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According to the 2016–17 Multipurpose Household Survey (MPHS), more Australians are remaining in the workforce beyond retirement age than ever before [1].

Australians aged 65 and over had a workforce participation rate of 17% for men and 10% for women, compared with 12% for men and 4% for women in 2006 (as at 2018).

Recent figures released by ABS suggest that increasing property prices, rising rates of mortgage and rental stress, and other financial responsibilities such as family support may extend working life for many Australians.

In a report authored by the Australian Institute of Health and Welfare (AIHW); it was noted that more Australians aged over 65 are renting or continuing to pay off their mortgage, with the percentage of people owning their homes without a mortgage falling from 79% in 2003-04 to 76% in 2015-16.

Changes In Income Sources.

If we look at the changes in income sources over between 2003 and 2015 it's clear the majority of Australians have not created a large enough asset base to self-fund their retirement.

This has resulted in a large proportion of the population relying on employment and the pension as their main source of income.

ABS figures show there's been an increase in the proportion of persons aged who reported a wage or salary as their main source of income, from 3.0% in 2003 to 7.2% in 2015. As of June 2017, 2.5 million people aged 65 and over received at least a partial age pension, representing 66% of older people.

The government is taking measures to reduce the financial strain and current reliance on the pension by increasing the Compulsory Superannuation contribution gradually from 9% to 12.5% between 2021 and 2025 {2}. However, these measures are only expected to delay or reduce the reliance on the pension for most Australians.

According to ABS statistics, the average superannuation balance by age is as below [1].

The Amount You Need For Comfort In Retirement.

According to the Association of Superannuation Funds of Australia’s Retirement Standard, to have a ‘comfortable’ retirement, single people will need $545,000 in retirement savings, and couples will need $640,000.

This translates to $43,200 per year for singles and $60,843 per year for couples.

Unfortunately, this calculation involves the retiree spending their entire superannuation balance and still taking a part pension. Regardless of the average superannuation balance for Australians at any age falls substantially below the required $545,000 for singles or $640,000 for couples.

Many superannuation funds estimate a superannuation balance of over $1 million is required to fund a comfortable retirement, of which Australians are falling dramatically short.

What is the significance of the above?

Since 2010, the Australian property market has experienced exponential price growth however, income growth has remained subdued. This has contributed to higher rates of household indebtedness and mortgage and rental stress.

Increasing housing costs have resulted in more mature-age workers reaching retirement age with a substantial mortgage debt outstanding, while also providing financial or housing support to their adult children.

With no way of being able to service existing debt in retirement, and with insufficient funds in super to sustain support a comfortable lifestyle, Australians are choosing to remain in the workplace for longer.

If this is not your desired outcome and you wish to retire from the workforce before 65 and not be a part of the 66% of the population who rely on the pension to fund their retirement, there is greater urgency to identify suitable asset classes that will allow you to realise financial freedom sooner.

How to achieve financial freedom sooner and live a comfortable life retirement.

Financial freedom is a position in which your assets are passively providing you with a sufficient income to retire on; it will not come without careful planning and action.

Australian’s typically turn to “growth assets” to build their asset base.

Over the past 20 years, the Australian share market has provided an average return of 8.8% per annum. Whilst shares have proven to be a strong performing asset class over the long term, they can also be extremely volatile. In recent times, we need only look back to the GFC in 2009 and COVID-19 in 2020 to see the devastating impact on the share market.

Over the past 20 years, residential property has provided an average return of 10.2% per annum. When this return is combined with the use of leverage; property investment returns can be extremely high, and utilised to build a substantial asset base.

Whilst the property market can experience a correction in house prices, it's widely considered to be a more stable asset class.

Clever investors have used the property to build an asset base of investments; which can be used to provide a retirement income.

I hope you found this article of value for your education as a property investor.

For further reading click below:

To chat further regarding your first or next property investment feel free to book in a call with me here.

Jarryd Gauci – Property Investment Consultant

P: (02) 9939 3249


[1] ABS- 6238.0 - Retirement and Retirement Intentions, Australia, July 2016 to June 2017

[3] ABS- 4430.0 - Disability, Ageing, and Carers, Australia: Summary of Findings, 2015

[4] Super Guide - Boost Your Superannuation

Disclaimer: When considering purchasing a property, it's always prudent to seek the advice of an appropriately qualified professional to determine which strategy is most appropriate for your individual circumstance.


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