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Buy your own home or risk living an impoverished old age; Benefits of home ownership
Topic Started: 18 May 2012, 08:49 AM (2,732 Views)
miw
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peter fraser
18 May 2012, 01:00 PM
I think that this has been true in the past, but whether it remains true will depend upon what policies are put in place. EG I understand that in Germany the aged pension doesn't get paid until you have sold your home and used up most of your own savings, therefore what's the point of owning your own apartment?



Well, not quite. The Germans have had "Rentenversicherung" since Bismarck which essentially guarantees you a pension at a fixed percentage of your last (I think) 5 years' earnings. It's funded out of a 19% payroll tax. Instead of savng money by adding an assets test which would never have flown in Germany, they are in the process of raising the retirement age to 67. So owning your own home is neither an advantage or a disadvantage, whereas in Australia it is a huge advantage because the PPOR gets preferentially treated in all kinds of welfare means tests.

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Trying to second guess what a future government may do is tricky, but as it stands home ownership should have the benefit of saving the future impost of rent because the government here is pro home ownership.


While home ownership is at 68%, I think it is a fair bet that we won't see policy changes that obviously make 68% of people worse off (or even feel worse off). That's politics.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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zaph
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peter fraser
18 May 2012, 01:00 PM
I think that this has been true in the past, but whether it remains true will depend upon what policies are put in place. EG I understand that in Germany the aged pension doesn't get paid until you have sold your home and used up most of your own savings, therefore what's the point of owning your own apartment?

Trying to second guess what a future government may do is tricky, but as it stands home ownership should have the benefit of saving the future impost of rent because the government here is pro home ownership.

If someone chose to accumulate savings instead of buying a home, they are then subject to a means test when they apply for an aged pension that a home owner with equal wealth isn't subject to.

In every game you just have to know the rules and use them to your advantage.


centrelink determines that a house is worth 135k

so if i have a ppor I'm allowed 186k of other assets before my pension is effected. if i don't have a house I'm allowed 321k before my pension is reduced. so if i save money and are a renter pensioner rather than a pensioner buyer, I'm screwed by the system.

centrelink needs to value a house at more than 135k

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zaph
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Strindberg
18 May 2012, 01:48 PM
from the op quote:


It is a ubiquitous myth that the age pension eligibility excludes the family home. The ownership or not of a house IS taken into account in the eligibility and calculation of the age pension.

A renter couple are allowed greater non-house assets than a home owner couple before the pension is reduced or eliminated.

In some circumstances a renter couple have greater pension eligibility than home owners with less total assets (including the home) than renters.
A renter couple with total assets of $400k are eligible for a full pension (subject to a common income test).
A home owner couple with a house worth $100k and other assets of $300k are NOT eligible for a full pension. Their non-home asset limit is only $265k and their pension will be reduced.
how about deeming returns?

you are very wrong.
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peter fraser
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zaph
18 May 2012, 01:51 PM
peter fraser
18 May 2012, 01:00 PM
I think that this has been true in the past, but whether it remains true will depend upon what policies are put in place. EG I understand that in Germany the aged pension doesn't get paid until you have sold your home and used up most of your own savings, therefore what's the point of owning your own apartment?

Trying to second guess what a future government may do is tricky, but as it stands home ownership should have the benefit of saving the future impost of rent because the government here is pro home ownership.

If someone chose to accumulate savings instead of buying a home, they are then subject to a means test when they apply for an aged pension that a home owner with equal wealth isn't subject to.

In every game you just have to know the rules and use them to your advantage.


centrelink determines that a house is worth 135k

so if i have a ppor I'm allowed 186k of other assets before my pension is effected. if i don't have a house I'm allowed 321k before my pension is reduced. so if i save money and are a renter pensioner rather than a pensioner buyer, I'm screwed by the system.

centrelink needs to value a house at more than 135k

I didn't know the allocated value, but I know you can own a house worth $1M and not lose anything, but if you hold that in cash you have a problem.

The dilema for the political parties is that both labor and LNP voters own homes of that value.

Edited by peter fraser, 18 May 2012, 02:43 PM.
Any expressed market opinion is my own and is not to be taken as financial advice
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miw
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zaph
18 May 2012, 01:51 PM
centrelink determines that a house is worth 135k

so if i have a ppor I'm allowed 186k of other assets before my pension is effected. if i don't have a house I'm allowed 321k before my pension is reduced. so if i save money and are a renter pensioner rather than a pensioner buyer, I'm screwed by the system.

centrelink needs to value a house at more than 135k
So essentially Centrelink give a fixed imputed rent value for a house.

I guess they can't do much else, otherwise someone living in Sydney would be at a huge disadvantage to someone living in Brisbane or (gasp) Rockhampton.

But you couldn't pay much rent from the yield of $135k worth of assets.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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Strindberg
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zaph
18 May 2012, 01:54 PM
how about deeming returns?

you are very wrong.
You are "very wrong" to call me wrong. You can of course postulate specific circumstances which my statements might not cover in their entirety. We can all nit pick. Expecting me to cover the whole issue of pension entitlements in a single post is stupid of you.
The issue of deeming is only applicable to "financial assets". In the comparative example I gave, deeming would be totally irrelevant if the assets were not deemable. Perhaps I should have included a massive table with various possible proportions of the assets which are deemable and shown the comparison for all cases.

I suppose for the nit pickers I should also have included the disparity resulting from rent assistance being given to the renter and shown the picture for all possible rent levels. Or perhaps taken into account the fact that the issue may be different where entry fees into a retirement home are an issue. Do it.
Housing costs to Income broadly unchanged since 1994 - re-ratified here
The People of Australia have the highest median wealth in the World
2002-2012 10 year house price growth the SLOWEST since 1952-1962
"There are two kinds of people in this world: ones that fiddle around wondering whether a thing's right or wrong and guys like us." (Hugo to Gagin in Ride the Pink Horse)
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audas
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NotFooled
18 May 2012, 08:49 AM
Extract from an article in the rent vs buy thread:


http://www.afr.com/p/opinion/it_all_depends_on_home_ownership_dHPJCmMkAJZxGyVao9EfAM

No one wants to suffer through old age. Home ownership provides some security and definite benefits for retirees.

This is one fundamental reason why we should encourage people to embrace home ownership.
Better yet, don't buy, save and go into a retirement home with way more cash than if you had of slaved your entire life ....
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justin007
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audas
18 May 2012, 03:14 PM
Better yet, don't buy, save and go into a retirement home with way more cash than if you had of slaved your entire life ....
Provided our currency does not grossly devalue over the next 20 to 30 years.. many parts of the world have negative real returns for savers.

Who knows what might happen long term.
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NotFooled
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The Bear Whisperer

audas
18 May 2012, 03:14 PM
Better yet, don't buy, save and go into a retirement home with way more cash than if you had of slaved your entire life ....
Or never retire. Work till you drop. Retirement is more of a modern luxury than an intrinsic right. Maybe it will disappear, destroyed by greedy governments, and people will have to return to having several kids to support them in their few remaining years of life when they can longer work and the government considers them a drain on society.

The Catholics may be on to something.
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newjez
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It is a bit of a pain having all your assets trapped in your house when you retire. If you need to downsize for cash, you can't downsize too much, and you need to do it frequently. Who wants to keep moving to a slightly smaller home when they're old? Besides, with stamp duty it's hardly effecient. There should be a better way to do this - like stick the excess cash in super fund.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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