News | Features
11 May 2021 10:52
NZCity News
NZCity CalculatorReturn to NZCity

  • Start Page
  • Personalise
  • Sport
  • Weather
  • Finance
  • Shopping
  • Jobs
  • Horoscopes
  • Lotto Results
  • Photo Gallery
  • Site Gallery
  • TVNow
  • Dating
  • SearchNZ
  • NZSearch
  • Crime.co.nz
  • RugbyLeague
  • Make Home
  • About NZCity
  • Contact NZCity
  • Your Privacy
  • Advertising
  • Login
  • Join for Free

  •   Home > News > Business > Features

    The Investor: Help Needed For Retirees To Live It Up A Bit

    I'm disappointed. Retired people have been gaining access to their KiwiSaver money for several months now, but there's no emergence of good new products to help them manage their savings.


    Many retired New Zealanders spend too little. They retire with a chunk of savings and then spend only the interest it earns, or perhaps a little of the capital. They die with considerable savings, plus a house. The kids inherit heaps - and these days it's often just one, two or three children to spread the money around - while their parents pinched pennies in their old age.

    When someone suggests to these retirees that they live it up a bit, they baulk. "What if we live a long time and run out of money?"

    One way to address that question would be to buy an annuity. You give the company a lump sum and they pay you a regular monthly amount until you die. If you die soon, they do well out of it. If you live for many years, you do well out of it.

    Twenty years ago, New Zealand had a competitive annuities market, but it's now down to one provider, Fidelity. For several reasons - including tax and a lack of suitable long-term bonds for the companies to invest in - annuities are not seen as a very good deal. But that could change, perhaps with government support.

    Another way to free up money in retirement would be to take out a reverse mortgage or home equity release. You receive a lump sum or monthly payments, and you make no repayments on the loan. The debt grows, through compounding interest, and is repaid when you sell your home.

    It's a way of making use of at least part of the money tied up in a house.

    Several companies offer these products, but they're not popular, perhaps partly because retirees don't like to see a growing debt. But as long as you borrow only a small portion of the value of your home, that keeps the debt under control.

    Another reason for the lack of popularity is retirees' reluctance to eat into their children's inheritance. My response: You earned that money, so it's yours to spend. But do explain to the kids what you're doing, so there are no nasty surprises later.

    If reverse mortgages don't sit well with you, maybe there's another way to do this. Many children of retired people are at a stage in life when they are saving. Perhaps the children could buy all or part of their parents' home, through monthly payments over the years.

    This could get tricky if one child can afford this but another can't. The better off one will end up with more of the house. But where there's good will and clear communication, it could work - keeping in mind that the goal is to improve the parents' standard of living in retirement.

    How about some financial institution helping people to set up such a plan - including legal documentation and help with communications?

    One further thought: Some councils offer rate postponement plans, under which retired people don't pay rates. Instead the debt accumulates, with interest, and is paid off when the house is eventually sold. This is not at the expense of other ratepayers because interest is charged.

    It would be good to see this extended to all councils. And perhaps similar schemes could be set up for house insurance, health insurance and other big bills.

    One way or another, New Zealand has got to come up with better ways to enable retired people to spend more of their wealth.

    © 2021 Mary Holm, NZCity


     Other Features News
     10 Sep: Spring clean your finances
     13 Aug: Plan ahead to give yourself a debt-free Christmas!
     10 Jul: Wise up to clear credit card debt
     07 May: Ways to prepare for the unexpected
     30 Mar: Time for a financial progress check
     10 Feb: Studying up on NZ Super
     10 Jan: Managing the back-to-school bills
     Top Stories

    RUGBY RUGBY
    Caleb Clarke wants to one day tell his grandchildren he went to the Olympics More...


    BUSINESS BUSINESS
    A slowdown in the rental market is more likely to be seasonal...than anything to do with the Government's tax changes More...



     Today's News

    Wellington:
    Three people have been seriously injured in a van crash in Wellington in Kelburn 10:47

    Entertainment:
    Jessica Biel's sons are "besties" with one another 10:46

    Law and Order:
    The scene of a violent attack at a Dunedin supermarket remains closed off as police carry out their investigations 10:27

    Entertainment:
    Peter Andre documented the "screaming and madness" in his household during self-isolation 10:16

    Law and Order:
    A workplace has become a traumatic crime scene for some Countdown Dunedin staff 10:07

    Entertainment:
    Tom Bradby claims Prince William and Prince Harry have been arguing for a year and a half 9:46

    Law and Order:
    Four people are still in hospital after yesterday's violent incident at a Dunedin supermarket 9:27

    Entertainment:
    Josh Duhamel almost died while shooting 'Shotgun Wedding' 9:16

    Business:
    A slowdown in the rental market is more likely to be seasonal...than anything to do with the Government's tax changes 9:07

    Entertainment:
    Jamie Oliver has slammed the police for failing to find his stolen tractor 8:46


     News Search






    Power Search


    © 2021 New Zealand City Ltd