Ask Paul: I have $900k in super, but can’t afford to retire

Owning a home can provide long-term security. Photo: Paul Clitheroe, Getty Images.

With $900,000 in super but rising housing costs, one renter faces an impossible choice between keeping the pension and securing a home for the future.

Reader question

I'm a single, 62-year-old renter in Melbourne living in a share house to keep my rent low.

I receive a carer's pension, as I'm caring for my daughter.

I have $900,000 in super (some from inheritance).

If I keep renting, I will have too much money in super to continue receiving the pension at 67, but not enough to live on for another 30 years.

If I want to continue on a pension, I could buy a home (for example, a unit), but prices are so high it would leave me with very little super for the next 30 years.

Retirement villages seem to have very high fees. I'm not sure what my best option is.

Any suggestions? - Sherri

Paul's response

I think that a lot here depends upon your daughter and her long-term needs, Sherri.

We are in Melbourne a lot; our youngest child lives there.

I don't know where you live, but I popped in 'two-bedroom, two-bathroom apartments with parking in the inner-city region' into a search engine. I set the filter at a maximum price of $500,000.

My thinking was that I would like you to own a home but have an amount in super that at age 67 would give you maximum, or at least a part age pension. A lot of options appeared in locations close to the city.

My experience, and one I think widely shared by Money readers and pensioners more generally, is that homeownership makes life a lot more certain and much more settled.

A home is also a good investment, and doesn't impact a future pension.

The extent of care your daughter needs and your carer support is fundamental to your decision.

You do have money going out in rent.

Homeownership would remove this expense. I'd encourage you to do your own research, based on your own needs and expectations, but my view is that owning a home will be a plus for you and your daughter.

It could also provide long-term security for her.

Maybe the foundation of a plan could be to own a home, while not jeopardising your carer or age pension.

You know best what your and your daughter's needs are, but I'd put homeownership into your thinking, while maintaining a reasonable super balance and allowing for future age pension options under the income and assets test.

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