Superannuation and home ownership

Nicholas Gruen is right. In fact, I agree with him so much that I’ve had a half-finished blog post advocating the same idea for about six months (apparently I didn’t agree enough to finish it though…).

What he said was that if the Government is to increase compulsory superannuation contributions, in spite of evidence that they are not necessary and are likely to have negative social outcomes, then the least they can do is allow people to use a part of their savings as a housing deposit.

It may be tempting to think that super is for retirement, and using it early would negatively impact on people’s later, more elderly lives.

Indeed, taking money out of super would reduce later payments, but at the same time by encouraging home-ownership by people who would otherwise be renting, then household savings overtime would be expected to increase. And by overtime, I mean by the time our current batch of 20-30somethings retire.

Saving for a deposit is a task that takes dedication and control. Congratulations to the people who have done this easily, but like many, in spite of recently nothing up 30 years, I am not amongst you. The combined income of my partner and I would likely have banks lining up to lend, if it wasn’t for that pesky upfront contribution that we have failed to squirrel away.

And, yeah, neither of us are all that rational. I know full well that if this state of affairs continues until I am ripe and ready for campervan trips up and down the coast, I am likely to be experiencing a much lower living standard than I otherwise would. Owning your own home significantly reduces the likelyhood of living in poverty when living off a retirement income.

Which is why failing to address the declining rate of home ownership amongst current and future generations is creating a time bomb when these people reach retirement, a second ‘aging crisis’. At least baby boomers will have property wealth to cover some of their health and care costs.

But dammit, we do have savings. Significant savings, which I am not able to invest in my future well-being. Instead of being able to use some of our superannuation to invest in housing, it is being left to the vagaries of the stock market. And we’re onto a winner with that one, given recent form…

Did I mention that our current rent payments almost match what loan repayments would be? We do live in inner Sydney, I guess. If we could use superannuation savings as a housing deposit, that money could contribute to my retirement savings instead of the retirement savings of my absentee, presumably much wealthier landlord who also benefits from a slew of tax deductions that I don’t receive as a renter.

Another thought bubble from my previous, never-to-be-completed post was the possibility of using super increases as a quasi- top-up unemployment insurance, with the point being that by income smoothing during the difficult times, our likelyhood of higher savings by old age could increase. There would need to be a fair bit  of investigation to test this, but I reckon it’s worth a look.

Especially if the Government persists with increasing the rates of compulsory contribution, in spite of the evidence that this will hurt workers on low incomes.

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