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Daily Mail
2 days ago
- Business
- Daily Mail
Boomer homebuyers had to battle the highest interest rates in Australian history - but there's one reason they 'did it tougher' is a big lie
Baby boomers had it much easier than the younger generations buying a house - despite having to pay exorbitantly high interest rates. The generation born after the war were hit with massive 18 per cent interest rates back in the late 1980s. Those repayments were crippling, when they were coming of age in the seventies and eighties, but houses were significantly cheaper compared with typical incomes. That was also back when Australia's population was almost half of what it is today, long before annual immigration levels soared. Baby boomer economist Saul Eslake bought his first house in Melbourne 's St Kilda East for $105,000 in 1984 on a $35,000 salary when he was 26, after benefiting from free university education. With an $80,000 mortgage, he was borrowing little more than double his pay before tax and hits out at any suggestion his boomer generation did it tougher - despite the high interest rates he paid. 'I paid eighteen-and-a-half per cent for some of that but my first house cost $105,000 and it took me less than three years to save up the deposit,' he told Daily Mail Australia. 'Even though interest rates are less than half what I was paying, it was nowhere near as tough as now and I didn't have HECS debt to pay off because I was part of that lucky generation when it was free. 'My generation had it pretty easy - we got free education, we got housing very cheaply and we have made a motza out of the increase in house prices that we have voted for.' In 1980, Sydney's mid-point priced house cost $65,000, or just 4.5 times the average, full-time male wage in an era when a woman would struggle to get a mortgage without a signature from her husband. Real estate data group PropTrack estimated Sydney's median house would cost $338,000 today, or just 4.3 times the average salary now for all Australian workers, if house prices had increased at the same pace as wages during the past 45 years. In 2025, Sydney's middle-priced house costs $1.47million or 14.3 times the average, full-time salary of $103,000. But that price-to-income ratio surges to 18.7 if it's based on the average salary of $78,567 for all workers. AMP deputy chief economist Diana Mousina, a Millennial, said the younger generations were having a tougher time now saving up for 20 per cent mortgage deposit just to buy a home. 'The problem now is just getting into the market - that's what takes the larger chunk of trying to save; it takes 11 years to save,' she said. Boomers battled with sky high interest rates in the 80s - they haven't been that high since - but they had it easier because house prices were much more affordable Melbourne's mid-point house price cost just $40,000 in 1980 or 2.8 times the average male salary. If affordability had remained constant, a typical Melbourne would now cost just $205,400. But the Victorian capital's median house price of $850,000 is now 10.8 times the average salary for all workers. Brisbane's median house price cost $32,750 in 1980 or just 2.2 times what an average man earned. That would be $174,600 today if buying power hadn't changed. Queensland capital houses now cost $910,000 or 11.6 times the average salary. The major banks are unlikely to lend someone more than five times their pay before tax, which means many couples would now struggle to get a loan for a capital city house unless they moved to a far, outer suburb and had a big deposit. Housing affordability deteriorated following the introduction of the 50 per cent capital gains tax discount in 1999, just before annual immigration levels tripled during the 2000s. 'Since about 2000, you've seen home prices relative to incomes rise at a substantial amount - it's been the fact that we have been running high levels of population growth - so immigration, so more demand for housing,' Ms Mousina said. 'We have been running high migration targets, at the same time we haven't been building enough homes across the nation. 'We do have pretty favourable investment concessions for housing, including negative gearing, capital gains tax concession.' Mr Eslake said politicians from both sides of politics wanted house prices to rise, because more voters were home owners than renters trying to get into the market. 'For all the crocodile tears the politicians shed about the difficulties facing would-be first home buyers, they know that in any given year, there's only 110,000 of them,' he said. 'Even if you assume that for everyone who succeeds, in becoming a first home buyer, there are five or six who would like to but can't - that's at most around 750,000 votes for policies that would restrain the rate at which house prices go up. 'Whereas the politicians know that at any point in time, there are at least 11million Australians who own their own home; there are 2.5million Australians who own at least one investment property. 'Even the dumbest of our politicians - as the Americans say, "Do that math" which is why at every election, politicians on both sides of the divide - while bewailing the difficulties faced by first-home buyers - promise and implement policies that make it worse because they know that a vast majority of the Australian population do not want the problem to be solved.' Sydney was the first market to become seriously unaffordable as Australia's most expensive metropolitan housing market. PropTrack estimated Sydney's median house would cost $338,000 today, or just 4.3 times the average salary now for all Australian workers, if house prices had increased at the same pace as wages during the past 45 years (pictured is an auction at Homebush in the city's west) In 1990, the typical Sydney house cost $187,500 or $447,300 now if affordability had remained constant. A decade later 2000, shortly after the introduction of the 50 per cent capital gains tax discount, a typical Sydney house cost $284,950. That would translate into $544,000 today if affordability had remained constant. This would also be the point where a single, average-income earner could still get a loan at a stretch with a 20 per cent mortgage deposit. By 2010, Sydney's median house cost $600,000 or nine times the average, full-time salary, putting a home with a backyard beyond the reach of an average-income earner buying on their own. In addition, the housing affordability crisis has worsened as Australia's population has climbed from 14.5million in 1980 to 27.3million now. During the 2000s, annual net overseas migration doubled from 111,441 at the start of the decade to 315,700 by 2008 when the mining boom was driving population growth. After Australia was closed during Covid, immigration soared to a new record high of 548,800 in 2023, leading to house prices climbing even as the Reserve Bank was putting up interest rates. When it came to the stereotype of young people wasting their money on smashed avocado breakfasts instead of saving for a house deposit, Mr Eslake had a simple answer to that. 'At the very least, a highly visible rolling of the eyeballs,' he said.
Globe and Mail
18-05-2025
- Business
- Globe and Mail
Will Lawmakers Increase Social Security Taxes? 39% of Workers Worry About It.
At this point, you may have heard the rumor that Social Security is on the verge of going broke. But thankfully, that's completely false. Social Security can't go broke because it gets the bulk of its revenue from payroll taxes. So, as long as people continue to hold down jobs and pay into the program, it can continue to get funded. That said, Social Security is facing a serious revenue shortfall as baby boomers stage a mass exodus from the U.S. labor force in the coming years, and an inadequate number of replacement workers come in. Social Security can use the money in its trust funds to keep up with benefit payments as needed. But once those trust funds are emptied, Social Security may have to cut benefits. And it's not like that scenario is decades away. We could be roughly 10 years from seeing Social Security slash benefits broadly if lawmakers don't manage to intervene. Thankfully, lawmakers do have solutions they can employ with the goal of preventing a broad reduction in Social Security benefits. But one popular solution could come with a world of backlash. Could lawmakers increase Social Security taxes? There are a number of different steps lawmakers could take to boost revenue for Social Security. One is to move full retirement age up by a year or two so that workers have to wait longer to collect their monthly benefits without a reduction. Another option is to raise Social Security taxes. But that's not something workers want. And not surprisingly, they're very concerned about lawmakers going down that road. In a recent survey by the Employee Benefit Research Institute, 39% of workers said they're worried about increased taxes for Social Security. That's understandable, given that many Americans feel tax-burdened to begin with. What increases in Social Security taxes could look like Lawmakers have a couple of choices for raising Social Security taxes. First, they could increase the Social Security tax rate. Or, they could raise the Social Security wage cap. Currently, workers pay a 12.4% tax rate for Social Security purposes. Of that, half comes out of their paychecks, and their employers pay the rest. People who are self-employed, however, must cover the entire 12.4% Social Security tax. It's possible for lawmakers to opt to raise that tax rate to a number that's higher than 12.4%. If so, it would pretty much burden every member of the workforce with heftier taxes. Meanwhile, Social Security's wage cap currently sits at $176,100, which means workers with higher incomes don't pay into the program beyond that earnings threshold. If lawmakers were to raise the wage cap, higher earners would pay Social Security taxes on more of their income. And if lawmakers were to eliminate the wage cap completely, higher earners would pay into Social Security on every dollar they earn. It might seem like raising or getting rid of the wage cap is the better solution, since it would only impact higher earners. But this option introduces a conundrum that lawmakers might struggle to manage. Social Security pays a maximum monthly benefit based on the wage cap. It wouldn't be equitable to raise the wage cap without also increasing the program's maximum benefit. But in that case, it's unclear how much revenue the program would net. Either way, lawmakers do need to do something to prevent Social Security cuts. Whether that means raising Social Security taxes is still up in the air. But it's a change that workers may unfortunately have to brace for. The $22,924 Social Security bonus most retirees completely overlook If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. One easy trick could pay you as much as $22,924 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.
Yahoo
18-05-2025
- Business
- Yahoo
Will Lawmakers Increase Social Security Taxes? 39% of Workers Worry About It.
Social Security's main source of funding is payroll taxes. The program is facing a revenue shortfall as baby boomers retire in droves. Lawmakers could raise Social Security taxes to prevent benefits cuts, but that has many Americans concerned. The $22,924 Social Security bonus most retirees completely overlook › At this point, you may have heard the rumor that Social Security is on the verge of going broke. But thankfully, that's completely false. Social Security can't go broke because it gets the bulk of its revenue from payroll taxes. So, as long as people continue to hold down jobs and pay into the program, it can continue to get funded. That said, Social Security is facing a serious revenue shortfall as baby boomers stage a mass exodus from the U.S. labor force in the coming years, and an inadequate number of replacement workers come in. Social Security can use the money in its trust funds to keep up with benefit payments as needed. But once those trust funds are emptied, Social Security may have to cut benefits. And it's not like that scenario is decades away. We could be roughly 10 years from seeing Social Security slash benefits broadly if lawmakers don't manage to intervene. Thankfully, lawmakers do have solutions they can employ with the goal of preventing a broad reduction in Social Security benefits. But one popular solution could come with a world of backlash. There are a number of different steps lawmakers could take to boost revenue for Social Security. One is to move full retirement age up by a year or two so that workers have to wait longer to collect their monthly benefits without a reduction. Another option is to raise Social Security taxes. But that's not something workers want. And not surprisingly, they're very concerned about lawmakers going down that road. In a recent survey by the Employee Benefit Research Institute, 39% of workers said they're worried about increased taxes for Social Security. That's understandable, given that many Americans feel tax-burdened to begin with. Lawmakers have a couple of choices for raising Social Security taxes. First, they could increase the Social Security tax rate. Or, they could raise the Social Security wage cap. Currently, workers pay a 12.4% tax rate for Social Security purposes. Of that, half comes out of their paychecks, and their employers pay the rest. People who are self-employed, however, must cover the entire 12.4% Social Security tax. It's possible for lawmakers to opt to raise that tax rate to a number that's higher than 12.4%. If so, it would pretty much burden every member of the workforce with heftier taxes. Meanwhile, Social Security's wage cap currently sits at $176,100, which means workers with higher incomes don't pay into the program beyond that earnings threshold. If lawmakers were to raise the wage cap, higher earners would pay Social Security taxes on more of their income. And if lawmakers were to eliminate the wage cap completely, higher earners would pay into Social Security on every dollar they earn. It might seem like raising or getting rid of the wage cap is the better solution, since it would only impact higher earners. But this option introduces a conundrum that lawmakers might struggle to manage. Social Security pays a maximum monthly benefit based on the wage cap. It wouldn't be equitable to raise the wage cap without also increasing the program's maximum benefit. But in that case, it's unclear how much revenue the program would net. Either way, lawmakers do need to do something to prevent Social Security cuts. Whether that means raising Social Security taxes is still up in the air. But it's a change that workers may unfortunately have to brace for. If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $22,924 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. Will Lawmakers Increase Social Security Taxes? 39% of Workers Worry About It. was originally published by The Motley Fool
Yahoo
14-05-2025
- Business
- Yahoo
Could This Potential Social Security Change Force You to Work Longer?
Lawmakers are tying to find a way to prevent Social Security cuts. One proposal is to make changes to full retirement age. That could force some people to delay retirement longer than they want to. The $22,924 Social Security bonus most retirees completely overlook › If you're looking forward to collecting Social Security in retirement, there's some potentially bad news you need to be aware of. Social Security is currently at risk of having to cut benefits because of an impending financial shortfall. The problem is that Social Security relies primarily on payroll taxes to meet its financial obligations. But in the coming years, that revenue source is expected to shrink as baby boomers wrap up their careers and exit the labor force in masses. Not only will baby boomers stop paying into Social Security in short order, but they'll also inevitably start claiming benefits. That's going to put a strain on Social Security, leaving the program with no choice but to tap its trust funds for money. It also means that benefit cuts are a strong possibility once those trust funds dry up. That's not a desirable outcome, though. Lawmakers are aware that Social Security cuts could push many older Americans into poverty. So they're invested in avoiding them if possible. But one potential solution for avoiding Social Security cuts could have harsh consequences for working Americans today. Many people work until they're able to collect Social Security without a reduction, otherwise known as full retirement age. Full retirement age is 67 if you were born in 1960 or later. What some lawmakers have suggested as a means of addressing Social Security's fiscal woes is pushing full retirement age back to 68 or 69. The logic is that since Americans are living longer, making them wait longer to get their benefits in full isn't unreasonable. It's also not a change that's unprecedented. Full retirement age was 66 for people born between 1943 and 1954. So it wouldn't be totally out of line to phase in a new full retirement age for workers today. But that's a change that could force many people into a later retirement than they want, since a lot of workers lack savings and can't afford to have their Social Security benefits reduced. If lawmakers decide to make changes to full retirement age, they would likely impact younger workers more so than near-retirees. It just wouldn't be fair to drop a bombshell like that on workers who are already in their 60s and on the cusp of wrapping up their careers. This isn't to say that lawmakers are absolutely going to raise full retirement age for younger workers. There are other options they can look at to get Social Security to a better place financially. But it's an option workers should keep on their radar. What can you do about this? Well, you can't necessarily prevent lawmakers from implementing a change you don't approve of. But you can do your part to boost your retirement savings so that if this change does come about and you don't want to work longer than you initially planned, you'll have a savings cushion to soften the blow of a reduction in benefits. Furthermore, if lawmakers don't make this change, and Social Security does end up being cut, you might need more savings to compensate for reduced benefits anyway. So a larger 401(k) or IRA balance is never a bad thing to have. If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $22,924 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. Could This Potential Social Security Change Force You to Work Longer? was originally published by The Motley Fool
