The constant tinkering and growing complexity of superannuation can only serve to fuel a lack of confidence in the system and drive consumers to seek alternatives to fund or financially support their retirement says Homesafe Solutions MD Mr Peter Szabo.
Running counter to federal government objectives for Australians to fund their retirement through the current regime of industry, retail, corporate and SMSF structures – many will turn to the family home as an option seeing it as a better, simpler and relatively more secure alternative to the vagaries of the stock market, low interest rates and ongoing fiddling with legislation added Peter Szabo.
“While the present and projected growth in the pool of superannuation is impressive it masks a harsh reality confronting many pre retirees and that is they will be leaving the workforce underfunded. In fact the benefits of the superannuation guarantee that started in 1992 will see those retiring in the coming 20 years unable to afford the retired lifestyle they envisage today”.
“The bottom line for those still working currently is they will have to defer retirement and stay in the workforce for longer; and if they can afford it increase contributions to bolster their superannuation savings”.
Even some of the more optimistic estimates of the „comfortable average‟ (e.g. $650,000 for a couple by Association of Superannuation Funds) needed to fund a reasonable retirement for seniors belies the reality that many have superannuation balances nowhere near the elusive numeric average affirmed Peter Szabo.
Hence the importance and often overlooked value stored in the family home – equity that can be accessed to supplement the underfunded superannuants and low income senior retirees.
Often retired senior homeowners are advised in haste to sell, downsize and find a smaller home not taking into account the financial, emotional and community costs of doing so – especially when there are alternatives that can unlock the value of the property and monetize some of the value thus allowing them to remain in the residence.
“Since Homesafe‟s equity release product came onto the market just over a decade ago, it has been welcomed by many senior Australians as a solution far better and less stressful to downsizing or reverse mortgages”, said Peter Szabo.
“By releasing some of the stored value in the family home, Homesafe‟s equity release solution provides seniors with a lump-sum they can use to fund the savings, superannuation, longevity financial gap”.
Unlike their predecessors, today‟s younger workers will do better and benefit from the superannuation guarantee over their working lives. However they too will face unique challenges that will invariably impact on their ability to contribute consistently to superannuation.
Last week it was reported that Australian home ownership rates are declining and young people preferring to rent instead of buying a property in the current hotly contested residential property market.
Peter Szabo concluded, “Irrespective of whether they be current or past working generations for superannuation to provide sufficient funds to support a long and comfortable retirement requires consistent and regular contributions”.
“Continuing socio and economic uncertainty is the new norm for today‟s working Australians that these factors will impact on their ability to contribute sufficiently to superannuation. Add in constant government tinkering with the superannuation system and owning a family home can prove to be a much needed asset lifesaver for ongoing financial wellbeing when it is time to face an underfunded retirement!”
