5 questions to ask about what to do with your home in retirement

But there are a couple of important things to consider. The first is the time and cost involved with selling one property and buying another, with packing, real estate fees and stamp duty, which can reduce the financial attractiveness of downsizing.

Another important issue is if downsizing frees up cash which is then invested or put into superannuation it could affect the retiree’s eligibility for the pension and other Centrelink benefits.

What do I do if I am still a renter when I retire?

Most retirees prefer to own their home because of the confidence and financial security it can provide, but not everyone is a homeowner.

If the retiree is fortunate to have sufficient money in savings or superannuation they could consider buying a property, but it’s not always the best option, says Ceravolo.

“Let’s assume for the sake of argument that someone’s renting, they retire, and they’ve all of a sudden got access to $300,000 or $400,000 in super that they hadn’t had access to before, then it’s a question of what makes financial sense,” he says.

Renting is not always the best option.Credit:Shutterstock

“Do I buy a property? With the cost of a house you’ve got somewhere to live, but you’ve got nothing to eat apart from probably Centrelink. The other alternative is would it make sense to keep renting and reinvest or convert your super into an income stream? Is that going to be sufficient to meet your lifestyle needs?

“One of the unfortunate things we have in Australia is this mindset that it’s the great Australian dream that you have to own a property. It’s not always the best option.”

What do I do with my home if I want to travel?

If retirees are only going on holiday for a week or two then there’s nothing more to be done than making sure someone is feeding the cat and watering the garden.

But longer trips require the house to be looked after and also provide the chance to produce income from the house.

Claire Mackay, an independent financial advisor at Quantum Financial on Sydney’s North Shore, says renting out the family home on Airbnb is a smart way to earn income to pay the council rates, insurance and so on, and potentially some extra.

“I had a client who did that. They took a year off and lived in Germany and they rented their house out for that period. That covered not only their cost of keeping their house here, but it helped them supplement some of their traveling over in Germany,” she says.

“That’s just being smart about what you’ve got.”

What if I still have a mortgage when I retire?

One option is to dip into superannuation once it becomes available at retirement age in order to pay off the remainder of the mortgage.

The opposing argument is that in the current low-interest rate, low-return investment landscape, leaving more money in the superfund might outperform the cost of maintaining the mortgage.

But Mackay says some people are better off clearing their mortgage because of the certainty that provides.

“But we could have a market turn and your balance could drop dramatically whereas your mortgage is still there. Even though interest rates have been on hold for some time, mortgage rates are creeping up. That tells you that the banks aren’t helping out people with mortgages. Therefore, I think personally in retirement you don’t want to be stressing out about that,” she says.

“Paying off your mortgage may be a smart thing because it just takes that worry away.”

What do I do if I want to take equity out of my property?

Apart from downsizing or renting out part of their home, retirees can also draw money out of their property with what’s known as a reverse mortgage.

The homeowner taps into the equity of their home by taking out a lump sum or a line of credit, with the loan typically being repaid when the house is sold or when the homeowner dies.

However, there are pitfalls, says Ceravolo.

“What you need to be prepared to sort of encounter at some point in the future is that you are paying interest on your interest. The size of a loan can actually increase exponentially,” he says.

“The issue there, and it can happen, is that the size of the debt at some point outgrows what the lender is prepared to lend on the asset value of the house.”

This will obviously have an impact on how much the homeowner is able to leave to their children.

Ceravolo says reverse mortgages are complex and difficult to understand products and anyone thinking of getting one should seek advice.

AustralianSuper manages more than $142 billion of members’ retirement savings on behalf of more than 2.3 million members from around 285,000 businesses. One in 10 working Australians is a member of AustralianSuper, the nation’s largest superannuation fund.

To learn more about what’s needed for the retirement lifestyle you want, head to Home in the Next Third.

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