The renting trap snaring retirees – and how to avoid it
<p><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;">It has long been known that renting in retirement is associated with a lower quality of life. Understanding the causal factors can help you avoid a similar fate. There are many reasons why renting in retirement can be problematic. For a start, figures on how much income we need to retire comfortably usually assumes that you own your home – the cost of rent isn’t included. So, anyone using this as a guide falls well short, potentially by 20-40 per cent.</span></p>
<p><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;">Additionally:</span></p>
<ul>
<li><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;">Rent usually eats up a larger portion of retirement income than home ownership.</span></li>
<li><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;">Over time, rents typically keep rising while mortgage debts reduce.</span></li>
<li><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;">Home ownership provides equity to use for other investments, further boosting retirement income.</span></li>
<li><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;">Downsizing homeowners can make an additional superannuation contribution from the sale proceeds, which renters cannot.</span></li>
<li><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;">Homeowners can make accessibility modifications to meet their needs as they age, like installing ramps or rails.</span></li>
<li><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;">Homeowners have greater stability and aren’t subject to eviction (and moving costs) at short notice.</span></li>
</ul>
<p><span style="border: 1pt none windowtext; padding: 0cm;"><strong>How big a problem is it?</strong></span></p>
<p><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;">Numerous studies have highlighted the growing scale of the problem faced by renting retirees. </span><a style="color: #467886;" href="https://grattan.edu.au/report/renting-in-retirement-why-rent-assistance-needs-to-rise/" target="_blank" rel="noopener"><span style="font-family: Aptos, sans-serif; border: 1pt none windowtext; padding: 0cm;">The Grattan Institute</span></a><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;"> recently found that “two in three retirees who rent in the private market live in poverty,” and that “most older working Australians who rent do not have sufficient savings to keep paying rent in retirement.”</span></p>
<p><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;">The rental trap is also not exclusive to low-income earners. </span><a style="color: #467886;" href="https://everybodyshome.com.au/resources/priced-out-priced-out-an-index-of-affordable-rentals-for-australian-voters/" target="_blank" rel="noopener"><span style="font-family: Aptos, sans-serif; border: 1pt none windowtext; padding: 0cm;">Everybody’s Home</span></a><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;"> recently found Australians earning $100,000 per year – above the </span><a style="color: #467886;" href="https://www.abs.gov.au/statistics/labour/earnings-and-working-conditions/employee-earnings/latest-release" target="_blank" rel="noopener"><span style="font-family: Aptos, sans-serif; border: 1pt none windowtext; padding: 0cm;">national median of $1,396 per week</span></a><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;"> ($72,592 per year) – are struggling to pay their rent.</span></p>
<p><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;">The end result is that homelessness is a growing problem for over 55s – particularly women. </span><a style="color: #467886;" href="https://www.mercyfoundation.com.au/our-focus/ending-homelessness/older-women-and-homelessness/" target="_blank" rel="noopener"><span style="font-family: Aptos, sans-serif; border: 1pt none windowtext; padding: 0cm;">The Mercy Foundation</span></a><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;"> notes that homelessness among these women grew 6.6 per cent in the 2021 Census, following a huge 31 per cent increase in the 2016 Census.</span></p>
<p><span style="border: 1pt none windowtext; padding: 0cm;"><strong>What is causing it?</strong></span></p>
<p><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;">Not owning your own home in retirement is obvious answer here. But there are various contributing factors that see people forced to rent later in life, including losing their home and being financially unable to replace it.</span></p>
<p><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;">These include:</span></p>
<ul>
<li><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;">Divorce/separation – court and legal fees, counselling costs, division of assets (including the family home).</span></li>
<li><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;">Pre-retirement chronic illness – time out of the workforce for both the patient and their partner to care for them, loss of income, less going into super, and higher healthcare costs.</span></li>
<li><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;">Death of a partner – up-front bills like funeral expenses, surviving partner suddenly on a single income.</span></li>
<li><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;">Elder abuse – an estimated </span><a style="color: #467886;" href="https://www.aihw.gov.au/family-domestic-and-sexual-violence/population-groups/older-people#abuse" target="_blank" rel="noopener"><span style="font-family: Aptos, sans-serif; border: 1pt none windowtext; padding: 0cm;">one in six older Australians experience elder abuse</span></a><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;">, including 2.1 per cent facing financial abuse.</span></li>
<li><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;">Domestic violence – fleeing abusive relationships with little or no money and assets.</span></li>
<li><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;">Climate change – loss of uninsured home/other assets as storms, floods, cyclones, and fires increase in frequency and severity.</span></li>
<li><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;">Scams – </span><a style="color: #467886;" href="https://www.nasc.gov.au/news/australians-better-protected-as-reported-scam-losses-fell-by-almost-26-per-cent" target="_blank" rel="noopener"><span style="font-family: Aptos, sans-serif; border: 1pt none windowtext; padding: 0cm;">Australians lost $2 billion to scams</span></a><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;"> in 2024.</span></li>
<li><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;">Gambling – </span><a style="color: #467886;" href="https://aifs.gov.au/research/research-snapshots/gambling-participation-and-experience-harm-australia" target="_blank" rel="noopener"><span style="font-family: Aptos, sans-serif; border: 1pt none windowtext; padding: 0cm;">46 per cent of gamblers are at risk of harm</span></a><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;">, including losing their home.</span></li>
<li><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;">Housing unaffordability – soaring prices (and stamp duty) push home ownership out of reach.</span></li>
</ul>
<p><span style="font-family: Aptos, sans-serif; color: #242424; border: 1pt none windowtext; padding: 0cm;">Women often face the brunt of these effects, disadvantaged by the gender pay gap, having less in superannuation, often having primary or sole custody of children, and having less secure employment.</span></p>
<p><span style="border: 1pt none windowtext; padding: 0cm;"><strong>How can you protect yourself?</strong></span></p>
<p><span lang="EN-GB">Thankfully, there are steps we can all take to protect ourselves and our retirement:</span></p>
<ul>
<li><span lang="EN-GB">Get your foundations right for a strong financial footing – emergency fund, spending and investment plan, insurances, superannuation, estate planning.</span></li>
<li><span lang="EN-GB">Make decisions jointly – letting your partner control finances alone means more risk for you and less spending oversight.</span></li>
<li><span lang="EN-GB">Have contingency plans – your own bank account, independent financial and retirement plans, insurances, and back-up plans just in case.</span></li>
<li><span lang="EN-GB">Get into the market ASAP – even a cheap investment property far from where you live is a financial asset and a roof over your head if needed.</span></li>
<li><span lang="EN-GB">Consider co-ownership – if you can’t afford to buy property alone, split the purchase and ongoing costs with an adult child, sibling, or close friend. Alternatively, sub-let a room to offset the costs.</span></li>
<li><span lang="EN-GB">Don’t settle for less – avoid accepting an unreasonable separation settlement just to resolve things quickly.</span></li>
<li><span lang="EN-GB">Be alert – know the warning signs of scams, elder abuse, gambling addiction and domestic violence to avoid losing everything.</span></li>
<li><span lang="EN-GB">Get independent advice – professional legal, accounting, and financial advice can help you build financial independence, create safeguards, and recover faster if disaster does strike.</span></li>
</ul>
<p><span lang="EN-GB">Overall, the best thing you can do is simply to act. By being proactive instead of burying your head in the sand, your future self stands a much better chance of enjoying a comfortable retirement!</span></p>
<p><strong><span style="line-height: 18.4px; font-family: Calibri, sans-serif; color: #242424;">Helen Baker is a licensed Australian financial adviser and author of the new book, <em>Money For Life: How to build financial security from firm foundations (Major Street Publishing $32.99).</em> Helen is among the 1% of financial planners who hold a master’s degree in the field. Proceeds from book sales are donated to charities supporting disadvantaged women and children<em>. </em>Find out more at </span></strong><a style="color: #467886;" title="http://www.onyourowntwofeet.com.au/" href="http://www.onyourowntwofeet.com.au/" target="_blank" rel="noopener"><strong><span style="line-height: 18.4px; font-family: Calibri, sans-serif;">www.onyourowntwofeet.com.au</span></strong></a></p>
<p><strong><em><span style="line-height: 18.4px; font-family: Calibri, sans-serif; color: #242424;">Disclaimer: The information in this article is of a general nature only and does not constitute personal financial or product advice. Any opinions or views expressed are those of the authors and do not represent those of people, institutions or organisations the owner may be associated with in a professional or personal capacity unless explicitly stated. Helen Baker is an authorised representative of BPW Partners Pty Ltd AFSL 548754.</span></em></strong></p>
<p><em><span style="line-height: 18.4px; font-family: Calibri, sans-serif; color: #242424;">Image: Shutterstock</span></em></p>
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