Breaking Point: Cost of Living Hits Australia’s Seniors

By Darren Moffatt

March 15

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Australia is grappling with a significant cost of living crisis, profoundly affecting our older population. 

The cost of living crisis in Australia has become a pressing issue, with the Consumer Price Index (CPI) witnessing a rise of 0.6% in the December 2023 quarter, culminating in an annual increase of 4.1%. This rise in the CPI is a reflection of the significant price hikes in new dwelling purchases by owner-occupiers (+1.5%), domestic holiday travel and accommodation (+3.9%), and medical and hospital services (+1.2%)​​.

The inflation figure for December 2023 stood at 3.40%, highlighting the escalating costs of housing, food & non-alcoholic beverages, and insurance & financial services. These statistics indicate a challenging economic climate, especially for those on fixed incomes, including many older Australians​​.

Amid these economic challenges, the Council on the Ageing (COTA)’s recent State of the Older Nation report reveals a distressing trend: six in ten older Australians report financial stress as a major factor contributing to a perceived decline in the quality of life for the elderly. Particularly hard-hit are those on lower incomes or dependent on pensions, who are significantly more likely to rate their quality of life as poor due to these financial pressures.

[Related Post: Cost-of-living crisis for Age Pensioners: what you need to know ]

80% of Australian Seniors are affected by rising living costs (National Seniors Australia) 

The cost of living crisis in Australia has significantly impacted seniors, with recent findings from National Seniors Australia highlighting the depth of financial stress and insecurity among older Australians. An overwhelming majority, 80% of those aged 50 and above, report being affected by rising living costs, with health costs, energy prices, and groceries topping their list of concerns. This situation is exacerbated for renters, low-income households, and those living in non-metro areas, who feel the severe impacts of these increases more acutely​​.

Furthermore, research indicates a stark concern among older Australians regarding their financial future, with over half fearing they will outlive their savings. This anxiety is compounded by the fact that a significant portion of the senior population relies on fixed incomes, such as pensions, which may not keep pace with inflation rates. The survey revealed that 53% of older Australians are worried they will not have enough funds to support themselves, underscoring the pressing need for financial security and stability in retirement​​.

These concerns are not unfounded. The Australian Unity Wellbeing Index has observed a drop in satisfaction with standards of living, particularly among households with an annual income of less than $30,000. This demographic reported the lowest levels of wellbeing on record, emphasising the disproportionate impact of financial stress on those with limited financial resources​​.

The rising cost of living not only affects the day-to-day affordability of essentials but also undermines the long-term financial planning and security of older Australians. Strategies such as cutting back on spending, although widely adopted, are not seen as sustainable long-term solutions. Instead, there’s a growing call for measures that ensure a reliable and adequate income stream that can provide reassurance and improve the quality of life for seniors facing these challenges​​.

Strategies for Managing Increased Living Costs

In the face of rising living costs, it’s crucial to adopt strategies that can help you navigate through these challenging times. Here’s a practical guide tailored for seniors to manage their finances more effectively:

  • Budget Wisely: Start by reviewing your current spending habits. Identify areas where you can cut back, such as discretionary spending, and prioritise essentials like housing, healthcare, and groceries.
  • Government Assistance: Explore government programs designed to support seniors. The Department of Social Services offers a range of benefits, payments, and services specifically tailored to help seniors cope with financial pressures​​.
  • Energy Bill Relief: Take advantage of energy bill relief programs. The Australian Government, in partnership with state and territory governments, is providing electricity bill relief for eligible households to help manage energy costs​​.
  • Pharmacy Support: Make use of the subsidies provided for essential medications through the Pharmaceutical Benefits Scheme (PBS), ensuring affordable access to necessary medicines​​.
  • Community Support and Non-Profit Organisations: Many community groups and non-profit organisations offer various forms of aid, from food banks to bill-paying assistance. Don’t hesitate to reach out for help if you need it.
  • Reverse Mortgage: Consider a Reverse Mortgage as a solution to supplement your income. This allows you to access the equity in your home as either a lump sum, regular income stream, or line of credit. It can provide a financial cushion without the need to sell your home, but it’s essential to seek financial advice to understand the long-term implications.

[Related Post: How a Reverse Mortgage Can Help Seniors with Healthcare Costs]

Reverse Mortgage Can Help Seniors Ease the Strain 

A reverse mortgage allows you to access the equity in your home without having to sell it. Essentially, it’s a loan that you can take out against the value of your home, providing you with a lump sum, regular income stream, or line of credit. This can be particularly helpful for covering daily living expenses, medical costs, or even funding a few luxuries in your retirement years.

Benefits and Considerations 

 

Benefits Considerations
Financial Flexibility: Offers a way to boost cash flow in retirement by tapping into home equity, providing a financial cushion for covering daily living expenses, medical costs, or enjoying luxuries in retirement years. Interest Accumulates: Interest on the loan compounds over time, meaning the amount owed can grow rapidly, potentially increasing the debt over the loan’s lifetime.
Stay in Your Home: Allows you to access the equity in your home without the need to sell, enabling you to continue living in your home and maintain your lifestyle during retirement. Impact on Estate: The loan and accumulated interest are repaid from the sale of your home, usually as part of settling your estate, which can reduce the inheritance you leave to your heirs.
No Regular Repayments: Unlike traditional loans, there are no required monthly repayments. Repayment is deferred until the house is sold, usually as part of settling your estate, providing ease of mind regarding regular financial commitments. Loan Limits: The amount you can borrow through a reverse mortgage depends on several factors, including your age, the value of your home, and the lender’s policies, which may limit the accessible equity.

Safeguards and Regulations

To protect borrowers, Australia has regulations in place for reverse mortgages. For instance, the ‘no negative equity guarantee’ ensures you won’t have to repay more than the sale value of your home when it is sold. This guarantee is crucial for your peace of mind, knowing that neither you nor your estate will be left with additional debt beyond the value of your home.

Before diving into a reverse mortgage, it’s essential to seek independent financial advice to fully understand how it fits into your overall retirement plan. Additionally, discussing your intentions with your family is advisable, as it may affect their future inheritance.

Learn more about Reverse Mortgages here. 

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Please consult a licensed financial advisor before you make any decision.

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Navigating Cost of Living for Seniors

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