Renting? You may need twice the super to retire well
Older renters need far more super than homeowners to retire comfortably. This is how big the gap really is, and what you can do about it.
Older Australians retiring without owning a home will need about double the superannuation of those with a paid-off property, if they want to enjoy a comfortable lifestyle, according to advocacy group Super Consumers Australia.
The 2026 Retirement Savings Targets for Renters report calculated that a typical single retiree who rented required $659,000 in super to ensure a financially secure future, compared to $322,000 for a retiree who occupied their own mortgage-free property. A couple renting would need a combined $786,000 in super compared to $432,000 for a couple who were homeowners.
Only 10% of retired homeowners were in financial stress, compared to almost half of retired renters, the report's author Katrina Ellis said.
"It wasn't a pretty picture and showed that retired renters were more than three times more likely to be in financial stress than homeowners," said Ellis, the deputy CEO of Super Consumers Australia.
How homeownership can improve retirement income
This latest study is another compelling argument of why it's vital to aim to have a fully paid off home when you retire.
Not only does it give you a roof over your head, it can also be used to improve your lifestyle in retirement. Many Australians enter retirement with more wealth tied up in their home than in their super and some may need to release some of this equity to give them more cash to enjoy their leisure years.
Two factors elevate the importance of homeownership in retirement planning. One is the fact that the family home is tax free - you pay no capital gains tax when you sell it. The other is that under our retirement system the family home is exempt from the assets test in assessing pension entitlements.
Why the family home matters under Australia's retirement system
Australia's retirement system is underpinned by three potential sources of income, a means-tested age pension, compulsory superannuation and voluntary savings inside and
outside super.
The government's 2020 Retirement Income Review explicitly included homeownership as part of the third pillar.
"The home is the most important component of voluntary savings and is an important factor influencing retirement outcomes and how people feel about retirement. Homeowners have lower housing costs and an asset that can be drawn on in retirement. Using relatively small portions of home equity through the Home Equity Access Scheme (HEAS) or similar equity release products can substantially improve retirement incomes for many people," according to the review.
What is a home equity release loan or reverse mortgage?
A home equity release loan, also known as a reverse mortgage, allows you to convert some of your home's value into cash for other purposes - renovations, travel, funding in-home care, helping family or simply meeting day-to-day living expenses - all without needing to sell the property or downsize.
The loans can usually be accessed as a lump sum, regular income or a line of credit.
These products are offered by lending companies and the Commonwealth government, which runs the HEAS through Services Australia. One big advantage of the HEAS is its low interest rate, 3.95% compared with 8% to 10% from private sector lenders. Its drawbacks include the fact it can take some time to be approved - often two to three months - and it's more restrictive than some other products in the marketplace.
It's only available to people of pension age - currently 67 - and the maximum amount available via the scheme is 150%
of the maximum pension rate. However, a retiree can choose to withdraw a smaller amount, can stop or start payments at any time, and can pay back the loan at any time. The HEAS was re-named and extended to self-funded retirees in July 2019 and the take-up has increased.
From July 2022 it was further extended so participants could also access up to two lump-sum advances a year, capped at 50% of the maximum annual rate of the age pension. At the same time a no negative equity guarantee was introduced, ensuring that the loan amount owed will not exceed the market value of the property used as security.
There are risks involved in all these schemes and it may have a long-term impact on your finances, so it's usually worth getting independent advice before you proceed.
What are the risks of using home equity in retirement?
If borrowing against your home is not for you, downsizing also provides another way of boosting your retirement income. This involves selling your current home and buying another and, in particular, can suit those who would prefer smaller and more convenient homes as they age.
The big drawback is that selling and buying is expensive. Costs include stamp duty, real estate agent fees and moving costs. Stamp duty on a $750,000 purchase, for example, varies from a low of $19,208 in the ACT to $40,070 in Victoria.
A plus for older people - 55 or older - is that if you sell a family home you have lived in for at least 10 years, you may be eligible to put some of the process of downsizing into your fund. This can amount up to $300,000 for each person and there is no upper age limit on taking advantage of this rule.
Can renting out part of your home increase retirement income?
If neither downsizing or borrowing against your home appeals, you could consider raising additional income by renting out part of your home.
This could work, in particular, if you have a home that would easily convert to dual occupancy or you're a person who doesn't enjoy living alone.
Remember it's important to make sure you are comfortable with anyone who is sharing your home and check out any potential tenants. You could also consider providing short-term accommodation.
Keep in mind that renting out part of your home will have tax implications, both income and capital gains, and could also impact any pension entitlements you receive from the government. You may need professional advice or check out the free financial advice information service provided by Services Australia.
How the Home Equity Access Scheme works
How it works is illustrated by case studies on the Pension Boost website (pensionboost.com.au). This company helps retirees apply for the HEAS for a fee ($440 for a pensioner and $660 for a non -pensioner).
It says it refunds these fees if the application is unsuccessful. And, of course, you can also apply for the scheme yourself through your Centrelink online account linked to MyGov for no fee. This site also enables you to calculate how much you can borrow.
How one retiree used HEAS to boost her income
One case study on pensionboost.com.au concerns 80-year-old Louise who owns a Brisbane apartment, valued at $525,000.
Louise is a single full pensioner who needs extra income to help pay for in-home care. It's estimated she can draw down $13,822 a year for 24 years with no impact on her pension, giving her a total annual income of $41,496 a year. After 10 years she would still own 73% of her property and after 20 years, 45%.
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