An analysis of projected home ownership rates for retirees has been revealed in new figures released by the Retirement Commission, which show that many over 65s are forced to keep paying their mortgages or rent later in life.
The Te Ara Ahunga Ora Retirement Commission had the Treasury analyse New Zealand’s Household Economic Survey to investigate how many superannuants were still paying rent or a mortgage.
The report showed about two-thirds of renters aged between 65 and 74 were spending 40% or more of the $463 NZ Super income on housing. That number is even more stunning for Kiwis that are paying a mortgage, with over half of people in the same age group spending over 80% on mortgage repayments.
“When comparing to those who own their homes outright this is almost totally reversed, with approximately 80 percent spending less than 40 percent of NZ Super on housing costs,” Te Ara Ahunga Ora policy director Suzy Morrissey said. “More than 50 percent spend less than 20 percent of NZ Super on housing costs (55 percent of those aged 65-74 and 70 percent of those aged 75+).”
It was also revealed that NZ Super is the primary source of income for 40% of those aged 65 and over – with only 20% having a small amount of cash on top of that.
In 2018, 80% of Kiwi’s aged above 65 were homeowners, and 20% of Kiwis above 65 were found to be renting. This amount is expected to lean towards 60% of Kiwis owning a home and 40% of Kiwis paying rent. This means that the long-term trends suggest that in the future, there will be less 65yr olds owning a home and more renting using the NZ Super.
“It’s a real challenge for people to make ends meet if they are having to use substantial amounts of their NZ Super to cover housing costs; the picture was worse for those still paying off mortgages, Dr Morrissey said.
What Does this mean for New Zealanders?
This means that a more significant percentage of Superannuation and KiwiSaver will be spent on housing costs, showing signs of becoming a more considerable expense. To combat the rising costs, Kiwis need to increase their KiwiSaver balance goals for retirement. To meet the higher goals, you can increase contributions, ensure you are in the correct fund that will provide you with a higher return in exchange for more volatility, and be with the correct provider that aligns with you.
Everybody’s retirement savings goals will differ according to each person’s financial situation. Those unsure how much they will need for retirement to cover their housing and living costs should consult a financial adviser. To make the most of your KiwiSaver and find the best fund and provider to set you up for retirement, complete the National Capital HealthCheck.