Ask Paul: I just don’t want to rent in retirement

Dear Paul,

I'm a 40-year-old single mum and want to buy a place of my own in the future. Should I invest my savings each week into shares or in a high-interest savings account?

I'm not sure when or if I will ever be able to afford a home on my own, so I don't really have a timeframe.

I can save roughly $20,000 a year. The cheapest duplex/apartment in my area costs more than $500,000. I just don't want to rent in retirement. - Abbey

When it comes to your money, Abbey, you have two key things going for you.

First up, you are 40 years young, so that gives you a very long time to achieve home ownership.

Second, you are saving $20,000 a year. That is a significant amount and tells me you must have a pretty well-paid job and you have good financial discipline.

I strongly agree with your goal to own a home. Renting in retirement is okay, but it leaves you exposed to landlords not renewing your lease and uncertain rent increases. A paid-off home removes those risks and gives you a lower cost base so your savings and possibly an aged pension can be directed to essentials and lifestyle costs.

If you already have a deposit, in this softer property market I'd be looking around and chatting to lenders about how much they will lend you. If not, in your shoes, I'd be saving your $20,000 a year into a high-interest account. Shares are great for a minimum timeframe of seven years, but not the place for a home deposit. Sure, they may go up 50% in a few years or, for all I know, down 50%.

It looks like higher interest rates are knocking property values about and I don't see rates dropping for some time, so I reckon this is a great time to build your savings and start to plan for home ownership.

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One response to “Ask Paul: I just don’t want to rent in retirement”

  1. Lorraine Condor says:

    Perhaps the NSW government's Shared equity scheme may be worth looking into if you have children under 18, info on Revenue NSW website.

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