Australian's mortgage debt in retirement could be greater than their superannuation savings, a fund manager has warned.
Irresponsible spending could mean people will be less solvent than their grandparents were in retirement, Australian Unity Investments retail general manager Adam Coughlan said.
The level of indebtedness among Australians is increasing, with some re-mortgaging their homes to pay for lifestyle goods like cars and plasma screen televisions.
"Many working Australians, who expect to be self-funded retirees because of their superannuation guarantee contributions, will not be able to support themselves because of the debt they will take into retirement," he said.
Financial planners should reinforce the importance of clients' budgeting discipline, Coughlan said. They should also explain the importance of reducing non-deductible debt, like mortgages, before deductible debt, including margin loans.
Younger Australians may be buoyed by false confidence by the financial security of their parents who had recently retired or were about to retire.
"Typically, the people retiring now, who own their own home, have seen their house possibly double in value in the last eight years," he said.
"They are retiring with property worth hundreds of thousands of dollars, no mortgage to speak of, and a useful accrual of superannuation savings."
Couglan warned the property boom created many older cashed up Australians, but markets would change and younger people could not bank on the same happening when they retired.
In a Core Data-brandmanagement study of pre-retiree Australians, only 48.8 per cent of pre-retirees said they had financial plan (not necessarily with a planner) and only 27.9 per cent of them actually had a written plan.
