Retirement mortgage blues
Retirement isn’t what it once was.
Plenty of Kiwis are working beyond age 65 when they qualify for NZ Super payments.
It’s no wonder. Work is good. People are staying healthier for longer. Mortgages are immense.
In many cases I suspect people working into their late 60s and 70s couldn’t afford to stop work even if they wanted to.
The traditional Kiwi money lifecycle was to off the mortgage in your mid to late 50s, and then do a last, mad savings dash while hoping not to be made redundant.
Instead, in 2015, BNZ publicised research suggesting that on current repayment trajectories one in three people with a mortgage will not have paid it off by the age of 65.
It is not ordinarily a very good idea to still have debt on your home when you stop work.
In fact, you need savings and investments outside of the equity in your home just to get by, and to cope with emergencies.
Living on NZ Super alone is
❚ Clear debt before retirement
❚ Postpone retirement to amass more wealth
❚ Find non-work ways to earn
hard enough without the bank taking a cut in interest payments.
If you have mortgage debt at
65, it’s better to postpone retirement, and keep working. Many do. The 2013 showed a third of 65-74 year-olds worked.
Salary plus NZ Super should allow anyone to polish off the rump of their mortgage.
But should you arrive at retirement with mortgage debt on the family home, even after the KiwiSaver account is drained, it’s time to take some hard decisions.
Downsizing, or moving to a cheaper town or suburb, are ways of getting the mortgage monkey off your back, but it is easy to underestimate how much real estate agents’ fees and moving costs can be.
You may also have luxury assets you could sell to reduce debt.
Pressing the ‘‘bugger the kids’’ button and taking out a reverse mortgage can be a solution. That’s switching one kind of mortgage debt for another. There may be no monthly repayment to make, but
‘‘If you have mortgage debt at 65, it's better to postpone retirement, and keep working.’’
they are expensive.
Some councils like Auckland’s allow over-65s with enough equity in their homes to defer their rates until they die, or sell their home, whichever comes first.
These are a form of cheaper equity release mortgage.
Some people sell up and move into a retirement village, but that may not be possible, depending on the size of the debt.
You could join the ‘‘sharing economy’’ and start taking in paying guests through the likes of Airbnb, or Look After Me.
There may be students looking for a term-time home, depending on where you are.
Longer-term boarders could also lift your income, and make living with the mortgage possible.
Some households cope with old age by having multiple generations living together, with the older generation progressively selling the house to the younger one.
You might be able to rent out other assets. Yourdrive actually lets car owners earn an income from their vehicles as well, by renting them out to people for weekend jaunts.
Accommodation Supplement is also available to some people with mortgages in retirement, but really, the absolute last thing I would wish on anyone in retirement is a Work and Income means test.
A third of people now work beyond the age of 65.