One of the biggest financial risks faced by retired people is running out of money before they run out of time. A pension is only enough for daily living costs and those who have just a small sum saved can run out of money if they have to replace a
car and pay for home maintenance.
There are options for those who need to supplement their retirement funds.
First, check with Work and Income to ensure all available benefits are being received, such as accommodation supplements and disability allowances. Check with the council on eligibility for a rates rebate.
If a large sum of money is needed, the cheapest option to consider is to borrow from family members. This should be done with the help of a solicitor to prevent any problems with gift duty or issues that might arise on death.
Unfortunately, children don't often have money to lend. Borrowing from a bank is a possibility and can usually be done by way of an interest-only loan. Although this will help keep repayments small, they still need to made and this can be stressful.
Selling the family home and buying a cheaper house is another way of getting access to funds. This can be an expensive option once all the costs associated with selling, buying and moving are taken into consideration.
Home equity release schemes are proving to be very popular as a last resort. If you need funds for home improvements, such as a new roof or painting, then taking out a loan will enable you to preserve the value of your house.
Choosing a home equity release scheme is something that needs to be done with caution and is best done with independent financial and legal advice.
Liz Koh is a financial adviser. Her disclosure statement can be obtained free of charge by calling 0800 273 847. www.moneymax.co.nz
