Can I rent in retirement?
Many Australians wonder if they need to own a home by retirement, or if living out your golden years as a renter is a viable option. The short answer is yes, you can rent in retirement – there’s no rule saying you must own your home. However, the more important question is: can you afford to rent in retirement comfortably? Renting when you’re on a fixed income (like the Age Pension) can be challenging, and unfortunately many retirees who rent struggle financially. Let’s explore why and what you can do to make renting in retirement work.
Renting in your golden years.
The Financial Reality of Renting in Retirement
One big issue is that Australia’s retirement income system assumes you own your home outright. The Age Pension is set at a level to cover basic living costs excluding rent. Homeowners don’t pay rent, so the pension plus a bit of savings is usually enough for them. But if you have to pay market rent from that same pension, the math gets tricky. To illustrate, the maximum single Age Pension is around $30,000 per year, and the median rent in Australia is over $31,000 per year (about $600 a week). That alone shows a shortfall – rent could eat up your entire pension and more, leaving nothing for food, bills, medicine, let alone leisure.
Because of this, it’s sadly not surprising that a large proportion of retired renters live below the poverty line. Roughly half of all people renting in retirement are living in poverty, according to research by the Grattan Institute and ANU. More recent data is even bleaker: two in three retirees renting privately are in poverty, and it’s especially dire for single older women (around 78% of single retired women renters live in poverty). These figures highlight a looming “poverty freight train” for a generation of renters. The fundamental problem is simply that their income isn’t enough to cover high rents.
To cope, retirees who rent often must dip heavily into their savings or superannuation (if they have any). Yet, many don’t have much saved: about 75% of retired renters have total assets under $125,000 (including any car or personal belongings). That means most are almost entirely reliant on the pension. With such limited financial buffers, even modest rent increases can cause real hardship. And it’s not just money – renting can bring stress about having to move if the landlord sells or raises the rent. For an older person, that instability can be very taxing.
Government Assistance and Its Limits
The government does offer Commonwealth Rent Assistance to eligible pensioners and others on benefits who pay rent. If you’re on the Age Pension (or certain other payments) and your rent exceeds a low threshold, you can get Rent Assistance, which is a fortnightly supplement. This helps, but it’s capped at a relatively modest amount (a few thousand dollars per year at most). Many advocates argue it’s not nearly enough given current rent levels. In fact, a recent report recommended increasing Rent Assistance by 50% for singles (and 40% for couples) to better support renting retirees. As of now, though, no such increase has happened. So, while you should definitely apply for Rent Assistance if you qualify – it’s essentially *“free” money you’re entitled to – be aware it only covers a fraction of typical rents.
If you’re renting and on a low income, you might also explore public or community housing options, where rent is subsidized. However, supply is limited and wait lists can be long, particularly in major cities. The lack of affordable housing is a serious issue affecting older renters, with some facing homelessness when they can no longer afford private rents. This is a worst-case scenario, of course, and governments are being urged to address it. But it underscores that renting in retirement requires planning and often some belt-tightening.
Making Renting in Retirement Work for You
Despite the challenges, many Australians do rent throughout their retirement and manage okay. The key is careful financial planning and lifestyle adjustments. Here are some tips and factors to consider:
Boost Your Retirement Savings: If homeownership is not in the cards, try to compensate by saving more in superannuation or other investments during your working years. You’ll need a larger nest egg to produce income to cover rent. Financial planners often suggest that renters will need hundreds of thousands of dollars extra in super compared to homeowners. This is because you’re effectively funding your housing costs out of your savings. For example, if you want to cover a $20,000 annual rent from your investments, you might need roughly $400,000 invested (assuming a 5% return). These are ballpark figures, but the point is the more you save, the more secure you’ll be.
Budget for Rent Over Time: Remember that rents can increase, and your income in retirement might not keep pace. It’s wise to budget conservatively – assume your rent will rise a bit each year and see if your income (pension + investment drawdowns) can absorb that. If you have an account-based pension from your super, ensure you invest it in a way that can generate growth or income to handle inflation (many retirees keep a portion in growth assets for this reason). AustralianSuper notes that staying invested and drawing a regular income from super can help cover things like rent rises or inflation in retirement.
Consider Downsizing Your Rental: In retirement, you might not need as large a home as before. Moving to a smaller or less expensive rental can free up money. Some retirees relocate from pricey cities to regional areas or outer suburbs where rents are cheaper. Others move into retirement villages or over-55 communities (though those often involve upfront fees). The trade-off is possibly leaving a community you know, but the benefit is financial relief and sometimes a more senior-friendly lifestyle.
Long-Term Lease or Rental Security: One worry as an older renter is having to move frequently. It can be disruptive and physically difficult. If possible, try to secure longer leases or find a stable rental situation. Private rentals in Australia usually have 6 or 12-month terms, but some landlords might be open to longer leases, especially if you’ve been a reliable tenant. Build a good relationship with the landlord or agent. Another idea is to look for landlords who specifically prefer long-term tenants (for example, some would be happy to have a retired person who is likely to stay for years). There are also emerging models like land lease communities where you own a relocatable home but rent the land, providing a mix of ownership and lower rent – though again, that may not suit everyone.
Know Your Entitlements: Apart from Rent Assistance, ensure you’re getting all other concessions available. Age Pensioners in Australia can get a Pensioner Concession Card which provides discounts on utilities, medicine, public transport, and vehicle registration. Every bit helps when you’re on a tight budget. Some states have specific housing programs or one-off grants for seniors facing housing stress – keep informed through Centrelink or seniors advocacy groups.
Healthcare and Support Services: While not directly about housing, remember that as a renter you might not have the same asset fallback (like tapping home equity) for big expenses. Look into health insurance, or the aged care support system (My Aged Care) if you need help at home as you age. The goal is to avoid any financial shocks that could jeopardize your ability to pay rent.
Renting vs Owning Trade-offs
It’s also worth highlighting some advantages of renting in retirement, as it’s not all doom and gloom. Renting gives you flexibility – you can move to a different location if you want to be closer to family or amenities, without the hassle of selling a house. You’re not tied down by property maintenance or council rates; if something breaks, it’s the landlord’s responsibility to fix (which is great on a limited income). You also don’t need a huge deposit or to worry about interest rates. If you managed to save money from not buying, you could invest those funds and potentially earn income that way. In some cases, retirees choose to sell their home (cashing out equity) and rent to enjoy a more liquid lifestyle – they use the sale proceeds to fund travel or a higher standard of living, essentially trading the security of a home for cash. This can work for some, but again, it requires disciplined budgeting to ensure the money lasts.
Lifestyle preferences play a role too. Some people simply prefer the freedom of renting – you can change scenery if you like, and you’re not tied up with the chores of homeownership. If you’re someone who likes the idea of maybe spending a couple of years by the beach, then a couple in a small country town, renting allows that freedom in retirement.
Conclusion: Planning is Key
Yes, you can rent in retirement, but you need to go in with a plan. Calculate what your likely retirement income will be (from pension plus any super or investments) and compare it to rents in the area you’d like to live. If there’s a gap, think about how to bridge it – whether by saving more now, cutting costs, getting assistance, or moving somewhere more affordable. It might also be worth consulting a financial adviser; they can run projections to see if your money will last 20-30 years while paying rent, and suggest strategies to stretch your income.
Also, keep informed about policy changes. With so many older Aussies facing rental stress, there’s growing pressure on the government to improve support – whether through higher rent assistance or building more social housing for seniors. Changes in these areas could improve the outlook for renting retirees in the future.
In the end, renting in retirement is certainly possible and is already the reality for many Australians. It can offer a flexible, maintenance-light lifestyle if you have the financial means to sustain it. But because the system isn’t really designed with lifelong renters in mind, it requires more personal preparation. By understanding the challenges (like the income gap) and taking steps to mitigate them, you can enjoy a stable retirement even without owning a home. Just be sure to budget conservatively, seek out any support available, and make housing choices that give you both comfort and financial peace of mind.
