Take control of your Retirement

What do you want from your retirement? Have you actually taken the time to sit down and think about it? Or even better, have you sat down with your partner and thought about what you want to do and how you want to live when you suddenly have a lot of free time?

Short of the more unrealistic dreams like becoming a famous rock star, there are no wrong answers to the question of what your retirement can look like. After all, it is your retirement.

If you're the type of person who loves alone time, perhaps good books, newspapers and TV will bring you long-term happiness. But with limited financial resources, a retired social butterfly or avid traveller might be miserable spending too much time at home and instead crave activity and interaction.

Whatever it is, start thinking about it before you retire and start thinking about how much money you will need to do the things you want too. Many people don’t plan and you know what they say, failing to plan is planning to fail.

An important question to consider is this. Do you think you’ll get a state pension when you hit 65? I guess it depends on your age, but the likelihood of retiring at age 65 and getting a state pension is diminishing every year.

Today the number of people in the over 65 age group is about 700,000 or 15% of NZ’s population. The over 65 population is likely to increase to 1.7 million by 2060. That means over 65s will make up a massive 27% percent of the population.

Currently there are just over 3 million people of working age (15 to 64), an average of four workers per retiree. By 2060, that figure could have reduced to just two workers per retiree. It is easy to see the difficulty in paying a state pension by this time.

The current pension situation is unsustainable. It is highly likely that there will be changes made to superannuation, be it an increased retirement age, means testing for recipients or something else entirely.

I believe that people who can, should make alternative plans for their retirement, plans that they have control over. Simply assuming that I will be eligible for a state pension when I turn 65, without creating a backup plan is a big risk to take.  

Fortunately, there’s a relatively simple why to ensure that you will have financial assets that generate income in your retirement and that’s through residential investment property. Property is an excellent, low risk way to save for retirement. It’s a long-term, stable investment plan, which is why so many people have been doing it successfully for many years.

Retirement was one of the primary reasons for beginning my journey into property investing. The basic premise was that if I bought a house and rented it out, the mortgage would be paid off before I retired and I would own a house outright that would pay me an inflation adjusted weekly return.  

A freehold house would also give me options should I need capital. I could borrow against the house, or sell it. As well as rental income paying off the mortgage over time, there was also the high chance of capital gain.

Investments can of course also be made into the stock market with positive results and I highly recommend getting some exposure to a balance stock portfolio. But a huge advantage with property is the leverage of your deposit. Even with a deposit of 15% (the minimum amount you need to buy a new investment property today), you still benefit from the capital gain on the total value of the property, which is 85% bank money.   

Here’s a simple example:

You buy a new house for $639,000 with a 15% deposit – you invest $95,850.

If the house appreciates by 5% your gain is $31,950. That’s a capital gain of 33% on the your deposit in just one year!

Considering residential property has appreciated by an average of 7% per annum in NZ over the long term you can see why people investment in property.

It’s the leverage that makes property investment so compelling. 

At Assured, we believe that property investment is one of the safest ways to save for retirement. Ideally investing should begin in plenty of time for your retirement, as this is not a ‘get rich quick’ scheme. It takes time, patience and planning. 

If you want to learn how to take control of your retirement planning get in touch, we’ll be happy to answer your questions and help you along the way.

Thanks for your time,

John Kenel

CEO

Assured Property