Re­tire­ment mort­gage blues

South Taranaki Star - - STARS PAST - ROB STOCK

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

GOLDEN RULES

❚ 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.

123RF

A third of peo­ple now work be­yond the age of 65.

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