Queensland couple Carole and Adrian Chick found themselves approaching retirement with $150,000 debt and uncertainty over what came next. (Source: Supplied)
The idea that Aussies can pay off their home loan, accumulate superannuation in the background and be set up for a comfortable retirement is no longer a given, a financial adviser has warned. More Aussies are approaching retirement with mortgage debt, with the trend expected to continue as Aussies buy later in life and take out bigger mortgages, all in the face of stubbornly higher interest rates.
Queensland couple Carole and Adrian Chick spent decades running a newsagency and had assumed their retirement would take care of itself. But as they approached 60, they had a mortgage on their Gold Coast home and a business loan worth a combined $150,000 and realised they had no strategy for what would come next.
“We didn’t think we were in a position to do anything really, other than finish renovating our house, sell it and maybe buying something smaller and then just using the money and hoping it would outlive us,” Adrian told Yahoo Finance.
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Financial adviser Gareth Croy said it was a common situation he was seeing among older clients – asset-holding, equity-rich Aussies who were relying on a strategy that might have worked for their parents or grandparents but is no longer relevant today.
“That is the misconception of general Australia,” the Your Future Strategy managing director told Yahoo Finance.
“A generation or two ago, if you worked hard, paid off your home loan and got to retirement, that was success, and it probably looked like a comfortable retirement.”
Croy said people were entering retirement assuming the capital they had in superannuation would be enough to sustain their pre-retirement lifestyle.
“In a lot of cases, that is just simply not the case,” he said.
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A growing number of Aussies are facing their retirement years with mortgage debt. Census data found that over the past 20 years, the number of Aussies aged 55 to 64 who own their homes outright has nearly halved.
Research by Digital Finance Analytics in 2024 found that about three-quarters of retirees with a mortgage owed more than they had in superannuation, while more than 50 per cent of 55 to 65-year-olds planned to sell their property or use their super to repay their mortgage.
The average loan balance for older Aussies with a mortgage was about $190,000, but some owed up to $500,000.
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In comparison, the most recent ATO data shows males in the 60 to 64 age bracket have a median balance of $219,773, while females have $163,218.
Croy said the ability to pay down debt wasn’t as easy as it once was, as incomes fail to keep up with borrowing costs.
“If you look at debt servicing as a portion of household income, it’s a lot higher than it was 20 years ago. Naturally, that tells us that incomes haven’t kept up with borrowing,” he said.
Aussies will often make a lump sum withdrawal out of their super to pay off their home loan, Croy said, but this then has knock-on impacts on capital and the amount you have left to fund your retirement.
Croy has encouraged Aussies to start planning for retirement early and consider what strategies they can put in place to ensure they can live the lifestyle they want, such as investing underutilised capital or boosting their superannuation.
“It’s very much tailored or customised to each individual or each couple. But going through the exercise of what’s our lifestyle look like or what do we want to do in retirement, and how much capital do we need invested to generate the income to do that?” he said.
Carole and Adrian ended up seeking advice and sold their home on the Gold Coast, which allowed them to pay off their outstanding loans and downsize to a smaller place in Redcliffe mortgage-free.
The Chick’s are now both retired and say they have been able to achieve a comfortable retirement through some careful planning. (Source: Supplied)
The couple, who moved to Australia from the UK decades ago, also set up an SMSF and moved over their UK pensions.
Carole was able to retire at 61, while Adrian worked part-time for a few more years and retired at 65.
The couple purchased an investment property in Nudgee through their SMSF, which they sold when interest rates began rising. Using the money from that property sale, they have now bought a portion of an investment property in Perth.
While the cost of living has increased, Carole said the couple, now 66 and 67, had been able to live comfortably in their retirement and weren’t worried about the future like they once were.
They are also doing things they “never dreamt in a million years” they would be able to do, Carole said, like travelling to visit their kids who live overseas.
“It’s just nice to know that is an option, we can think about doing that, which I don’t think we really thought we would be able to do before.”
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