Here's a Decade by Decade Plan with some options to see you through.
Realistically most people now would have to work till 75 to have enough Super to retire, have a life in retirement and move into aged care. But if that's not practical, or you won't have enough Super or it's just not Desirable, here are some more options.
Decade 1: Your 50s
Consolidate and reduce Debt.
Don't keep Large Credit Cards, Car Loans or Personal Debt at high Interest.
Do look at Consolidating Credit Cards, Personal loans, and Debts into a lower rate Home Loan and aim to pay out all Debts and home loans by retirement.
Don't go guarantor for your Children's business Loans. 75% of all new business' will go broke in 2 years, so there is 3 out of 4 chance you will be taking on their Debt. If you can afford to lose the money, go ahead.
DO see a Financial Planner to use your Superfund to save Tax and put the savings on your home loan. Options open up around mid 50s.
Don't just let your home loan sit there, as the equity in your property increases you can typically get a better Interest rate on your home loan. Use it to speed up paying off your loan. A good Mortgage Broker should be offering you a review every 12 months. Costs nothing and they do all the work.
DO look at a possible investment property. While borrowing money on a home gets harder as you get older, Investment properties which can be sold at retirement if you wish, can offer capital growth to be used later and are easier to finance. If you have been doing a good job of creating equity in your property this can be used instead of a deposit. Look at areas where property prices continue to rise and rents are easy to obtain. Avoid obscure areas.
The more basic average House values tend to double every 10 years in good areas, so you could have a lot of equity to play with by the end of a couple of decades.
Decade 2: You 60s
Still consolidate to reduce debt if you haven't already. Looking to clear your home loan is key or to reduce the loan as much as possible in retirement. Increase home loan payments as much as practical. Ideally you would want to be clear of your home loan before you are 70.
Once you are 65 options open up to release equity in the form of Reverse Mortgages. Typically these days, most people won't look at this option till their seventies where they could obtain up to 25%
But at 65 you can access up to 20% of your home in a Reverse mortgage. Quite often people are forced into early Retirement by health, Lack of Job opportunity or having to care for a partner. So a Reverse Mortgage can be used if you wish to stay in your own home but can't afford to make any more mortgage payments.
If you have reduced your mortgage to under 20% of the value of your home, you may be able to convert it to a Reverse Mortgage, where you do not have to come up with any payments at all. You will have to be able to pay the rates Insurance and maintain the home, as a condition of a reverse mortgage. But you can opt for a monthly or yearly pension, as a portion of this, to help.
Depending on the value of your home you can have quite a nice lifestyle once you top up the aged pension with say 10k a year.
Decade 3: Your 70s plus
Most people are going to be retiring or retired in their Seventies. This is still a fairly active period of time if you have your health. Travel is still good, you still enjoy getting out and about, you will still want to be able to eat out, buy presents for Grandchildren etc. This is the most common age when a Reverse Mortgage comes into play. If you have paid the house off and have income from Super you are in a good spot. But once again Super can run out and you may not be able to afford to make mortgage payments and still have a life with just your Super Income. You may find at some stage, you find yourself left with just your house and a pension.
The costs of living still come in. Fridges and washers break, cars need repairs or replacing. An additional income from the equity in your home can keep you going. You don't want to be housebound and restricted when there is still life to live.
Most of the time the remaining equity position in your home will be maintained over the long term, that is, as long as house prices keep moving upwards at the Historical rates of the last 50 years. It will come in fits and starts.
Into your 80s
As you move past this decade your ability to travel and get around will be affected, so an income to help you stay in your home and have help and be comfortable will be important. There is more and more help available to keep people in their homes as long as possible. Quality of life is generally much better in your own home.
Eventually you may need Aged Care. The percentage of Equity you can access in your home to pay for Aged Care is greater than a Reverse Mortgage. Depending on what you have already taken, you can access this once again to help with the Deposit needed. Once again no repayment is needed until the home is sold or the last partner passes on the estate. You may have relatives live in your home or some have rented it out to supply additional income for your needs, in Aged Care. This may give you the choice of an Aged Care facility that you prefer. It also gives you the choice to return home if you have had to go to an Aged Care Facility because of injury or illness and have recovered sufficiently to manage again.
The vast majority of people will not be in Aged Care for more than 5 years, the average is only 2 years.
In most instances there will still be a reasonable estate left for your heirs to inherit. Even after this whole process. This can be planned for, but keep in mind that if you live to your late 80s or 90s your children will probably be in their 60s and planning their own retirements, with their own homes. They will be needing to look at paying off their own homes and doing their own planning long before they receive an inheritance. They should not be relying on you as part of their retirement plan. Although what you leave them will be of great assistance in managing their retirement.
So 3 decades of planning may keep you right for up to 5 Decades
50s Consolidate, plan and work on reducing Home loan and personal debt.
Look at investing in a second property if it can be done effectively
Look at Superannuation and Tax benefits mid 50s with Financial adviser
Review your mortgage on your home and investments on an annual basis.
60s Hopefully very little personal Debt left,
Goal to pay off home loan or very close by end of your sixties.
Asses investments along the way and close to retirement.
Get Financial advise on how to handle any investments before actually retiring.
70s probably retired by now or soon.
No more Loan repayments to make.
Plan in place to fund money in retirement via Super, Pension and Equity Release.
Live life to its fullest and most comfortable conclusion.
Don't forget to have some fun on the way.
80s Slower but still a good life if you are healthy. Still getting around. Hopefully still at Home. In-Home Help affordable and available when needed.
But 50% of people will need aged care in the next 20 years.
Look at remaining equity in Home to see if suitable for help with an Aged Care loan.
Make sure any Financial Advise benefits You first, Heirs second.
Congratulations, you are actually in rare air. But we do expect more people to start turning 90. You've seen a lot. At some stage you may have decided to sell the house that is now getting older and downsize to a smaller home, something easier to manage, less running costs or closer to the kids. Investments and good financial advice should still see you with additional income to the pension and assets to call upon.
Everyone's journey will be a bit different. We hope these options can make this part of your life more comfortable and enjoyable and remove some of the Financial Stress and unknowns that are coming.
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