Planning for housing in retirement can feel overwhelming. And figuring out how much to set aside isn’t one-size-fits-all. There’s no magic number that works for everyone. Your situation, goals, and lifestyle all play a part in the answer. It’s more than the numbers – it’s about aligning your financial plans with the life you want in retirement.

It can be easy to get caught up in the details when planning for retirement. But when you’re trying to figure out how much to set aside for housing, it helps to keep things simple. Whether you own or rent, retire early or later, or plan to downsize – these choices shape how much you’ll need. In this article, we'll look at each key factor to help you assess your needs. Let’s break it down.

Do you own your home, or rent?

Housing is a big part of your retirement plan. Consider how your real estate decisions will impact your housing budget. Whether you own your home or rent will play a key role in how much you need to set aside. Let’s explore both scenarios.

If you own your home

Owning your home can offer a sense of security, but it doesn’t mean your housing costs end as soon as you retire. If you still have a mortgage, those payments will continue into retirement. It’s important to factor in how long it will take to pay off your home and how this aligns with your retirement timeline. Even if your mortgage is paid off, consider ongoing costs like property taxes, insurance, and maintenance. These expenses can add up, so it’s worth thinking about how they will fit into your retirement budget.

If you rent

Renting in retirement comes with its own set of considerations. Unlike homeowners, renters don’t have to worry about maintenance or property taxes. But rent payments can still be a significant ongoing expense. If you plan to rent for the long term, you’ll need to account for the possibility of rent increases over time. Also think about whether you plan to stay in the same place or relocate to a more affordable area. Understanding these factors can help you estimate the amount you need to set aside for housing in retirement.

Are you contributing to your superannuation?

Superannuation – your retirement savings account – is a cornerstone of retirement planning for many Australians. If you’re already contributing extra to your super regularly, you’re on the right track to retire comfortably . But it’s important to consider how your superannuation will support your housing needs in retirement.

When you retire, you can access your super in different ways. Some people choose to take a lump sum, which can be useful to pay off their mortgage. Others prefer regular income payments, which can help pay essential expenses including rent or mortgage payments. Understand these options to help you decide how to align your superannuation with your housing needs.

If you’ve built a solid superannuation balance, it might give you the flexibility to maintain your lifestyle without worrying too much about housing expenses. If your super balance isn’t where you’d like it to be, you might need to adjust your contributions or consider other income options.

Remember, your superannuation is just one piece of the puzzle. Understanding how it fits into your overall retirement plan positions you to make more informed decisions about how much to set aside for housing.

Do you have an emergency fund saved?

Life is full of surprises, and not all of them are pleasant. As a long-term investor, it's likely you know the value of being prepared. An emergency fund is a key part of that preparation.

An emergency fund consists of short-term savings to cover those unexpected hits – like medical bills or a broken appliance. In retirement, without a regular income, these surprises can be tougher to handle. That’s why having an emergency fund is so important. It can protect your retirement savings from being drained by unplanned expenses.

Emergency savings can save the day if something goes wrong. If you own your home, you’re responsible for any repairs, and those costs can add up quickly. Even if you’re renting, it’s comforting to have a financial cushion for whatever life throws your way (such as a sudden rental hike).

Planning for the unexpected is just as crucial as planning for the expected. With an emergency fund in place, you can hopefully be ready to handle life’s surprises and keep your stress levels low.

Do you plan to live in your current circumstances?

As retirement gets closer, it’s natural to start thinking about where you’ll want to live. Your current home might be perfect now, but will it still work for you down the road? This is a big question when planning your housing budget.

Moving to a more expensive home or area

Thinking about upgrading or moving to a more desirable location? That’s exciting, but don’t forget to factor in the extra costs. A pricier area means higher living expenses, so you’ll need to save more to make it work. It’s a good idea to crunch the numbers now to avoid any surprises later.

Downsizing your home

On the flip side, downsizing might be on your mind. Moving to a smaller home or a cheaper area could save you money, freeing up cash for other retirement goals. Keep in mind that downsizing isn’t just about saving – it’s about finding a place that fits your lifestyle as you get older.

Whether you stay put, move, or downsize, these choices can greatly impact your housing budget for retirement.

When do you plan to retire?

Retirement is something many of us look forward to. When you decide to retire can shape your financial game plan. Your retirement age isn’t just a number. It’s a key factor in shaping your financial plan.

Retiring at the standard retirement age

The standard retirement age in Australia is 67 – the eligibility age to receive the Government Age Pension. If this is your goal, your savings will need to last for a specific number of years. For many, this can be manageable, especially if you’ve been saving and investing steadily and also the Age Pension. But even then, it’s worth checking that your housing budget is in line with your expected costs during those years. Make sure your plan fits the bill. The bill could include things like:

• Healthcare costs
• Long-term care
• Aged care
• Care for a sick relative

Retiring at preservation age

The preservation age in Australia is now 60 years or older. If you’re eyeing retirement at this stage, your savings will need to stretch further. You’re looking at a longer retirement period, which means more years of covering living expenses, including housing. It’s key to consider how your housing needs might evolve over these extra years and to make sure your savings can keep up.

Retiring early (FIRE)

If your goal is FIRE (financial independence retire early) , planning is even more crucial. Early retirement could mean decades without regular take-home pay, so your savings need to go the distance. Covering housing costs for all those years? That’s something you’ll need to map out carefully for the longer term. Know your future needs and make sure you’re set up to meet them.

No matter when you plan to retire, the timing will play a big role in your housing needs. Align your retirement goals with a realistic housing budget, and you’ll hopefully be in a better position to enjoy those years ahead.

How can you determine how much money you need?

Now that we’ve covered the key factors, it’s time to pull it all together. Planning how much you need for housing in retirement requires taking a step back and looking at the bigger picture.

Start by considering where you stand right now – savings account balance, whether you own your home, are paying off a mortgage, or renting. Then, think about your future plans: where you want to live, when you plan to retire, and how long your retirement might last. These decisions will shape your housing costs.

Next, do the maths. Add up all these factors to get a rough estimate of what you’ll need. It might not be an exact science, but it’ll give you a clearer picture. Practically, this could mean setting up a retirement budget that includes all your expected housing expenses. Keep these elements in mind:

• Factor in ongoing costs like maintenance, rates, or rent, and consider any big changes, like moving or downsizing.
• Don’t forget to include your superannuation and emergency fund in the equation – these can be valuable tools for covering housing expenses.
• Earnings from your investment portfolio can also help cover costs.

As you plan your retirement housing budget, also think about possible tax deductions. You might be eligible for a tax deduction on home expenses, like interest on an investment property loan. These may potentially reduce your housing costs in retirement.

Developing a retirement budget involves big decisions. If you’re not sure where to start or want a second opinion, it might be a good idea to consult a financial adviser. They can help you fine-tune your plan and ensure you’re on track to meet your retirement goals.

Create a realistic and flexible retirement plan that fits your lifestyle and spending habits. These steps should help you prepare to manage your housing needs in retirement and enjoy the peace of mind that comes with it.

Your retirement, your plan

Figuring out your housing needs for retirement doesn’t have to be overwhelming. By pulling together the key pieces – your current situation, future plans, and financial resources – you can create a plan that works for you.

When planning for retirement, it's crucial to think about where you're putting money, especially for big expenses like housing. It’s about being proactive and making sure your housing budget lines up with your retirement goals. Whether you’re looking to stay put, move, or downsize, having a clear plan can give you greater confidence to enjoy your retirement years.

The main thing is to get started, stay flexible, and keep your plan aligned with your chosen retirement lifestyle. That way, you can step into retirement with peace of mind by getting a solid handle on your housing needs.