Financial advice critical as more Australians
retire with debt

20 March 2025

New research from Colonial First State (CFS) has revealed the critical role financial advice can play for a growing number of Australians approaching retirement with a mortgage.

An increasing number of Australians are now retiring with a mortgage, a trend expected to rise as first home buyers age, loan terms lengthen, and house prices continue to climb.

The latest CFS Rethinking Retirement Report shows that retiring debt-free is a top priority for most Australians. The research found that 28% of Australians approaching retirement (aged 50 to 64) have a mortgage, while 14% of retirees still carry mortgage debt.

Without financial advice, only 45% of homeowners with a mortgage are confident they will be able to retire debt-free. However, after receiving advice, confidence levels jump to 63%.

The research found most homeowners wish to remain in their current residence in retirement. Moving to a smaller home is not a popular choice, with just 13% of those with a mortgage planning to take this route.

CFS Head of Technical Services Craig Day said many Australians may decide to delay their retirement date until they have paid off their mortgage.

“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,” Mr 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,” he said.

Mr Day explained that, from a purely financial perspective, the decision to use your super to pay-off your mortgage may simply come down to comparing your mortgage rate with what investment return you believe your fund will achieve.

“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,” he said.

“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.”

Mr Day emphasised that managing a mortgage will increasingly become a core part of the retirement planning process and a new reality for more Australians.

“There is no one-size-fits-all approach to retirement. Getting advice about your unique circumstances from a professional adviser will give you the confidence to make the right decisions towards achieving a debt-free retirement,” he said.

“That’s why at CFS we have developed a Retirement Hub and a wider range of services, including aged care guidance, to help more Australians achieve their retirement goals.”