Retirees don’t necessarily want to downsize to spend less time mowing lawns, with many revealing that more practical considerations weigh heavily on their minds when deciding where to spend their golden years.

Research shows that what might be called the Australian retirement dream of downsizing into a modern apartment isn’t particularly appealing to most retirees.

This is despite specific tax incentives designed to make the shift out of the family home more financially appealing.

To try to free up housing stock amid a significant national shortage, the federal government has introduced tax incentives designed to help asset-rich and cash poor homeowners “trapped” in their homes to move into smaller properties, in turn freeing up larger family homes.

Incentive to move

The downsizer contribution allows people aged 55 or older to contribute up to $300,000 from the proceeds of the sale of their main home into superannuation, without it affecting annual contribution caps.

But does it go far enough?

Reserve Bank of Australia governor Michele Bullock criticised stamp duty as a barrier to retirees downsizing late last year.

That led to the South Australian Liberals announcing a proposal this week of $15,000 in stamp duty relief for downsizing retirees. If it goes ahead, other states could follow.

Mortgage broker Max Phelps, from Golden Eggs Home Loans, said stamp duty was a huge roadblock for retirees, who had paid tax all their lives and didn’t want another huge tax bill for downsizing. 

Phelps said taxing transactions would always mean fewer transactions – whether for an over-the-counter item or in selling a home.

“Stamp duty is a tax, and when people get to retirement age, they typically don’t want to be paying more tax,” he said.

In the meantime, Australia’s lack of suitable housing stock remains an ongoing headache, with many retirees not keen to downsize anyway.

Staying where we are

Research by the country’s largest industry super fund, AustralianSuper, found that 74 per cent of people aged 50 and older either nearing or in retirement plan to stay where they are.

Respondents were asked to select their top three priorities when considering where to retire – with being close to health services, family and friends, and safety and security concerns topping the list.

More than half (55 per cent) of those surveyed said access to healthcare was the most important factor in deciding where to retire.

Respondents also cited family and friends as a top consideration when choosing where to live later in life. Some retirees wanted to live near their children and grandchildren to provide family support, including regularly caring for grandchildren.

Safety and security was the third-most important factor when choosing where to live in retirement, with 33 per cent listing it as a top priority. It scored higher among women aged over 50.

The survey also found that safety and security concerns increased with age, demonstrating that what is important in retirement can change over time.

Retaining a lifestyle

AustralianSuper head of retirement Jacki Ellis said millions of Australians approaching retirement or enjoying their golden years are redefining what it looks like.

“Today’s retirees are already telling us the traditional cliff-edge moment of working until retirement age and then stopping all together no longer works for them,” Ellis said.

“As more Australians chase a retirement that is an extension of their current lifestyle, it’s no surprise many Australians want to stay put rather than marking the end of their working life with a move.”

Meanwhile, the federal government’s MoneySmart website reminds potential downsizers to weigh up the pros and cons to decide if downsizing is the right move.

While downsizing can free up money to pay off debts and lower household costs, it also means less space and the need for time to adjust to a new neighbourhood.

The article first appeared in The View. Read the original here