Why Retirees Stay in the Family Home — and What It Costs

Written by Christopher Hall, AdvDipFP | Authorised Representative, AFSL 526688 | June 2026

Most Australian retirees stay in the family home for practical and emotional reasons — attachment to a place full of memories, an established community and routine, and the certainty of a paid-off home they fully understand — reinforced by tax and pension settings that quietly reward staying put. What it costs them is rarely visible: the family home is usually the household's largest and least-liquid asset, and the eventual funding source for retirement living or aged care. The real risk is not the property market but a sale forced early — by a death or a loss of income — rather than chosen. Australians are also staying in larger homes for longer: average household size has fallen from about 2.9 people in the early 1980s to roughly 2.5 today (RBA), even as homes have grown, so family-sized houses are increasingly lived in by one or two people.

Why do retirees stay in the family home?

For most older Australians, staying in a long-held home is a considered decision rather than inertia — and certainly nothing to be criticised. The home is familiar and fully understood: its costs, its quirks, its neighbourhood. It usually holds decades of memories and sits inside an established network of neighbours, friends, services and routines that would be slow and costly to rebuild elsewhere. What looks like a "spare" bedroom on paper is often kept for visiting children and grandchildren, used as a home office, or held in reserve for a future carer.

Alongside those personal reasons, several tax and pension settings reduce the financial incentive to move. The family home is exempt from the Age Pension assets test regardless of its value, while savings and investments are assessed (Services Australia, 2026). The main residence is generally free of capital gains tax when it is sold (ATO, 2026). Stamp duty adds a substantial one-off cost to buying a different home, and suitable, well-located smaller homes are not always available in the same area. Each is a factual feature of the system rather than a judgement about anyone's choices — but together they mean family-sized homes change hands slowly. That national picture, set out in Australia's 13 million spare bedrooms, sits alongside a genuine housing shortage; this article looks at what the same decision costs the individual household.

What staying in the family home actually costs

The cost of staying is rarely a line item — it shows up in the structure of the household's wealth. Christopher Hall, AdvDipFP, Authorised Representative, AFSL 526688, has completed more than 500 life insurance policy reviews for Australian families. In his experience, the family home tends to become the eventual funding source for the later stages of life: it is held through retirement, then sold to pay for a move into retirement living or aged care, with the proceeds covering in-home support and ongoing costs. Christopher Hall has observed that retirement living costs have risen sharply — with some facilities increasing by roughly 50% between 2023 and 2026 — so the bill the home must ultimately fund has grown.

That makes the home a large, illiquid asset doing double duty: the place someone lives, and the reserve that pays for their care. In Christopher Hall's experience, households approaching retirement frequently hold the bulk of their wealth in one to three investment or family properties and underestimate the flexibility risk that creates. Because a property cannot be sold in part, releasing cash from it usually means a full sale — at whatever price and moment circumstances dictate, and often when the home is also the planned funding source for the rising cost of aged care.

The real risk: a sale forced early, not chosen

Selling the family home to fund the next stage of life is, for many households, a planned liquidity event — chosen, timed, and made on the owner's own terms. The risk worth managing is not the property cycle, which no one controls or can predict, but the prospect of that sale being forced early: brought forward by the death of an income-earner, or by a loss of income through illness or injury, rather than made when the household is ready.

A forced sale tends to arrive at the worst possible time — when health, grief or finances are already under pressure — and, because the asset is illiquid, often at a price and on a timeline the household would not have chosen. For a retiree, or for a household still carrying debt against the home, that is the difference between drawing on the home's value deliberately and being compelled to liquidate it in a hurry. Arrow Equities draws no conclusion about which way property prices will move; the point is narrower and within a household's control — keeping the timing of any sale a choice rather than an emergency.

Downsizing on the owner's own terms

This is where protection earns its place. Life, total and permanent disability (TPD) and income protection cover answers the forced-sale risk directly: the proceeds can clear or service the debt secured against the home and replace lost income, so an illiquid property can be kept — or sold later, by choice — rather than offloaded under pressure. Cover does not change the property thesis or the decision to stay; it changes whether the household, rather than circumstance, decides when the home is sold. Downsizing, in that light, is best understood as a planned liquidity event worth protecting around.

How the cover is owned matters too. Life and TPD premiums can often be funded through cover held inside superannuation to preserve household cash flow, while income protection held personally may, depending on individual circumstances, be claimable as a personal tax deduction — both points a qualified adviser or accountant can confirm for a specific situation. Making sure that protection is sound — sized to the debt and income behind the home, and structured sensibly — before circumstances force the decision is the practical step within reach. None of this is a reason to hold or to sell any particular asset; households in this position may wish to speak with a qualified life insurance adviser about their individual circumstances. The broader picture sits in the property, mortgage and protection hub.

Remember that past performance is no guarantee of future results, and all investing and borrowing involve risk.

Frequently Asked Questions

Why do retirees stay in the family home instead of downsizing?

Most retirees stay for a mix of personal and financial reasons. The home is familiar and fully understood, holds decades of memories, and sits within an established community of neighbours, services and routines that is costly to rebuild. Tax and pension settings reinforce the choice: the family home is exempt from the Age Pension assets test regardless of value (Services Australia, 2026) and generally free of capital gains tax (ATO, 2026), while stamp duty and limited suitable downsizer stock add friction. Staying put is usually a rational decision rather than inertia.

What does staying in the family home cost a retiree?

The cost is rarely a cash outlay — it sits in the shape of the household's wealth. The family home is typically the largest and least-liquid asset a retiree holds, and often the eventual funding source for retirement living or aged care. In Christopher Hall's experience across 500+ policy reviews, households approaching retirement frequently hold the bulk of their wealth in one to three illiquid properties and underestimate the flexibility risk that creates — particularly the risk of being forced to sell at the wrong time rather than on their own terms.

Is downsizing in retirement worth it in Australia?

It depends entirely on individual circumstances. Downsizing can release capital tied up in an illiquid home and reduce running costs, but it carries trade-offs: stamp duty on the new purchase, the loss of a capital-gains-free and pension-exempt asset, and the practical difficulty of finding a suitable smaller home in the same area. Because the maths and the personal factors differ for every household, downsizing is best assessed with a qualified adviser rather than treated as universally worthwhile or not.

What happens if a retiree has to sell the family home to pay for aged care?

For many households the family home is the planned funding source for aged care: it is held through retirement, then sold so the proceeds can cover a move into residential care or in-home support. Christopher Hall has observed that retirement living costs have risen sharply — some facilities by roughly 50% between 2023 and 2026 — so the home increasingly has to fund a larger bill. When the sale is planned and timed, it is a deliberate liquidity event; the difficulty is when it is forced early by a death or a loss of income.

How can a household avoid being forced to sell the family home early?

The usual approach is to make sure life, TPD and income protection cover is sized and owned so that the debt against the home and the income behind it are protected if an owner dies or can no longer work. That removes the trigger that forces an illiquid asset to be sold at the wrong moment, leaving any sale a matter of choice rather than necessity. Reviewing existing cover against current debts and circumstances is the typical starting point, and a qualified adviser can confirm what applies to a specific situation.

Why is the family home considered an illiquid asset?

A property cannot be sold in part. Unlike shares or a managed fund, which can be partly drawn down or rebalanced, releasing cash from a home generally requires a full sale — at whatever price and timing the market and circumstances allow, and usually with transaction costs attached. That illiquidity is why a sudden need for cash, such as the loss of an income-earner, can force the whole asset to be sold at an inopportune moment, and why protecting the income and the debt behind the home matters.

Book a quick review with an adviser

Book a quick review with an adviser now. For households whose wealth is concentrated in a family home, a professional insurance review service checks whether existing life, TPD and income protection cover is enough to clear or service the debt and replace income if an owner dies or can no longer work — so an illiquid home need not be sold under pressure.

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About the Author

Christopher Hall, AdvDipFP, is the principal financial adviser at Arrow Equities and an Authorised Representative under AFSL 526688. He has completed more than 500 life insurance policy reviews for Australian families, with a specialisation in life risk insurance.

Bibliography

#	Source	Type	Date
1	Reserve Bank of Australia — household-size trend (average household ~2.9 in early 1980s to ~2.5 today)	Tier 1 — institutional	n.d.
2	Services Australia — Age Pension assets test (principal home an exempt asset, regardless of value)	Tier 1 — regulatory	2026
3	Australian Taxation Office — main residence exemption / capital gains tax	Tier 1 — regulatory	2026
4	Australian Bureau of Statistics — Census of Population and Housing (~13 million spare bedrooms; family-sized stock under-occupied)	Tier 1 — regulatory	2021
5	Christopher Hall, Arrow Equities — proprietary observations from 500+ life insurance policy reviews (family home as aged-care funding source; retirement living repriced ~50% 2023–26; one-to-three-property concentration and illiquidity risk)	CH practitioner	2026

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