Renting in Retirement: Is it possible?

As record numbers of Australians transition into retirement, considering your cost of living and comparing it to your expected average annual retirement income is a crucial step in retirement planning. For many Australians transitioning into retirement, the increasing cost of housing continues to be a burden on people’s ability to pay off their property in their lifetime. This can lead to a few common scenarios — selling the property prior to retirement and renting, continuing to pay down the mortgage and leaving beneficiaries with an asset that has debt owing, or long-term renting due to lack of affordable properties on the market. Naturally, this is a stressful situation for anyone to think about, whether you’re about to retire or you’re a young adult watching your parents prepare for their retirement.

How much money do you need to retire comfortably in Australia?

According to the Association of Superannuation Funds of Australia (ASFA), there are two broad categories of lifestyle in retirement — comfortable or modest. A comfortable retirement affords people with a good car, top-tier private health insurance, dining out on regular occasions, travel, and the other lifestyle factors you enjoyed while working. In a modest retirement, you may be entitled to the Age Pension, but you’ll only be able to afford a basic lifestyle, with limited funds available for small luxuries.

To live a comfortable retirement, you need to have a nest egg of approximately $545,000 for single people, and $640,000 for a couple in super. These nest eggs would generate an income of $43,000 for single people and $61,000 for a couple.

For a modest retirement, you require a much smaller nest egg around $70,000 for single people and couples in super. This modest nest egg is all that’s needed for a modest retirement because the Age Pension and associated pension supplements, if eligible,  will may cover most of your living expenses.

How can renting affect your retirement income?

While these numbers help you understand what your nest egg should be before you retire and what you can expect your annual income to be, things become complicated if you don’t own your home. The ASFA’s calculations assume that retirees will own their property before retirement, therefore not needing to allocate money towards mortgage repayments or rent in the household budget. However, the Australian Bureau of Statistics (ABS) report that around 285,000 Australian households are renting in retirement. While renting can afford you the ability to live in a more desirable location than if you owned a property, the cost of your rent still needs to be factored into your retirement planning and therefore the numbers provided by ASFA need to be tweaked if you are renting in retirement.

Can you rent and afford a comfortable retirement?

Based on the ASFA’s calculations, if you live in Sydney retired couples and singles would need $1,166,000 or $1,045,000, respectively to afford a comfortable retirement lifestyle and rent. While this number may be slightly lower for other cities and regional centres where rental prices are lower, it provides a more realistic calculation of exactly how much your retirement nest egg should be if you’ll be renting retirement. Having a greater understanding of how you can structure your super funds in the accumulation and drawdown phases can help you be better prepared.

As with other passive investments, you need to ensure you’re not drawing down so much capital each year that your balance isn’t compounding at an adequate rate to provide you with enough retirement income for the rest of our life. For example, if the average return on your super balance is 9% per year, it is wise to drawdown 4% or less of your balance each year so you can maintain adequate funds throughout retirement, which may be longer than you think. A good financial adviser can work through the calculations based on your individual circumstances, factoring home ownership or rent and any Centrelink benefits you are entitled to, so you can live the retirement lifestyle you want without a fear of running out of money.

What are the alternatives to renting in retirement?

If you don’t own a home and you’re not keen on renting, then there are other options. Maybe you want the freedom of living in a motor home, setting up in a modern tiny home, basing yourself in a retirement village, securing granny flat rights, or, living on a cruise ship. While these options may not be for everyone, the very nature of retirement, can give you the flexibility to live a nomadic lifestyle with a smaller carbon footprint. If you’re interested in staying in one place, a retirement village or granny flat can provide you with that lifestyle.

In conclusion

There’s no one size fits all when it comes to your retirement dreams and your retirement finances. But, if you don’t own your home, you’ll need to factor the cost of rent into your retirement planning to ensure your nest egg and the annual income you’ll draw is enough to provide your desired retirement lifestyle.

Want to know more? Work through your options with one of our financial advisers.

The link between financial stress and mental health

If you’ve ever laid awake at night thinking about your finances you’ll know: financial stress can be debilitating. What you may not be aware of is the strong link between financial stress and mental health.

According to the Australian Institute of Health and Welfare, 4.2 million Australians received mental health related prescriptions from their doctors over the 2017-2018 period.

Though governments annually spend over $9 billion on mental health, there’s a continuous need for more resources, funding, and understanding around mental health issues.


What is mental health?

The term, mental health, refers to a wide range of health and behavioural issues that vary in severity and duration. Among the most common mental health issues in Australia are depression and anxiety.

While the causes of depression and anxiety are varied, financial stress is a common theme.


What is financial stress?

Financial stress is the all-consuming worry about money. Mortgage stress, in particular, is defined as needing to use more than 30% of the household income to cover mortgage payments.

A report by ratings agency Moody’s, stated that the number of Australian mortgages more than 30 days overdue was at its highest level for five years, (1.58%).

According to Relationships Australia, financial pressures are the number one contributor to relationship breakdown.


Signs of financial stress

Recognising financial stress before it gets out of hand is a step towards taking back control of your life. Some signs are:

  • arguing with loved ones about money
  • difficulty sleeping
  • feelings of anger, withdrawal or fear
  • mood swings
  • loss of /increased appetite
  • increased use of alcohol or other substances
  • thoughts of self-harm.


Reducing financial stress

Financial problems can happen to anyone. A sudden illness, retrenchment, or an unexpected expense may throw your budget out of kilter. However, there are steps you can take to get your finances back under control:

  • seek independent financial counselling. Check out MoneySmart’s website, for help locating a counsellor near you
  • speak to your lender about restructuring your mortgage or consolidating credit cards, etc
  • speak to your creditors about setting up a payment plan
  • work with your financial adviser to develop a realistic budget
  • contact the National Debt Helpline on 1800 007 007.


How can you manage stress?

Emotional stress can find you obsessing over ways to solve problems, ultimately affecting your behaviour and interaction with others. Take care of your health by:

  • talking with a trusted friend or professional counsellor
  • keeping a journal
  • distracting yourself by going for a walk, seeing a movie or playing sport
  • practicing meditation to take your mind to a ‘quiet place’
  • taking back control and including your partner in the discussion about ways you can do this.


Where to find help for mental health issues

If mental health issues affect you, or someone you know, consider:

  • speaking to your doctor
  • calling Beyond Blue on 1300 224 636 or chat online
  • calling Lifeline on 13 11 14 or chat online
  • visiting Black Dog Institute at


Saturday 10 October 2020 is World Mental Health Day, which aims to remove the stigma attached to mental health through awareness and information, but you don’t need to wait until then to reach out for help. Speak to trusted people in your life about your struggles and need for help. By removing some of the misconceptions around mental illness, we build a caring community in which those that are affected are more likely to seek the help they need.

To chat with one of our team members about your finances, get in touch today.