Retiring is a right of passage. After 65 off years of hard work, every Kiwi deserves to spend their later years in comfort, safe in the knowledge that they can afford to live the life they want.
Unfortunately, the fact is that it's a massive undertaking securing enough funds to retire comfortably in Auckland, one that no doubt challenges many Kiwis. Government Super Senior statistics estimate that Auckland's population of 65 plus citizens will increase by 106 per cent from 170,000 to 350,000 by 2033. So this will be a challenge faced by even more of us in the near future.
Instead of saving hard and sacrificing your quality of life while you're young, we at Goodlife Financial Advice recommend saving smart and investing. Property is one way that you could achieve this, if you invest well with a detailed and personally tailored plan.
How much does it really cost to retire?
A lot more than you'd think. A 2015 report from Workplace Savings NZ and Massey University sheds a little light on the exact costs with their guidelines. Assuming you retire at 65 and live until the Ministry of Health reported average life expectancy of 81, we've also worked out how much retiring will cost you in total:
- A 'no frills' retirement in metropolitan areas around NZ will cost roughly $22,400 to $32,700 a year. That's between $358,400 and $523,200 in total.
- A comfortable or luxury retirement will cost you between $56,900 and $101,800. In total that's $910,400 to over $1.6 million!
Those numbers are fairly imposing, but it's not time to give up on dreams of an early and comfortable retirement yet. There's several investment opportunities available to you that can help you reach this goal by the time you retire: chief among them is residential property investment.
What could smart property investment provide?
There's no one size fits all approach to funding retirement.
Property as part of a diverse investment portfolio can make retirement more comfortable thanks to capital gains and passive rental income. BNZ chief economist Tony Alexander highlights a trend towards property as part of funding retirement in comment to Stuff in September 2016:
"[They] are seeking assets and buying investment properties. They are also seeking assets they can hold and live off of for three decades in retirement rather than just 15 years given advances in health and medicines."
It's a small wonder that Kiwis are employing this strategy. As an example: if you bought property at QV's Auckland median value in 2013 and if it appreciated at the average rate, it could be worth as much as $1.2 million in 2016. That's a 58.5 per cent increase and almost $500,000 worth of equity that could provide security and comfort in retirement.
Additionally, if you pay off your mortgage and rent the property out you could cover a no frills retirement with that income alone. TradeMe's rental index puts the average rent in wider Auckland at $500, which is $26,000 a year. Add your pension and other investments on to that amount and you might even be able to retire in the lap of luxury.
Get advice and get started
There's no one size fits all approach to funding retirement and for some property investment might not be the solution. The team at Goodlife Financial Advice know this better than most and are dedicated to taking our time to understand your situation to help formulate a personalised investment plan and ensure your comfortable retirement.
The earlier you start the better, so get in touch for a chat about how we can help you work towards a comfortable and secure retirement.
Here's to your financial independence!
Authorised Financial Adviser / Investment Property Expert
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