Why Renters Need a Long Term Plan

Read More

RentersWhy Renters Need a Long Term Plan

The rate of home ownership in New Zealand is falling. Just under 65% of households owned their own home at the time of the last census in 2013, and this is the lowest it has been since 1951. The rapid increase in property prices since 2013 has no doubt further eroded this percentage. The flip side is of course that more people are renting and either delaying the purchase of a first home or choosing to rent long term.

Affordability is only one reason people rent. Other reasons include the flexibility to be able to travel, the desire to live in a more expensive location, perhaps close to work or close to good schools which would otherwise be unaffordable, and freedom from the responsibility and cost of house maintenance. These are all sensible reasons to rent, however renting over the long term has serious consequences for retirement.

The fact is, NZ Superannuation is set at a level that covers basic living costs but not rent or mortgage payments. If you don’t own a debt free home in retirement, you will need a big chunk of money, probably at least half a million dollars, to finance your rent payments for the rest of your life. That’s around the cost of house in a mid-sized town.

There are two ways of building this wealth. The first is to save very hard out of income. The second is to borrow money to invest. Borrowing to invest only makes sense if you are investing in a business or in property. For most people, property is the easier option.

The answer’s obvious. If you choose to live in a rented home while you are working, play it safe by investing in a rental property, preferably in a location you would be willing to retire to.

Related Articles

Economy
Liz Koh

Budget Winners and Losers

The latest Government budget had something for everyone but while most households will be a few dollars a week better off, there are some clear winners and losers. In the winners’ corner are businesses, those on high incomes, and savers. The biggest losers are property investors who have built large portfolios financed partly by tax rebates.

Read More »

Top Up or Miss Out

The end of June is an important date for KiwiSaver members. The financial year for KiwiSaver runs from 1 July 2009 to 30 June 2010 and if you have contributed at least $1,040 to KiwiSaver during that time, you will be eligible for the full amount of Government tax credit to be paid into your KiwiSaver account in July.

Read More »

Responsible Investing

There is a worldwide trend for investors to want to make a positive contribution to the world by investing in companies that are socially and environmentally responsible. If you are passionate about the effects of climate change, the scarcity of food and water, and social or environmental policies in general, then you will no doubt wish to ensure that the companies in which you invest are going about their business in a manner that is consistent with your views.

Read More »

Helping You Live your retirement To the Max

Keep in touch

Fill in your details and we’ll get back to you in no time.