Housing can be a big cost in retirement

11 October 2017

Chief Editor, Kiwi Wealth News

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As with so much else involving retirement in the 21st Century, where we live when we stop working is changing. Gone are the days when most Kiwis could expect the path to a comfortable retirement to include buying and paying off their own home before retirement.

Instead, for younger people, soaring house prices are both making it harder for them to get on the property ladder and ensuring it takes them longer to pay off their house once they’ve bought it. At the same time, older people may find themselves locked out of the property market after a divorce, business failure, redundancy or ill health.

Whatever their circumstances, Kiwis now have to plan for a wider range of potential scenarios, whether that is renting, or living with family, or moving into retirement communities.

And on top of this uncertainty, there is “a silent housing crisis” among retirees - whether they’ve bought a home or rent one, retirees are facing increasing housing costs.

Homeowners struggle with costs

More than 30% of over-65s are still paying off their mortgage and even for those who own their home outright, other costs – like high council rates and rising power and maintenance costs – can strain their ability to stay in their homes.

Renters in retirement

And for retirees who rent – which is currently more than 25% of retired people and growing – rising rents and a shortage of council housing for pensioners is creating a cash crunch for older renters.

This means that a significant, and increasing, number of people in retirement are already, or likely to be, paying a big chunk of their money to a landlord or a bank.

In fact, the cost of housing in retirement is likely to be the number one factor that will determine how much money Kiwis will need to have saved by the time they stop working.

If that’s the case, then it’s important, especially for those approaching retirement, that they can get to grips with exactly how much of their retirement savings might be needed to cover their housing expenses.

But how?

What can you do?

Luckily, Kiwi Wealth’s innovative online tool can help! It’s called Future You, and it’s available to Kiwi Wealth KiwiSaver Scheme members aged 18-65 who haven’t made a transfer from an Australian complying superannuation scheme.

It allows members to select, as a goal for their retirement, one of three different lifestyles – either ‘No Frills’, ‘Flexible’ or ‘Deluxe’ – see how much that lifestyle might cost them, what their KiwiSaver account balance may be when they are able to withdraw and whether they are on track to achieve their selected retirement goal.

Alternatively, members can choose to input their own goal lifestyle instead.

New function gives you even more control

And now, with a recent update to Future You, members can, on top of creating their own goal, input detailed lifestyle expenses, covering accommodation, food, utilities and luxury items, giving them a far greater understanding of what their potential budget could be in retirement.

Members’ ability to customise their expenses, including housing costs, to reflect their own situation and expectations for their future, means they get the clearest picture yet of what their retirement lifestyle could cost them.

While housing costs may be increasing, you don’t have to feel like you’re losing control. Our Future You tool can help ensure retirement planning doesn’t have to be a mystery.

Get an idea of what Future You could do for you, or check out the tools that you could access as a member of our Scheme.

The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed, or relied on, as a recommendation to invest in a particular financial product or class of financial products. You should seek financial advice specific to your circumstances from an Authorised Financial Adviser before making any investment decisions.

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