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An increasing number of Australians in their retirement years owe money on their mortgages thanks to increasing house prices in contrast to a generation ago when most people left the workforce debt-free.<\/p>\n
In the 2019-20 financial year, the portion of homeowners aged 55 to 64 with mortgage debt reached 54 per cent, a significant jump from 23 per cent in 2002-03.<\/p>\n
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Those with debt in later life need a plan on how the debt will be retired.<\/span>Credit: <\/span>AFR<\/cite><\/p>\n Australian Bureau of Statistics (ABS) figures show the age at which people retire is increasing, giving them longer in the workforce to pay off their debt. The average retirement age of those retiring in 2020 was 64, compared to just under 55 for those who retired in 2002.<\/p>\n For some, their mortgage debt will be small, but carrying a large debt into later life leaves you more exposed if your plans were to go awry, says Rachel ViforJ, professor of economics at Curtin University, who researches housing economics.<\/p>\n \u201cThey may have every intention of working for longer, but could have health problems,\u201d she says.<\/p>\n They will have seen their variable mortgage interest and minimum repayments rise since the Reserve Bank of Australia started its rate-rising cycle in May last year, leaving them with less capacity to save for retirement, Professor ViforJ says.<\/p>\n \u201cWe may start to see more people [who satisfy a condition of release] drawing on their super to pay off their mortgage debt; though, it\u2019s not showing up in a big way in the data yet,\u201d she says. \u201cThat could be because the average super balance of many older Australians is still quite low.\u201d<\/p>\n The portion of homeowners aged 55 to 64 with mortgage debt has grown markedly since Professor ViforJ first compiled the figures from Australian Bureau of Statistics (ABS) data for this masthead five years ago, and has been on the rise since 2002-03.<\/p>\n It was 54 per cent in 2019-20, the latest year for which the ABS data is available, from 47 per cent in 2015-16 and 23 per cent in 2002-03.<\/p>\n The portion of homeowners older than 65 with mortgage debt was 4 per cent in 2002-03 and 13 per cent in 2019-20, though it has stabilised at about that level since 2015-16.<\/p>\n Jonathan Philpot, wealth management partner at HLB Mann Judd, says many of those still working in their 60s would want to be making salary sacrifice contributions into their super because of the tax breaks.<\/p>\n Increasing payments on the mortgage probably be the next best thing to do if you have spare money after making salary sacrifice contributions to maximum allowable annual cap, he says.<\/p>\n For those who are retired and in pension phase, the decision whether to increase the mortgage repayments is probably \u201cline ball\u201d, Philpot says.<\/p>\n That is because super can be expected to pay about 6 per cent over the longer term, which is roughly equal to the interest rate of the typical variable rate mortgage, he says.<\/p>\n \u201cIf they are entitled to the age pension, they should put some of the money they draw from their super account towards their mortgage,\u201d Philpot says.<\/p>\n The money in a super pension account is counted under the assets test for the age pension and the strategy could mean they obtain more of the age pension, he says.<\/p>\n