Will you still be paying a mortgage in retirement?

One in three Australians expect to still be paying off their home loans in retirement, a survey shows.

worried couple looking at their retirement savings

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A rising number of Australians expect to still be paying off their home loans when they enter retirement, according to superannuation provider Vanguard.

A survey of 1,800 people aged over 18 found that 45% of Gen Z respondents believed they'd still be paying off their mortgage by the time they were ready to retire.

Gen Zs were born between 1996 and 2010.

The survey found 32% of Gen X respondents also expected to still be paying off their property loans in retirement.

Gen Xers were born between 1966 and 1980. This is the next generation due to retire, with the elders of the group turning 58 this year.

This is two years shy of the superannuation preservation age and nine years shy of the 'retirement age', which refers to the age at which Australians are eligible for the age pension.

Gex Xers have varying intentions on how to deal with their mortgages when they decide to give up work.

What will Gen Xers do when they enter retirement?

Vanguard said 38% of Gen X respondents intended to keep paying off their mortgages in retirement.

Another 25% planned to use their superannuation savings to wipe out the debt in one hit. And 18% said they would consider selling their mortgaged home and repaying the debt when they quit work.

Among Millennials, 29% also think they'll still have a mortgage when they enter retirement. Millennials were born between 1981 and 1995.

Vanguard's How Australia Retires report also revealed that 8% of retirees today are paying off a home loan.

The latest data from the Australian Bureau of Statistics (ABS) shows there are 4.2 million retirees in the community today. So, 8% equals 336,000 homeowners.

Expert says this is a 'sleeper issue' in our economy

Vanguard Australia managing director Daniel Shrimski said the rising number of people expecting to retire with a mortgage or rent their homes during retirement was a "sleeper issue".

He said:

After working hard and saving for the majority of our lives, Australians want to feel excited about a financially secure retirement.

However, our research has revealed nearly 1 in 5 Australians are renting in retirement, and 30 per cent of working Australians expect to still be paying a mortgage after they retire.

This is a bit of a sleeper issue when it comes to retirement. We tend to presume we'll be homeowners and mortgage free – but having unresolved debt or needing to drawdown on savings to pay rent is likely to be a big financial burden for many, especially if full-time paid work is no longer an option.

This is an important point, considering that four of the top five reasons for retirement are beyond the control of workers.

They include sickness, injury, or disability (which prompted 13% of current retirees to quit work), being retrenched, dismissed, or unable to find work (5%), and caring for an ill, disabled, or elderly person (3%).

This is one of the reasons why many Australians retire earlier than initially planned. As we've previously reported, the average age at which most workers intend to retire is 65.4 years. However, existing retirees report retiring much earlier than this at an average age of 56.9 years.

Shrimski added:

This is why it's so important that a robust superannuation balance is part of a 'whole of wealth' retirement plan, so Australians can have confidence and security in retirement.

According to the research, homeowners who are not in a relationship have a 31% higher chance of retiring with a mortgage.

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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