How to escape the late-life tenancy trap
Working longer and shifting further are among the options for the silver renters. Susan Edmunds reports.
New Zealanders who are still renting as they approach retirement are being told they need to take action.
Statistics NZ figures show that at least 90,000 of those aged 50 to 54 do not own the home they live in, up from 60,000 in 2006 and 49,083 in 2001.
Another 70,000 people aged 55 to 59 and 55,000 people aged 60 to 64 are in the same boat.
But not having a freehold house can make a big difference to your lifestyle when it comes time to stop working.
Claire Matthews, of Massey University, produces retirement expenditure guidelines.
She said those who could retire with a freehold house would be better off.
‘‘You’ve still got maintenance and rates but, with regard to maintenance at least, you can determine when you are going to do that.
‘‘With a rental, a basic twobedroom in Auckland is $400 a week. If you’ve got to pay $400 before you’ve looked after any other living expenses, that’s quite a lot of money.’’
So, if you have recently turned 50 without a house to your name, what can you do?
Matthews said buying a house and aggressively paying down the mortgage was one option for those who could afford it.
You might choose to buy a house in another, cheaper, part of the country and rent it out until you are ready to retire and live in it.
Commission for Financial Capability group manager of investor education David Boyle said this was a good option for people who worked in a major centre but were open to the idea of retiring elsewhere.
‘‘That’s happening a lot. You need to work out where you would like to finish up and like to live that is a bit more affordable. That’s something to look at. Rather than thinking you’ve got to buy where you are working today.’’
If you have not owned a house before, or are in the same financial position as a first-home buyer, you can withdraw your KiwiSaver savings to pay for the deposit, whatever your age.
Financial coach Lisa Dudson said renting in later life was fine ‘‘provided you have savings’’.
She said people who were renting and spending any extra money they had left over were in a dangerous situation.
‘‘If you’re renting with no savings you’ve seriously got to get your act together.’’
She recommended increasing KiwiSaver contributions to 8 per cent as a starting point. ‘‘If you don’t think you’ll get into a house, at least get your KiwiSaver up to 8 per cent because it comes out of your pay before you see it.’’
‘‘They need to go hard in respect of saving as much as they possibly can,’’ Boyle said. ‘‘To ensure they have got a nest egg that will provide them with an income in retirement and also cover the cost of rent.’’
Boyle agreed KiwiSaver was a good option to save. He said even the $520 a year from the Government would add up to $7800 over 15 years, without any investment returns.
Financial adviser Liz Koh said some people could save more by reducing their costs – getting other people in to reduce the rent, for example.
‘‘You have to bear in mind that the more luxurious your lifestyle now, the less luxurious it will be later on.’’
She said it was better to reach retirement with a mortgage than as a tenant.
‘‘When you get to retirement if you have a house with a mortgage you might have to sell it but at least in the meantime the equity will have increased in the house and you can stall the sale as long as possible.’’
Matthews said another option was to put off retirement.
You could work longer, or stay on in a part-time or consulting role to bring in more income.
Boyle said this would help people to build a bigger nest egg to provide for the years ahead when they would not be able to work.