More retirees weighed down by mortgage debt: research

Yasmine Raso

Senior Journalist, Financial Newswire

21 March 2025

Further concerns around current retirement trends have emerged out of Colonial First State’s (CFS’) latest Rethinking Retirement report, which found the number of Australians retiring with mortgage debt has continued to rise.

While retiring debt-free remains top of mind for the majority of Australians surveyed it may not become their reality, with the report indicating that 28 per cent of pre-retirees (those aged between 50 and 64 years old) have a mortgage and 14 per cent of retirees are still paying off their mortgage debt.

The research also found that just under one quarter (22 per cent) of retired homeowners and 30 per cent of retired non-homeowners were using their pension payments to continue paying off their debt.

CFS Head of Technical Services, Craig Day, said mortgages are set to become a fixture in the retirement planning process, as current property market trends mean home buyers enter the market later, house prices continue to rise and loan terms extend.

“For those who don’t get to choose when they retire, one option is to use a lump sum from your super to reduce or pay off your mortgage. However, our research shows that only 15% of Australians plan on taking this option,” Day said.

“The other option is to continue paying your mortgage in retirement using the income from your super, such as an account-based pension. We know that almost one in four retirees are using their pension payments to service some form of debt.

“If the net earnings within super are less than the home loan interest rate, you may be better off withdrawing a lump sum to repay your home loan or hold in an offset account. If the net earnings within super are more than the home loan interest rate, you may be better off maintaining your existing income stream and home loan balance.

“However, many people may not want to bet on future investment returns and would prefer the peace of mind of being debt free in retirement. In these circumstances, using your super to pay off your mortgage will reduce the amount of assets you have available to fund your retirement and could result in you receiving less retirement income or your super savings not lasting as long.

“On the flip side, using super to pay off your mortgage could potentially increase your age pension entitlement as it would reduce your assessable assets.”

The report also suggested engaging in financial advice boosted the retirement confidence of homeowners with a mortgage; 45 per cent were confident they could retire debt-free with no advice, compared to 63 per cent with advice.