Retirees need not fear ‘longevity risk’ – the home can fund it: response to study


‘Longevity risk is a big sleeper issue in Australia.

An important recent study showing only half of Australians have planned financially for increased life expectancy may cause unnecessary fear among older Australians because it overlooks a key strategy for reducing longevity risk – the family home.

‘Longevity risk’, where retirees outlive their income due to longer life expectancy, is a big sleeper issue in Australia but too many advisors and advocates miss the simple solution – the family home.

The study, by National Seniors Australia, showed half of Australians were not considering longer lifespans in their financial plans, and found most Australians were failing to prepare for the likelihood their spending needs may rise in old age. The latest Retirement Income Report by research firm, Investment Trends, underlines the issue by finding only one in four Australians believe they will be able to live comfortably in retirement.

The National Seniors study proposed only two solutions including purchasing longevity insurance through the super fund, or paying 10 per cent of savings to purchase an annuity product.

But any discussion on longevity risk must consider the family home, according to Dianne Shepherd, general manager of leading equity release provider Homesafe Wealth Release®. “Studies on how to fund living longer are flawed if they do not factor in the family home.

“We shouldn’t discount the value built up in the home for providing access to future retirement income. Retirees who own a home should be able to relax about living longer.

“Retirees today have the ability to access the equity in the home and stay in their home in the future.

“One way to achieve this is by using a debt-free equity release approach, such as Homesafe Wealth Release and avoid being penalised by living longer than expected.”

Ms Shepherd said unlike reverse mortgages, the Homesafe Wealth Release solution has been specifically designed to provide senior homeowners with greater certainty as to how they can manage the impacts of their own longevity.

She said there is a growing need for debt-free alternatives to downsizing or reverse mortgages. “It’s essential senior homeowners can retain some control over the future equity in their home, in the event their lifestyle needs or circumstances change.”

Homesafe provides a debt-free alternative via a home equity release solution where the homeowner agrees with Homesafe to sell a share of the future sale proceeds of their home in return for a lump sum payment today – the home is only sold when the homeowner chooses, or after the death of the surviving homeowner, with the unsold share of the sale proceeds returned to their Estate. Homesafe is not entitled to receive any more than the agreed share, and does not provide any time limit by which the house must be sold.

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