Housing Costs Key To Determining The Future You
Housing costs key to determining the Future You
Pay now or pay later – the cost of housing in retirement is the number one factor that will determine how much money Kiwis will need to have saved by the time they stop working, Kiwi Wealth says.
Ramesh Naran, Senior Manager, Digital and Innovation at Kiwi Wealth, believes housing costs would most affect people’s expected lifestyle costs in retirement, and that now is the time to review and take action.
“Everyone’s costs in retirement will be different and that’s especially true when it comes to housing.
“Some people will be renting, some will move to the cheaper regions, some will be mortgage-free and others may still be paying a mortgage.
“Renting in retirement is an increasingly important issue. More than 25% of retirees are already doing just that, and that’s increasing. Add in those still with mortgages at retirement age, which is now at around 30% of over-65s and also trending up, and there’s a lot of people who are already, or likely, to be paying a big chunk of their retirement income to the landlord or the bank.”
In response, Kiwi Wealth has added new functionality to its online retirement income tool Future You, allowing members of the Kiwi Wealth KiwiSaver Scheme to edit individual line items in their estimated expenses, giving them greater customisation, flexibility and control over projected retirement lifestyle costs such as housing.
Members of the scheme can not only get an estimate of their retirement lifestyle costs, but can see how their KiwiSaver account might help them afford those costs – and make changes if they want. They can also use the tool to easily see how much they might save by the time they want to retire, and see this every time they login to their Kiwi Wealth KiwiSaver Scheme account.
“NZ Super was designed for a time when more people owned their own homes. Now Kiwis are having to plan for a wider range of housing scenarios that will affect their retirement lifestyle.
“For example, renting is typically cheaper than buying a house and making repayments, but rent is an ongoing cost. That means if you expect to be renting in retirement, you will need potentially more stashed away than if you are a home owner.
“Conversely, the higher costs of buying a house, and paying it off, over your working life effectively ‘front-loads’ your housing costs.
“It’s ultimately a case of paying now or paying later for housing in retirement. That makes it imperative for people to plan accordingly based on their individual circumstances, and it’s why we’ve added new customisation to Future You.”
The new Future You update enables members to model their retirement income requirements in detail using customisable lifestyle line items such as accommodation, food, utilities and even “luxury items” like overseas travel.
Benchmarked against the new Massey University retirement income guide, which provides projections based on a ‘No Frills’, ‘Flexible’ or ‘Deluxe’ lifestyle in retirement, the Future You tool helps members tailor their estimated lifestyle costs and consider what they could do to achieve a retirement goal over the long-term.
“Our members say the Massey figures are a good starting point but they believe their personal circumstances will vary quite widely,” Naran says.
“They want to be able to determine their own retirement income goal and look at their KiwiSaver account based on that, along with the ability to update things as plans or life stages change.
“It all adds up to giving people the clearest picture yet of how they are tracking.”
• The Future You tool is available to members who are aged between 18-65 and who have not made a transfer from an Australian complying superannuation fund.
• Future You bases estimated weekly costs on data from Massey University and, for accommodation, the Trade Me Property Price Index: A public version of the tool is available for non-members to trial athttps://futureyou.kiwiwealth.co.nz/
Kiwi Wealth Limited is the Issuer and Manager of the Kiwi Wealth KiwiSaver Scheme. The Product Disclosure Statement for the Kiwi Wealth KiwiSaver Scheme is available at www.kiwiwealth.co.nz.