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Start Making Sense Ep 5: Why home ownership is the fourth pillar of retirement income policy

There are three pillars to Australia’s retirement income policy: the age pension, compulsory super, and voluntary retirement savings.  

The current review is also considering home ownership as an important part of the retirement system. And that’s a good thing, because CoreData research shows that home ownership is an important driver of retirement satisfaction.

At a time when the super industry is processing billions of dollars of early-release payments to members, reducing their future balances, it’s important to consider the bigger picture.

And the bigger picture is that there are more important things in retirement than having a high super balance. In the real world, retirement outcomes are about more than money.  

In fact, when we define retirement success as members feeling prepared, confident and satisfied, we see that home ownership is one of the most important statistical drivers of a member’s retirement outcomes.

Our Best Possible Retirement Index provides a standardised measure of retirement satisfaction. It provides insight into what’s really important to Australians.

The index produces a score from zero to 100. The mean score is around 50, with 100 being perfect retirement satisfaction, and zero being the absolute worst-case scenario.

In these charts we can see the positive impact of home ownership on retirement outcomes.

The retirement outcomes are measured using our Best Possible Retirement Index. The higher the score the better the outcomes. 

Click on the chart to enlarge

When we compare the blue bars, we see that retirees who own a property have much higher retirement satisfaction.

People who own their home with no mortgage left to pay scored 62.8 on the retirement satisfaction scale. Those who still have a mortgage score just 49.4, while those who don’t have a property at all score a measly 37.

A similar story emerges for pre-retirees, depicted by the orange bars.  

Click on the chart to enlarge

Pre-retirees who own their home feel much better prepared and more confident than those who don’t.

Pre-retirees who own their home with no mortgage left to pay score 61.4 on the retirement outcomes scale. Those who still have a mortgage score 50.8, while those pre-retirees who don’t have a property at all are comparatively miserable. They score just 41.3.

The data is clear. Home ownership is an important contributor to a successful retirement.  It’s an important fourth pillar of the retirement system.

At a time when home ownership for younger generations appears out of reach, perhaps early access to super is not the biggest issue.

If you’d like to learn more about the real drivers of retirement outcomes and what super funds should be doing now for the benefit of members, give us a call.

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