Recent media reports have put the spotlight on 'paper-millionaires' who own homes worth a substantial amount of money, but are cash-poor as they head towards retirement.
While the final figure you need to save for retirement depends on the lifestyle you want to lead, there’s no denying that planning for your retirement includes putting aside a sizeable chunk of savings. More than just a home, your house is a critical asset when it comes to planning for your retirement.
The term 'paper-rich' is becoming more common as house prices soar, but this increased equity doesn’t translate into cold-hard cash in the bank. What this means is that while your house might be worth $800,000, you don’t have access to that cash tied up in equity to fund your lifestyle.
Approaching retirement can be a daunting prospect, particularly when considering the family home. Today’s market could mean big returns if you chose to sell your house, either to downsize or move to a slightly more affordable suburb. This is usually the sensible option when looking to release cash in retirement, but is easier said than done. Others choose to stay living in the family home and sign up to products like a reverse mortgage to release cash. This is an expensive way to fund retirement lifestyle but is still an important option for some people.
If you’ve worked with a good mortgage adviser, you’ll be mortgage-free when it comes closer to retirement. If you haven’t – it’s not too late. Either way you can make gains from your most precious asset, while setting yourself up for the golden years. But don’t hang your hat on your house giving you the retirement living you seek, make sure you are in KiwiSaver at the very least.
Contact us for advice on how to sort your mortgage and savings roadmap, so you aren’t caught short at such an important stage of life.