What Is Your Most Important Retirement Asset?

most important retirement assetA recent article by News.com.au really caught me by surprise.

In the article, the MLC Quarterly Australian Wealth Behavior report/survey suggests that most Australians think they need about $818,000 in savings and investments to retire. However most people expect to only have $557,000 available to them when retirement comes – a clear shortfall.

So why am I surprised? Because according to the article, Australians are forgetting to factor in their most important retirement asset.

It is the place where you eat, sleep, and basically lounge around most of the time. The most important asset is your own home.

How much is your home worth?

 investment properties as a retirement assetI find it surprising that Australians are forgetting about their home as an asset when clearly, it is. The article finds that the average worth of an Australian home is about $442,000. That is more than enough to make up the difference to the targeted retirement nest egg.

Only 11 percent of Australians have said that they are going to sell their family homes to add to their retirement funds. The reason why most of Australia would rather keep their homes varies from person to person. Some prefer to hold on to their homes as an asset that they can leave to their children. Others prefer to keep it because they prefer to live out the rest of their lives in their house they are already comfortable with.

The news article goes on to quote National Australia Bank’s corporate super general manager Lara Bourguignon. According to Ms Bourguignon 75% of the people surveyed had a financial plan. You can read the original article here.

The surprising part

Having a financial plan is clearly crucial to retirement for most of us. But what I find most surprising is that Australians should forget about their own homes as an asset. Given the rising Sydney market, we would all be well aware of the value of our homes.

But what if many Australians are aiming to have financial reserves beyond their own home?

Investment properties can provide us with positive cash flow without having to keep drawing from our savings and dwindling down our nest egg. Clearly such investments are the best kinds of retirement asset – much better than selling off the home we live in.

So perhaps that is why many Australians do not count their own homes.

We all know that the key to a comfortable retirement is planning and preparation. I highly recommend seeing a financial adviser. Make 2017 a great year for your financial future and retirement!