How downsizing could boost your super as you approach retirement
How downsizing could boost your super as you approach retirement
The traditional idea of staying in a family-sized home until we die is finally evolving, with a little nudge from the Government’s enticing downsizer incentive, boosted in 2023.
Every Sunday I write a column that is published in the money section of The Age, The Sydney Morning Herald, Brisbane Times and WA Today. This week’s column can be read in full here. I usually include it on my email later in the week, but today I’m bringing it to you on the day it’s published. A little experiment. Tell me if you like it and I’ll keep doing it. Enjoy!
The traditional idea of staying in a family-sized home until we die is finally evolving. With a little nudge from the Government’s enticing downsizer incentive which was boosted this year, forward-thinking pre- and post-retirees are reassessing their homes with fresh optimism, and wondering if they are indeed the keys to bolstering their super balances. And they might well be.
The numbers tell us it’s time. Nearly 60,000 Australians have downsized and poured more than $14.5 billion into their superannuation funds using the downsizer incentive in the last five years according to the ATO. And when they downsize, they not only reap the financial rewards, they also unlock a wealth of potential lifestyle benefits that can come from moving into areas better suited to their looming retirement years.
Recent ABS Census data indicates that between 75 and 80 percent of pre-retirees and retirees own their own homes in this country. Yet, the average superannuation balance sits somewhere between $150,000 and $200,000 among people aged 55-74, a figure that falls short of meeting the expectations for a comfortable retirement. And the mean housing price in Australia stands tall, at a formidable $912,000 in the June quarter.
The government recognises the imbalance in these numbers, and they’ve well and truly done what they can with the downsizer incentive to try and correct it.
The downsizer incentive encourages people to sell the family home, provided they have owned it for more than ten years, and invest up to $300,000 per person, or $600,000 per couple into superannuation, tax-free.
It was launched five years ago, but was slow to find appeal. At first, it was available only to people over 65, then, from 2020 to over-60s, and now, on January 1, 2023, they made it more accessible again, dropping the qualifying age to 55, the perfect window for retirement planning. And at 55 I think they’ve found the sweet spot for retirement lifestyle-seekers wanting to rid themselves of the shackles of the big home.
So if you are contemplating downsizing, here’s a few important things you might want to consider:
Understand your timing windows. The downsizer incentive is only available to you after the age of 55. And, even then, it is not available to you unless you’ve owned your home for at least ten years, calculated from the date of settlement. So timing it will be important for some people. If you can see the window of opportunity a few years ahead of you, keep a watch on the signposts and don’t be tempted to sell early, unless you’ve calculated the opportunity cost.
This article continues with lots more tips and insight into the downsizer incentive. Read it here on the Sydney Morning Herald. It’s free to access the article - you may need to register.
And just in case you missed it, here’s a link to this week’s Epic Retirement Newsletter.
How to Have an Epic Retirement is the ultimate guidebook for modern retirees. It is grounded in my own widespread research on modern retirement, and draws on my prior ten years as the CEO of Starts at 60 and Travel at 60 (before I stepped away to pursue my next career in retirement education). It also draws on the work of the leading thinkers in the longevity, health, happiness, purpose and modern ageing spaces and incorporates many interviews with people who have navigated the sometimes challenging path into retirement.
I hope you’ve had a lovely weekend!
Many thanks! Bec Wilson