Many Australian retirees will not have enough money to live comfortably as most of their wealth will be tied up in the family home, the head of Homesafe Solutions has warned.
Homesafe Solutions managing director and founder Peter Szabo says retirees’ income will be comprised of insufficient savings and superannuation which will fall short of the funds required to maintain a comfortable and dignified life.
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“Another reality is that many will enter retirement with a mortgage over the family home that will be required to be serviced without the benefit of a salary or wage. Or in the worst case scenarios, asked to be repaid in full by the lender,” he said.
“Seeing the value of their homes steadily rising over recent years, many will be tempted to succumb to the urge to sell the home and downsize to more modest accommodation.
“Unfortunately many have realised that the decision to sell the family home in order to access the equity, retire debt and fund the retirement savings gap was made in haste and will not deliver the desired financial and social outcomes”.
According to Mr Szabo, those who downsize are usually overly optimistic. They often want their new property to be within close proximity to the CBD and have two or three bedrooms to accommodate family, friends and grandchildren when they visit.
Mr Szabo warned that downsizers soon realise downsizing can be a very expensive undertaking when transaction costs such as legal fees, stamp duty, moving charges and storage are factored in.
“There are far better and more appropriate alternatives to downsizing for seniors that allows access to the equity in the family home to fund a comfortable and dignified retirement,” he said.
“Homesafe’s equity release offering is one such option that allows retirees to live in the comfort of their home in a familiar and secure environment surrounded by friends, family and community in which they have lived for many years”.
Mr Szabo said downsizing and relocating to a new home can be emotionally exhausting for retirees seeking a solution to address their retirement financial gap.
“Furthermore, as retirees age, illness or death of a spouse amplifies stress, especially if residing in a strange and unfamiliar area with no long standing links and reassuring attachments to neighbours, friends and family,” he said.
“All very important factors that must be considered carefully before deciding to downsize, especially when Homesafe’s equity release offering can provide both a financial solution and peace of mind”.