Ask Paul: I just don't want to rent in retirement


Dear Paul,

I'm a 40-year-old single mum and want to buy a place of my own in the future. Should I invest my savings each week into shares or in a high-interest savings account?

I'm not sure when or if I will ever be able to afford a home on my own, so I don't really have a timeframe.

ask paul clitheroe i dont want to rent in retirement

I can save roughly $20,000 a year. The cheapest duplex/apartment in my area costs more than $500,000. I just don't want to rent in retirement. - Abbey

When it comes to your money, Abbey, you have two key things going for you.

First up, you are 40 years young, so that gives you a very long time to achieve home ownership.

Second, you are saving $20,000 a year. That is a significant amount and tells me you must have a pretty well-paid job and you have good financial discipline.

I strongly agree with your goal to own a home. Renting in retirement is okay, but it leaves you exposed to landlords not renewing your lease and uncertain rent increases. A paid-off home removes those risks and gives you a lower cost base so your savings and possibly an aged pension can be directed to essentials and lifestyle costs.

If you already have a deposit, in this softer property market I'd be looking around and chatting to lenders about how much they will lend you. If not, in your shoes, I'd be saving your $20,000 a year into a high-interest account. Shares are great for a minimum timeframe of seven years, but not the place for a home deposit. Sure, they may go up 50% in a few years or, for all I know, down 50%.

It looks like higher interest rates are knocking property values about and I don't see rates dropping for some time, so I reckon this is a great time to build your savings and start to plan for home ownership.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. View our disclaimer.
Lorraine Condor
January 5, 2023 11.27am

Perhaps the NSW government's Shared equity scheme may be worth looking into if you have children under 18, info on Revenue NSW website.