Retirement, money and savings: What retirees are doing after selling the family home

Many retirees have a million-dollar asset thanks to the property boom but little cash to enjoy their retirement. Now some are selling their home and hitting the road. However, experts are urging caution. Carmen Hall reports.

Some asset-rich cash-poor retirees are selling up and choosing to rent or move into motorhomes to free up money, a rental agency boss says.

Tauranga Rentals director Dan Lusby said many people were finding it tough to make the most of their retirement because they had limited money coming in despite living in a million-dollar home thanks to the property boom.

As of February 2024, the median house price in Bay of Plenty was $820,000, up from $385,000 10 years earlier and meaning the median Bay property increased in value by 7.85 per cent each year, or $43,500 on average.

As a result, some were choosing to sell so they could help their children gather a deposit for a house.

Others were selling, putting the money in the bank and using the interest to travel or buy a campervan and “live life”.

But the head of the New Zealand Motor Caravan Association urges retirees not to leap in and sell all their property holdings so they can drive off into the sunset.

Working longer to pay mortgage

Rapson Loans and Finance co-owner Tristan Hewett said a small number of superannuitants had sought advice about selling assets to free up money.

“It is really tough when the only option left is to sell or to downsize.”

Rapson Loans and Finance co-owner Tristan Hewett. Photo / Alex Cairns

He said a few clients still had debt when they reached 65 but many were working later in life to pay their mortgages.

“Older people do have the option to downsize their houses and move to a cheaper area to enable them to reduce or repay their lending that way.”

Reynolds said one option for people who were asset-rich but cash-poor was to downsize and reduce debts with themoney from the sale.

“There is also the option of a reverse mortgage but there are quite strict parameters around that.”

Having a home provides security

New Zealand Motor Caravan Association chief executive Bruce Lochore said people often reviewed their assets, including property, when they retired.

Some downsized for convenience and might buy a motorhome or caravan. Others sold everything to live on the road but he urged people to not leap in.

“We absolutely don’t recommend they get out of the property market. It’s great for a while and, you know, they may do it for five or 10 years.

“We see time and time again, people who have left the property market, all they’ve got is their motor home, and it doesn’t fit with their health issues at a later stage.”

Carrie Abbott, from iRent Property in Rotorua, said it heard of retirees who had bought motorhomes and spent months travelling the country.

“But they typically rent their properties out while they are away rather than sell up.”

‘What’s the point of working and not being able to enjoy it?’

Tremains Bay of Plenty managing director Anton Jones said retirees often downsized their homes or moved to retirement villages.

Tremains Bay of Plenty managing director Anton Jones.

Retirement villages had standalone houses and facilities including swimming pools and gyms.

Demand for smaller homes was also growing.

“There are a lot more people looking at smaller houses because they are cheaper. Superannuation is not great ... if you are asset-rich and need the money to live off.”

Most people spend much of their lives trying to save for their kids and putting money away to enjoy life in their later years.

“So, instead of scrimping and scraping you’re going to want have a bit of fun when you retire. What’s the point of working and not being able to enjoy it?”

Asset-rich means you have options

Mark Lister is investment director at Craigs Investment Partners.

Craigs Investment Partners investment director Mark Lister said people who were asset-rich were “quite lucky”.

“They have options ... and that is the good news.”

They could downsize, rent a smaller place, live with family or in a granny flat and use the capital to generate a return.

There were other financial tools such as a reverse mortgage but they would need to seek sound expert advice, Lister said.

“You are probably younger than you think you are,” he said.

“If you’re 65, and you’re just retired you know there’s every chance you live to 100. So, you don’t want to put yourself in a position where you’re burdening yourself in the future by not making the right financial decisions.”

Term deposit rates of 6 per cent were also attractive - but that was not going to be the case forever and he expected the rates to drop.

Lister said it was probably going to get harder to generate that level of return off savings.

Hard to change asset or money into retirement income

Te Ara Ahunga Ora Retirement Commission personal finance lead Tom Hartmann said it was difficult to draw a regular retirement income from a lump sum.

“In the past, people used to try to stick a huge lump sum in term deposits and live off the interest so that they didn’t deplete their capital, but that’s not really possible for most people as you have to have a silly amount of money in order to be able to do that. For most people, the better approach would be to be diversified safely in a Balanced Fund and drawing down from that over time.”

The balance of homeownership was expected to drop, which meant KiwiSaver would become more important for those who retired without an asset or a lump sum.

“It is the best retirement vehicle because of the incentives for people building wealth, because of the added contributions from the Government and employers. It will play a larger and larger role as we go by, but it is still very young as it only started in 2007.”

Retirement village living could free up cash

Retirement Villages Association executive director John Collyns said realising $900,000 on your home and buying an Occupation Right Agreement in a village for $750,000 added a lot of money to people’s retirement savings.

Retirement Villages Association executive director John Collyns.

“We also know that a sizeable minority – at a guess, 25 per cent - of residents only have their national Super to live off, so predictable costs are incredibly important.”

The association had 425 member villages across New Zealand including 27 villages in the Tauranga City Council area, nine in the Rotorua District and 44 across the Bay of Plenty region.

Carmen Hall is a news director for the Bay of Plenty Times and Rotorua Daily Post, covering business and general news. She has been a Voyager Media Awards winner and a journalist for 25 years.