Retiree Finance Guide
Retirement changes your relationship with debt and insurance. Your income shifts from wages to super, investments and perhaps the Age Pension, which affects how lenders assess you. At the same time your insurance needs change, and protecting what you have matters more than building it.
By Better Rate Mate Editorial Team · Last reviewed
1Key financial priorities
Decide whether to pay off your mortgage or invest
Paying down a mortgage gives a guaranteed return equal to your loan rate. If your home loan rate is 6% and a savings account pays 4%, paying off the loan comes out ahead. Super may earn more over time, but its returns aren't guaranteed.
Understand your borrowing capacity in retirement
Lenders assess whether you can repay from your retirement income, such as super drawdowns, the Age Pension or investments. They can't refuse you because of age alone, but ASIC's responsible lending guidance expects them to check how retirement will affect your income. See home loans for older borrowers.
Consider downsizing and the downsizer contribution
If you're 55 or older and sell a home you or your spouse have owned for 10 years or more, you can each contribute up to $300,000 of the proceeds into super as a downsizer contribution. It doesn't count towards the contribution caps and must be made within 90 days of receiving the proceeds (ATO).
Review all insurance policies
Term life insurance may matter less once the mortgage is paid and children are independent, while health insurance and, if you still earn, income protection may still matter. Check whether each premium still reflects what you need. For cover later in life, see life insurance for over 60s.
2Loan types to consider at this stage
Reverse mortgage
Use with full understandingLets you borrow against your home's equity without regular repayments. Interest compounds, so the debt grows and reduces what you leave, and Moneysmart says the rate is likely to be higher than a standard home loan. Reverse mortgages taken out from 18 September 2012 have negative equity protection.
Home Equity Access Scheme
Government loanA voluntary, non-taxable loan from the Australian Government for people of Age Pension age or older, secured against real estate. Services Australia's current rate is 3.95% a year, compounding fortnightly, and a no negative equity guarantee applies.
Standard variable loan, paying down
If you still have incomeA low-fee variable loan with redraw lets you make extra repayments while keeping access to the money if you need it.
3Insurance needs at this stage
- ✓Private health insurance, especially hospital cover
- ✓Home and contents insurance at replacement value, including any renovations
- ✓Funeral insurance or a pre-paid funeral plan, if you want to spare your family the cost
- ✓Travel insurance that covers pre-existing conditions if you plan extended travel
4Common mistakes to avoid
- ✗Paying for income protection insurance after you've stopped earning an income
- ✗Not using the downsizer contribution when selling the family home
- ✗Entering a reverse mortgage without independent legal and financial advice
- ✗Keeping a life insurance policy sized for a mortgage that is now mostly paid off
- ✗Not reviewing home and contents cover after the children have taken their belongings
5Tips for getting a better rate
- 1If you still have a mortgage, ask your lender for a rate review: a low LVR usually qualifies for its cheaper pricing bands
- 2Consider fixing part of the loan for certainty on a fixed income
- 3Compare energy plans regularly to keep costs down
- 4If you're considering a reverse mortgage, look at the government's Home Equity Access Scheme as well
Common questions
Can I get a home loan in retirement?
Yes, if the lender is satisfied you can repay from your retirement income or assets without substantial hardship. The Age Discrimination Act 2004 stops lenders refusing a loan on age alone unless the decision relies on reasonable actuarial or statistical data. See our guide to home loans for older borrowers.
What is the downsizer contribution?
If you're 55 or older and sell a home owned for at least 10 years, you and your spouse can each contribute up to $300,000 of the proceeds to super, within 90 days of receiving them. It doesn't count towards the contribution caps (ATO).
What is the Home Equity Access Scheme?
A voluntary, non-taxable loan from the Australian Government for people of Age Pension age or older, secured against real estate they own. The current rate is 3.95% a year, compounding fortnightly (Services Australia).
