Your next forever home

By Sam Powell

This article was originally published on smh.com.au.

In 2019, 51-year-old Katrina Bart and her husband Chris, 57, had an epiphany after reading an influential investment book. They realised they didn’t want to slog away at their jobs forever. They wanted to set themselves up to retire.

So they sold their home in Newcastle and bought a less expensive house at Runaway Bay on the Gold Coast, which left them debt free and ready to retire.

The Barts are part of a growing number of Australians who are successfully balancing financial, emotional and lifestyle factors when they buy a retirement home. They are finding their forever home: a home they plan to live in for the rest of their retirement.

“We want to stay in this place for as long as we possibly can,” Katrina says. “We like it here and we don’t want to have to downsize again.”
 

Learn more about kick starting your retirement planning or speak to a financial adviser.
 

Forever home factors

A new MLC report “The roof over retirees’ heads” has highlighted the vital role that homes play in the retirement of Australians.

Jason Marler, Head of Actuarial at MLC Wealth, says many are deciding where they want to live in retirement from 50 years of age. “This often coincides with children growing up and moving out of home,” he says.

Marler says MLC research has found key elements that create a satisfying life in retirement include relationships, friendships, community and safety.

Individual housing needs in retirement vary, Marler says, but a “forever” home should factor in later stages of life when mobility and health declines. That means houses with better access, less upkeep and less maintenance.
 

Deciding to downsize

Marler says staying in an existing pre-retirement home, even if isn’t perfect, does have benefits. “It can provide stability and allow people to stay connected to the local community and family if they are close by.” He says that existing homes can be modified to, for example, improve access, such as replacing stairs with a ramp.

But a growing number are choosing to downsize because they find their existing homes too big, and they’re struggling to clean, garden, and maintain upkeep.

According to the MLC report, the proportion of retirees downsizing their homes has increased sharply. Some 22 per cent of 65 to 74-year-olds downsize their home; and 19 per cent of over 75s.

Marler says downsizing can cut ongoing financial expense and upkeep. He notes that around 36 per cent of retirees in the 60 to 65 age bracket retire with a mortgage, and downsizing allows them to release equity to pay off the housing debt.

The Government’s Downsizer Contributions Scheme, which started July 1, 2018, lets over-65s contribute up to $300,000 ($600,000 for a couple) from their house sale to superannuation.

Downsizers should speak with a financial adviser to determine how releasing home equity may impact Age Pension entitlements.
 

The sea change and tree change

Others are finding their forever home by relocating to warmer and more relaxed environments that often have cheaper house prices than the major cities, the so-called “sea-” and “tree-changers”.
 

Moving to retirement locations before retirement

The MLC report notes that Australians are actually choosing to move to retirement locations before they retire. Those aged between 55 and 64 are shifting from the major cities to smaller cities and regional areas, with the “Sunshine State” of Queensland the most popular destination.

The Barts also decided to move to Queensland. Not only was family there – Chris’s parents also live on the Gold Coast – but they could take advantage of more affordable house prices and become debt-free before they retire.

The Barts sold their 130-year-old heritage property in Newcastle’s Cooks Hill for $1.04 million, then bought their Runaway Bay house for just $620,000 in a secure estate, which allowed them to wipe out their mortgage.

Katrina says the 3-bedroom house is just 12 years old and very large and modern. “If we had stayed in Newcastle, we would have had to downsize to a three-bedroom apartment,” she says.

The Barts are now in “semi-retirement”, Katrina says. She will continue to work as a clairvoyant, and Chris will remain a consultant to his recently sold business, Australian Heritage Restoration.
 

Planning for happiness

Marler says that housing is a vital factor in retirement strategies. To make the right decision around housing and to improve retirement outcomes, he advises seeking the advice of a financial adviser and talking with family. But the rewards are significant when a ‘forever’ retirement home is found.

Disclaimer: The information contained in this communication is general in nature and does not take into account your objectives, financial situation or needs. You should consider whether it is appropriate for your personal circumstances prior to making any investment decision.