If you’re nearing retirement, you may be contemplating your current living arrangements and whether a more reasonably priced location would be better suited to you in the years after you finish working.
We take a look at some of the reasons moving to a less expensive city, town or suburb might make sense, and other financial and non-financial things you should think about before packing your bags.
Why a cheaper location might make sense
You need to think about funding a longer retirement
People are living longer and as a result require a bigger pool of savings to fund their lifestyle in the years after they finish working. To put it into perspective, the government has projected that in 40 years the number of people aged over 100 will be 300 times what it was in the mid-1970s1.
You’ve had less time to accumulate super
Because baby boomers only had the benefit of compulsory super toward the end of their working lives, many haven’t had enough time to accumulate enough in super to self-fund their retirement.
The Age Pension alone isn’t enough to live comfortably
September 2016 figures show individuals and couples, around age 65, who are looking to retire today, need an annual budget of $43,372 and $59,619 respectively to fund a comfortable lifestyle. This assumes they own their home outright and are in relatively good health2.
By comparison, the maximum annual Age Pension rate for a single and couple is currently $22,804 and $34,382 respectively3, keeping in mind not everyone is eligible for government assistance.
You want to have fun in retirement
Those who want to live a comfortable lifestyle in retirement will spend about 28% of their weekly budget on leisure and recreation4, which may be easier to fork out if you’re living in a cheaper area.
Your adult children want financial assistance
Nearly 75% of parents are providing financial support to their adult children earlier in life, with young people looking to the bank of mum and dad for assistance with education, property5 and weddings6.
Other things to factor in
While more affordable living arrangements might be ideal in retirement, you should also factor in other considerations.
The first things to assess, if you’re looking to move to a more affordable location, are property and rental prices, and the general cost of living when it comes to food, transportation and health care.
Remember, whether you’re planning to buy a property or rent a place in the area you’re looking to move to, there will also be out-of-pocket expenses to factor in, such as connecting and disconnecting utilities, removalist fees, and stamp duty if you’re planning on purchasing a home.
If you’re selling your existing property, it’s also worth looking into whether the money from the sale could affect any Age Pension entitlements you may receive under the income and assets tests.
To ensure you move somewhere you love, there will be other crucial things to think about, such as:
- How far it’s located from your family and friends
- Whether you know anyone in the place you’re thinking of moving to
- What local amenities are nearby—shops, restaurants, transport, medical facilities
- Whether the area is big on community events such as festivals and concerts
- What recreation facilities are there—golf course, gym, community pool, sailing club
- Whether there are club associations you can join like Leagues and Rotary
- What the weather is like and whether it’s going to suit you all year round
- How the job market stacks up in case you decide to step back into the workforce
- What the crime rate is like.
If you’re not too sure about some of these things, that’s ok. It might be a good prompter to trial the place you’re thinking about moving to before leaving everything behind. You may consider a weekend away, a house swap or if you’re thinking of buying, renting before you put down a deposit.
We look at the average super balances for different age groups in Australia so you can see whether you’re on track with your super.