The average household has about $32,000 in other financial assets.
About $55 billion or 8% of our wealth is outside housing.
About $775 billion or 92% of our wealth is in housing.
Over 55 ??
This week’s article is more for people age 55 plus but all age groups should read it too.
Most Kiwis over 55 did, and most also traded up or built bigger better houses as time went on. According to recent stats, the average over 55 Kiwi will look like this :
A $500,000 home & $40,000 in savings
A $750,000 home & $60,000 in savings
Auckland Kiwis may have a $1 million home & $80,000 in savings
Retirement looms – the Implications
Most of these households will be used to earning $70,000 to $100,000 pa.
They will get joint $28,000 pa. government super but want/need $50,000 to $60,000 pa. – a shortfall of say $25,000 pa.
If they have say $60,000 in savings, and take $25,000 pa. from savings to top up their super, their savings will all be gone within 3 to 5 years.
It is pretty easy to see that 92% in housing and 8% in savings does not work well when you retire, or when your income stops.
Yes and why not ? Over the medium to long term, most home owners in NZ have enjoyed nice capital gains (but not all).
The problem is our income stops when we retire, just when we want to be freed up from work, and go out and about doing things. Of course that costs money.
But we should not hesitate either as we don’t live forever – instead we have 3 stages in retirement;
GO GO - SLOW GO - NO GO
So if we don’t live today, tomorrow, and next month, all too soon we might become SLOW GO’s – usually brought about by a health event.
So if all our money is tied up in our big home, is it serving us ?
Land rich and cash poor ? Has your big home become a ball and chain ?
Capital Gain does not pay airfares, or buy camper vans
Not till you sell the house and therein lies the problem. If you want access to more cash, a mind shift, and a house shift may become necessary.
I recognise this is not everyone - some people like staying at home, being in a community, playing golf, gardening, and enjoying other local hobbies.
If this is you, you may not need a lot of cash and income, so you can keep your big house longer.
Many others want to do more (me too)
If you do, how much can you spend ? How much should you hold back in case you live “too long” ( my dad lived to 100).
Worry worry worry ! But don’t - get advice instead and make a plan.
A problem shared is a problem halved. Also look on line ……………
But maybe you CAN keep your big house longer – option 1/
You could rent it out to pay for your tripping around. $400 to $600 per week rent is a tidy sum towards your extra costs - remember food, clothing, and many other things cost much the same, home or away.
If your house is near to needing a new carpet, or kitchen, or other renovations, then don’t – rent it out for say 1 to 2 years, and renovate it when you get back. Then you get the pleasure of the upgrades, not your tenants who will probably not notice or care anyway.
That’s just one option – many more to come
These are meant to be your golden years, but to get them you will need:
- Reasonable health - so look after yourself
- Cash flow – organise it by planning, thinking, and getting advice
More next week & the week after & the week after & ………………………..
We will keep writing articles on this topic, and float as many ideas as we can come up with.
If you would like to help us to help others, email me your success stories and I will publish them in a future article.
Supplied by Alan Clarke, financial & retirement adviser, & author. He also writes regular articles for the media and on line.
His second book “The Great NZ Work, Money & Retirement Puzzle” is now available.
You can buy it on line at www.acfs.co.nz
Alan is an independent authorised financial adviser (AFA) FSP26532
His disclosure statement is available on request and free of charge.