Increasing Life ExpectancyIn 1971, life expectancy for males and females was 67 and 71 years, respectively. Today, both genders can expect to live beyond 80 years. This means that retirees face the challenge of funding their retirement for 15 years or more.
Facts and Figures
Huge Dependence on NZ SuperMore than 60% of retirees rely mainly or entirely on NZ Super for their income. For many, their home is their only asset and NZ Super their major source of income, making them asset rich but cash poor. (Reference REVIEW OF RETIREMENT INCOME POLICIES, undertaken by the Retirement Commission)
Sizable Asset PoolThe population aged 65+ has an estimated $725 billion in financial and non-financial assets. Of this, over 25% ($185 billion) comes from owner-occupied dwellings. Equity Release options can help unlock these assets to support a better retirement. (Reference Statistics NZ)
Rising Cost of LivingThe cost of living expenses for superannuants has averaged 2.4% per year compared to 2.1% for all New Zealanders between 2008 and 2022. Rates, dwelling insurance, and health insurance have also risen significantly. Many councils are now signaling rate increases in excess of 10% and medical insurance continues to climb. This puts more pressure on retiree disposable income, both now and in the future.
Need for Maintaining Standard of LivingWhile Equity Release products can be used for lifestyle reasons, such as holidays, or an emergency (health), another prime use can also be to maintain a reasonable standard of living and cover every day costs which NZ Super, unfortunately might not be sufficient to cover.
Increase in Working Past 65More than 200,000 people aged 65+ remain in the labor force, with almost 50% of the population aged 65-69 remaining participants in the workforce. This is due to living longer, choosing to remain active, and financial pressures. While people are working beyond retirement age, which supports retirement income, the young and old are more susceptible to losing their job when economic times are tougher.
Low Retirement IncomeAccording to the Retirement Commission, 40% of people aged 65 and over have virtually no other income besides NZ Super, and another 20% have only a little more. Retirement income is lower for women than men, on average.
Aging PopulationNew Zealand's population is aging. By the 2040s, a quarter of the population (1.4 million) is projected to be over 65. Retirement income is lower for women than men, on average. The New Zealand Treasury has warned that our fiscal position (debt) is unsustainable in the absence of change. Change could mean paying more tax, or a change in NZ Super.
Difficulty in DownsizingResearch (noted by the Retirement Commission) indicates that people are finding it harder to downsize due to a lack of appropriate properties. There is a need for a greater number of suitable accommodation options, including smaller, modern, and accessible properties.
Are You Asset Rich But Cash Poor? Equity Release Can Help.
Balance Your Lifetime Wealth
The Lifetime Balance Approach is a strategy that helps individuals manage their finances more effectively over their entire lives. (In economic speak, it's known as the Lifecycle Hypothesis, where you save during your working years, accumulate wealth, and spend more than you earn when you retire).
This approach involves utilising financial assets such as savings or physical assets such as home equity when income is low to support or maintain consumption (spending) when expenses often outpace income in retirement.
In New Zealand, where traditional saving habits may not be strong, homeownership has become a key way for people to build wealth. This is achieved through capital gains and gradually paying off mortgages, essentially turning homes into a valuable saving tool and vehicle to release equity.
