As we approach the golden years of retirement, the dream for many is to settle down in a comfortable home with financial worries left far behind. However, for a significant number of Australian retirees, this dream is far from reality, especially for those who rent their homes. A concerning report from the Grattan Institute has shed light on the financial struggles faced by retirees who rent privately owned homes, and the findings are alarming.
The report reveals a stark contrast between the financial security of homeowners and renters in retirement. Two-thirds of retirees who rent are living in poverty, a situation that is not only current but is projected to worsen. The disparity is even more pronounced when we look at the net financial worth of these households. While only 6% of homeowner households aged 65 and older have a total net financial worth of less than $25,000, this figure skyrockets to over half for those who rent.
Brendan Coates from the Grattan Institute has voiced his concerns, stating that Australia is failing a significant portion of its retirees. While many retirees enjoy a comfortable financial position, those who rent are facing severe hardships. The problem is particularly acute among single men and single women, with poverty rates of 74% and 78% respectively.
The decline in home ownership rates among the lower-income demographics is a contributing factor to this issue. Over the past four decades, home ownership rates among the poorest 40% of 45- to 54-year-olds have plummeted from 68% to 54%. This trend is not showing signs of reversing, and as Coates points out, today’s older renters are tomorrow’s renting retirees.
The implications of this trend are far-reaching. With home ownership rates falling, more people will find themselves renting in their later years. Unfortunately, many of these future retirees are not on track to accumulate enough savings through their superannuation to cover the cost of rent, leading to a bleak outlook for their financial security in retirement.
The government has made efforts to alleviate some of the financial pressure on retirees who rent by increasing the maximum rate of rent assistance, which now stands at $211.20 for singles. This assistance is designed to supplement the age pension for less well-off retirees. However, even with a 27% increase over the past two budgets, the reality remains grim. In cities like Sydney, a single retiree relying solely on income support can afford to rent only 4% of one-bedroom homes, with slightly better but still concerning figures in Brisbane 13% and Melbourne 14%.
Coates has called for a lift in commonwealth rent assistance and highlighted the need for an updated income support system that reflects the growing trend of renting among retirees. The current situation, where social housing constitutes a smaller share of the housing stock, exacerbates the problem.
Are you a retiree who rents, or do you know someone who does? How has this affected your retirement plans? Join the conversation below and let us know how you’re managing or preparing for the financial aspects of retirement living.
Also read: Good news: Rental growth may have finally hit its peak, but…
Pensioners who rent should become Grey Nomads. Buy a comfortable home on wheels and escape the rent trap. Even if you pay to stay in a van park the cost for most is way less than renting a house.
Who can afford a caravan when you are spending most of your pension on rent and hardly have enough left to buy the essentials for living.
Part of the problem with the age pension, is it was never meant to cover much more than everyday living costs, mostly targeted towards people who owned their own home, as many did back then. But since it’s inception, it has had to stretch to the cost of buying a mobile phone, paying for server and internet connection etc, all the ad-ons that didn’t used to exist.
I have enough in super to bury me, budget, (so I daren’t touch that) I have no ability to increase my meagre savings, I am paying 2/3 of my pension in rent, just managing to hang on to my 2 little companion dogs and fuel my 27 year old car. I’m at the bottom of the barrel, but I’m fortunate enough to still have a roof over my head, I am extremely frugal but I have to be. We who were late into the work force and superannuation, have had minimal help along the way to a comfortable retirement. Sorry if this sounds all mixed up, but I have so much to say, am am not sure how to say it. Thanks for reading.
Is Mr Ryder a renter or home owner? Crazy comments from obviously a blinkered view on where we are at the moment as a nation. Caravans and the right vehicle to tow it goes into the thousands of dollars what renters want is stability and a lifestyle that will keep them out of poverty. Sure more social housing for those on an age pension is wanted but the progress is slow, maybe revoke the submarine project and divert the recent transfer of $800 million to USA coffers into housing, we simply have our priorities totally amiss.