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Family homes could ease longevity risk fears
Retirees who own their family home should not fear longevity risk, according to equity release provider Homesafe.
Longevity risk concerns plagued older Australians, with Investment Trends’ latest Retirement Income Report finding that only one in four Australians believed they would be able to live comfortably in retirement.
They were also failing to prepare for the likelihood that their spending needs may increase with old age, according to a study by National Seniors Australia.
Homesafe Wealth Release general manager, Dianne Shepherd, said that retirees who could access the equity in their homes would not need to fear longevity risk though, should they factor it into their financial planning.
By utilising debt-free equity release approaches, retirees could both access the equity in their homes and continue to live in them.
Shepherd said that Homesafe offered a solution where the homeowner agreed with the company to sell a share of the future sale proceeds of their home, when they chose to sell or passed away, in return for a lump sum payment in the present. The unsold share of the sale proceeds would belong to either the homeowner or their estate.
She said that the solution responded to a growing need for debt-free alternatives to downsizing or reverse mortgages that were better designed to provide senior homeowners with more certainty in managing their longevity.
“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,” Shepherd said.
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Speaking to Super Review, the $70 billion fund has unveiled its new solution to address the ‘cognitive load’ of retirement as members enter their golden years.
New research has suggested it’s time to reconsider the home as a fourth pillar of the retirement income system, alongside the age pension, superannuation, and voluntary private savings.
New research has revealed over 60 per cent of retirees believe their super fund offers retirement income products suitable to support their retirement lifestyle.
Some retirees are “needlessly” paying two sets of fees and often more tax than they need to, according to the industry body.
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Equity Release provides additional funding when other options are considered to be unsuitable. But I would have thought an income stream would be preferred than taking a lump sum