It's time to keep our debt levels low and plan for retirement earlier
Over many generations there has been a long held belief that we need to pay off our mortgage as fast as possible. As a consequence, it was common to find Australians in their 50s and 60s who had done just that, although it was also common to find that they had not planned for retirement with many reliant on the aged pension.
Times, of course, have changed and property prices have soared over consecutive decades as a result of easier access to credit, not to mention the marketing hype around property encouraging individuals to borrow to buy bigger homes, pools, new cars and holidays.
Now it is very common to find people in their 50s and 60s with significant levels of debt in the years immediately prior to retirement, so it’s no wonder many are nervous about retiring.
If we look back at the GFC, many retirees and those close to retirement struggled after their superannuation plummeted as the market fell with some even having to go back to work to survive.
It is now ten years on and the coronavirus crash has hit current retirees and those nearing retirement.
So once again, many Australians in retirement or close to retirement may be faced with the conundrum of whether to continue working or return to work to survive. Some may even need to sell down their assets if they want to retire.
With the concerns and restrictions surrounding the coronavirus expected to continue for quite some time, analysts are predicting residential housing prices will fall in the coming year. We are already seeing a significant increase in vacancy rates in rental properties in major cities as students, expats and others have left Australia.
Those in debt who are nearing retirement may need to sell their property to pay off their debt and rent rather than buy, which may push property prices down further.
While the coronavirus has been devastating, the one thing that needs to change as we move forward is a reduction in the level of debt in Australia, because we cannot continue as we have in the past.
As a country, it is important that we keep our debt levels low and plan for retirement earlier rather than later, as we don’t know when the next GFC or coronavirus will occur.
Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in bookstores and online at www.wealthwithin.com.au