Kiwis tend to invest in property.
The average household in New Zealand has about $400,000 in housing (March 2014).
The average household has about $32,000 in other financial assets.
About $55 billion or 8 per cent of our wealth is outside housing.
About $775 billion or 92 per cent of our wealth is in housing.
Over 55
This article is more for people over 55 but all age groups should read it.
Kiwis love houses, and put all their money into them.
Most Kiwis over 55 did, and most also traded up or built bigger better houses as time went on. According to recent stats, the average over 55 Kiwi will look like this:
A $500,000 home and $40,000 in savings.
A $750,000 home and $60,000 in savings.
Auckland Kiwis may have a $1 million home and $80,000 in savings.
Retirement looms - the implications
Most of these households will be used to earning $70,000 to $100,000 a year.
They will get joint $28,000 a year government super but want/need $50,000 to $60,000 a year -- a shortfall of say $25,000 a year.
If they have $60,000 in savings, and take $25,000 a year from savings to top up their super, their savings will be gone within three to five years.
It is pretty easy to see that 92 per cent in housing and 8 per cent in savings does not work well when you retire, or when your income stops.
But we love our houses. Yes and why not?
Over the medium-to-long term, most home owners in New Zealand have enjoyed nice capital gains (but not all).
The problem is our income stops when we retire, just when we want to be freed from work, and go out and about doing things. Of course that costs money.
But don't hesitate as we don't live forever -- instead we have three stages in retirement:
Go go, slow go, no go
So if we don't live today, tomorrow, and next month, all too soon we may become slow go's -- usually brought about by a health event.
If all our money is tied up in our big home, is it serving us?
Land rich and cash poor? Has your big home become a ball and chain?
Capital gain does not pay airfares, or buy camper vans. Not until you sell the house, and therein lies the problem. If you want access to more cash, a mind shift, and a house shift may become necessary.
Not everybody
I recognise this is not everyone -- some people like staying at home, being in a community, playing golf, gardening, and enjoying local hobbies.
If this is you, you may not need a lot of cash, so you can keep your big house longer.
Many others want to do more (me too)If you do, how much can you spend? How much should you hold back in case you live "too long" (my dad lived to 100).
Worry, worry, worry! But don't -- get advice instead and make a plan.
A problem shared is a problem halved. Look online: www.calcxml.com/calculators/i-am-retired-how-long-will-my-savings-last;
But maybe you can keep your big house longer:
You could rent it out to pay for your tripping around: $400 to $600 a week rent is a tidy sum towards your extra costs -- remember food, clothing, and many other things cost much the same, home or away.
If your house is near to needing a new carpet, or kitchen, or other renovations, then don't -- rent it out for say one to two years, and renovate it when you get back. Then you get the pleasure of the upgrades, not your tenants, who will probably not notice or care anyway.
That's just one option -- many more to come.
These are meant to be your golden years, but to get them you will need:
Reasonable health -- so look after yourself.
Cash flow -- organise it by planning, thinking, and getting advice.
I will keep writing articles on this topic, and float as many ideas as possible.
If you would like to help, email me your success stories and I will publish them.
Alan Clarke is a financial and retirement adviser and author. His second book, The Great NZ Work, Money & Retirement Puzzle, is available at www.acfs.co.nz Alan is an independent authorised financial adviser (AFA) FSP26532; his disclosure statement is available on request and free of charge.