Renting in retirement: how much more will you need in super?
As home affordability remains a problem, more and more Australians may end up renting in retirement.
That will mean they will need more money to fund their retirement. How much more?
Well, according to research by the consultancy Milliman, a retiree renting a one-bedroom unit in Sydney would require more than $500,000 in extra superannuation savings to fund the same lifestyle as a homeowner.
The analysis shows that a 65-year-old "urban renter" retiree spends about $15,000 a year more than the nation-wide retiree, with nearly half of their budget allocated to rent (even after Centrelink rent assistance).
And this will continue to rise.
"While retirees spend less on most categories of expenditure (except health) as they age, rental costs tend to continue rising. By age 85, urban renter retirees are spending more than $20,000 a year above the expenditure of nation-wide retirees who own their home," says Milliman.
The finding raises significant questions about government policies, which tend to favour homeowners. Renters receive relatively low levels of subsidy (Centrelink rent assistance) while the often-substantial value of the family home is exempted from the age pension means test, says Milliman.
"It also underlines the importance of super funds delving deeper into their membership to understand their circumstances before offering general advice. In some cases, older Australians may be better off diverting savings towards homeownership rather than superannuation," says Milliman.