first-generation immigrants and other groups without access to intergenerational housing wealth – are finding it increasingly difficult to enter the housing market,” he said.
If current trends continued, Peyton said younger people could spend their whole lives renting. House prices have risen more than 400 per cent over the past two decades, double the rate of wage growth.
“Superannuation alone will not be enough to support the growing number of younger Australians locked out of home ownership,” he said.
Among recent retirees, women had an average superannuation balance of $383,217, up 56 per cent since 2016. While the average male had a much larger balance of $504,420, growth was just 7.9 per cent since 2015.
The average retiree spent $38,913 in 2023, up 7.5 per cent since 2007, adjusted for inflation.
About 90 per cent of all spending by retirees was on essentials like groceries, petrol, and utilities.
Among those who did not own their home, about 40 per cent of all spending was on rent, up from 33 per cent in 2003.
“In comparison, housing costs for retiree households with mortgages are less burdensome as a share of total expenditure, remaining relatively stable over the period and reflecting the fixed nature of mortgage repayments for many retirees,” Peyton said.
“These findings highlight the disproportionate financial pressure faced by renters in the retiree population.”
The other areas of spending that experienced significant growth between 2007 and 2023 were private health insurance (up 48 per cent adjusted for inflation), other insurance like home and car (56 per cent), and meals out (30 per cent).