Majority of homeowners face ‘debt cliff’ heading into retirement

• Australians aged 50+ are expecting to retire with more debt than ever before
  
• Over half prepared to shift their lifestyle to save more in retirement
• Consistent with ABS data showing 4x increase in household debt levels for over 55s in last 20 years

New research by AMP shows that older Australians are expecting to head into retirement with higher levels of debt, presenting a growing challenge to them achieving financial confidence in later years. 

For Australians aged 50 and over AMP’s research found:

• Almost 9 out of 10 believe they will still be paying off a mortgage when they retire
• 1 in 3 are not confident their nest egg will provide for an adequate lifestyle
• 3 in 5 believe staying in their family home is more important than a higher income in retirement
• Over half are prepared to change their lifestyle to save more money in retirement

With the rising cost of living and inflationary pressures, together with a national housing affordability crisis, many older Australians are facing the reality of missing out on the financial security of owning their home when they retire.

According to the data, fewer than 1 in 10 Australians aged 50 and over expect they will have enough savings for retirement and 1 in 9 expect to have more than $250,000 in unpaid debt when they retire. More than 2 in 5 said they would opt to sell and downsize to reduce their debt, echoing fears and concerns about not being able to afford a comfortable lifestyle in retirement.

Rising household debt a real worry

Australians are living longer and levels of outstanding debt on assets like the family home mean many are facing a looming debt cliff once they hit retirement. 

According to ABS data, average household debt levels have quadrupled over the past 20 years for older Australians aged 55 and over, rising from $62,000 in FY03-04 to $242,000 in FY21-22¹. 

This increased level of household debt is seeing more Australians sacrifice a better lifestyle to help cope with the rising cost of living and mounting pressures to pay off the mortgage.

AMP Director, Retirement, Ben Hillier said: 

“For as long as we can remember the Australian dream has been debt-free home ownership, which provides the financial foundation and security for a comfortable retirement. 

“While home values and super balances are increasing, research shows that more and more Australians will be retiring with increasing levels of household debt, leaving more retirees exposed to interest rate fluctuations, and presenting an evolving challenge in financial planning for retirement.

“Rising retiree debt needs to be acknowledged as an issue by industry, Government and regulators so that we can work together to provide Australians with greater financial confidence in their retirement. 

“Central to this is providing easier access to more affordable financial advice, which, encouragingly, is being addressed by the Quality of Advice Review.

“Industry also needs to innovate to develop solutions which unlock the full value of a retiree’s balance sheet to maximise income, taking into account home equity values, superannuation balance and household debt.”

Ways to learn more about your retirement: 

1. Read AMP’s Retirement whitepaper: See AMP’s Retire with Confidence whitepaper, which has plenty of insights and strategies for maximising your income in retirement. 
2. Sign up to our podcast: Our Simplifying Investing podcast series offers access to two of Australia’s leading economists in AMP’s Dr. Shane Oliver and Diana Mousina, as well as industry experts such as AMP’s director for retirement, Ben Hillier.
3. Check out our Insights Hub: You can find valuable information about managing your finances in retirement and have a read of AMP’s biennial Financial Wellness report, which has some great insights around how to improve your financial wellbeing. 

About the research

AMP commissioned Dynata in August 2023 to conduct a survey of 1000 Australians aged 50 years and over regarding their attitudes to retirement. The survey was conducted to understand the priorities of Australians when it came to retirement, expected levels of savings and expected lifestyle changes that could impact on levels of income in retirement.

¹ ABS: Average household debt grows by 7.3 per cent (media release)