by Twane Wessels and Lucia Viegas
Millennials are staring down a retirement time bomb that is ticking louder by the day.
Unlike their parents, many won’t own a home by the time they retire.
Instead, they’re juggling two burdens - saving for their own future while funding the pensions of those who came before them.
Fewer homeowners among retiring cohort
Millennials are squeezed between rising housing costs, stagnating wages and a retirement system built for a different era.
For generations, most Australians entered retirement as homeowners. Not anymore.
Census data shows just 55 percent of Millennials - those aged 25–39 in 2021 - own a home.
At the same age, 62 percent of Gen X and 66 percent of Baby Boomers were on the property ladder.
Emerging trends also reveal decreasing homeownership rates among older, retiring cohorts.
According to the Australian Institute of Health and Welfare (AIHW), each successive birth cohort since 1947–1951 has experienced lower rates of homeownership by late middle age.
For instance, among individuals aged 60–64, the homeownership rate was 81.3 percent for the 1947–1951 cohort, compared to 78.3 percent for the 1957–1961 cohort.
It’s taking longer to save for a deposit and buyers are entering the market later, often with bigger mortgages.
The ripple effect? More Australians are likely to retire still paying off their homes, or renting. Both come with serious costs.
Retirement system built for a different era
Housing stress - paying more than 30 percent of income on housing - is on the rise and for many that figure is closer to 50 percent. It leaves little room to save for anything else.
Australia’s super system wasn’t designed for this. It assumed most people owned their homes by retirement.
The Australian ‘retirement standard’, issued by the superannuation industry’s peak body, Association of Superannuation Funds of Australia (ASFA), issues a quarterly benchmark for the amount required in retirement.
ASFA’s calculations all assume home ownership at the time of retirement.
This sentiment is echoed in the aged-care policies that are targeted at enabling people to age at home - which works in a society where people own their own homes.
Paying rent or a mortgage along with potentially supplementing the cost of aged-care, which has a means-tested public funding structure, could become financially debilitating.
Our age pension is relatively generous by global standards but at today’s prices it won’t stretch to cover rent or mortgages in old age.
For those retiring with a mortgage, the outlook is bleak. It’s like renting, but without access to government rent assistance.
Solutions to a national economic challenge
This structural shift in home ownership isn’t just an issue for the individual affected, it’s a national economic challenge.
A growing cohort of non-homeowners will put increased pressure on the age pension and social service benefits.
We need new ideas and action if we’re to safeguard the living standards of retirees.
That starts with boosting housing supply to prevent prices from spiralling further out of reach and targeted policy efforts to increase home ownership by retirement.
Options include rethinking rent assistance - $249.20 a fortnight for a single person doesn’t go far when the national median weekly rent is about $620.
We could also consider new forms of support, such as mortgage relief for retirees.
This could take the form of a benefit similar to rent assistance for those still paying off a home.
There is potential for these benefits to be funded by correcting inequalities in the current system where generous tax concessions favour higher income cohorts.
Research from The Australia Institute found the cost of superannuation tax concessions to the federal budget is almost the same as the total cost of the aged pension and greater than the NDIS in 2022-23.
Super tax concessions cost the taxpayer $52.6 billion, while the entire age pension program cost $55.3 billion.
If we fail to act now, we risk leaving a generation to retire poor, stressed and insecure.
It’s time for policies that reflect today’s reality, not yesterday’s assumptions.
- Assistant Professors Twane Wessels and Lucia Viegas from Bond University’s Business School are experts in retirement, superannuation and quality of life for older Australians.