Funding your retirement years
Helping you maintain your lifestyle and know what your financial choices are in retirement.
What went wrong ?
Nothing.
If you were not lucky enough to get a great kick start, perhaps a sizable legacy, you did what most others did at that time. Married quite young, took on a mortgage - hopefully a State Advances 3%er; raised the children and you had done well to pay off all your debts by the age of 65 - plus hopefully a wee nest egg.
Some may have been part of an “until death” Company Super scheme-the lucky ones!
Many of these schemes were cancelled in the 80’s and 90’s and participants received a lump sum payment - which was a double edged sword.
Hopefully you invested well.
Remember the stock market crash of 87 and latterly for those who thought Real Estate was a safer bet – the Blue Chip collapse - and many others
The Government was not much help either - they have kicked in now, but back in 1975 they scrapped the compulsory Super scheme which would have given us all good pensions now.
So here we are at 65 plus and running out of funds before we run out of life - If this describes you give me a call or send me an email note from this site and I will be in touch for a cost-free chat discussing your options.
"For five years I struggled. I just thought that was my lot but Maurice changed all that - we found an option which works well for me – I am now financially independent again.
I should have done this before now.
Thank you Maurice"
Well, you could just live on the pension if that is all you have - with no financial backstop - stiffen up -go without - be as frugal as you can so that when you pass on your family will have more inheritance.
That's the way it used to be.
Well that's the way it used to be as well and many of you will remember this scenario well
Even in the most loving families I am now finding that option is very seldom a solution.
As we get older we now want our space - and our freedom – we want to be out doing stuff - enjoying life, travelling - eating out
And thank goodness in MOST cases attitudes of beneficiaries have changed as well.
“Its Mum and Dads money - they earned it - they should use it to enjoy life more ”.
Here is a list of the more common options to generate retirement funds:
While not a standard bearer for this product I do want to highlight this type of loan because I believe the product has been often unfairly criticized in recent years.
That is a shame because the perception and the reality are quite different.
Many thousands of reverse mortgages are currently held by Kiwis who are delighted with the financial independence this product can bring.
But like any financial service you need to know if it is right for you - you need good advice.
You often hear bad news stories from many quarters but if properly constructed the product can help pensioners into the THIRD AGE.
Ask enlightened children if they are happy to see Mum and Dad enjoying life to the full - or just existing on the pension - and you will be pleasantly surprised at the response.
Some of that wealth in some way will be accessed by this current older generation before the remainder is Willed on.
Because just GOING WITHOUT like many of our parents did is just not cutting the mustard anymore with the Baby Boomers.
The most feared feature of Reverse Mortgage.
You hear stories - very seldom supported by fact - of the whole equity in a house disappearing within a few years - with nothing left for beneficiaries
So let's put some context around that by giving you a typical use of the product.
Sorry to be briefly technical but to explain I need to quote the financial rule of 72 as it applies to Reverse Mortgage
If you borrowed a sum of money on a Reverse Mortgage and the interest rate was say 7.2% - any amount you borrow will double in close to 10 years. Of course remember you pay no interest on that loan - it accrues and is repaid in full when the contract ends.
So, say you choose to borrow $50,000 and assuming it is ALL drawn down on day one - again unusual because customers usually draw just what they need from time-to-time.
But if it was all drawn on day one, in 10 years you would need to pay back $100,000.
Sounds a lot - maybe?
Now if that $100,000 was billed against a $500,000 freehold home, and assuming there was absolutely ZERO increase in house value over that 10 years - 20% of your house value would have been spent leaving $400,000 for your beneficiaries.
That’s the difference between existing on the pension and having some extra cash to pay the rates; buy a new fridge or TV, being able to enjoy some small luxuries again, or draw larger amounts less frequently to, maybe, holiday.
Is it sounding like a fair swap now?
An increasing number of people do.
I spent the first 25 years of my working life with the Fletcher Challenge Corp. Initially in the rural sector with Wrightson NMA and latterly as General Manager American Express and Managing Director of Centurion Finance.
In 1990 I established my own business consultancy and have worked with a range of Companies in New Zealand and offshore.
I now specialise in providing support and financial options to retirees who may be wanting to do more with their retirement years - but struggle financially to do so. I have had meaningful meetings and telephone links with over 2000 people throughout NZ in the last few years discussing with them all the financial options that may be available in their particular case, and this advice has been given free of charge.
My "pro-bono" time is divided. For nearly 25 years I was a very active member of Business Mentors, helping an array of small businesses develop plans to succeed. I have scaled this back recently to concentrate on my current role as chair of the Moths and Butterflies Trust - with a special interest in Monarchs.
Trusted Advisor. I am authorised to provide the following types of financial
advisor services:
• Financial advice
• Retirement Planning
• Home equity release products
• Annuity products
As I mention in the website, over the last twenty years I have put Reverse Mortgage loans in place for many people.
The general rule of course is that they are Asset Rich and Cash Poor and although you still hear advice from a range of people - largely ill-informed I have to say - about how bad REVERSE EQUITY MORTGAGES {REM} -are I am happy to put on record that if a loan is put in place properly with good advice and for the right reasons they can be a life changer for those who proceed.
I thought it might be helpful to those considering a REM if I included some real life experience from those whom I have helped to secure a loan.
A woman rang me in tears one morning to say she felt she felt violated - her exact words - because she had just watched 10 Real Estate agents inspecting her property.
Her good neighbour was comforting her.
In fact she had heard about REM and encouraged her to call.
The problem started when her husband died - the funeral was more than anticipated - but she was never going to skimp on the love of her life, her pension reduced, and she had been given a quote for some much needed maintenance on her home.
She had gone to her Bank (of over 50 years) to get a loan but of course with no real ability to repay the loan and keep something of a lifestyle. That was not going to work. And in the end they refused her application anyway - which is not unusual with requests in this age group.
The advice from the Bank was to sell down - Not bad advice at face value!
But in this case the Lady was very attached to her home. They had bought it as their retirement home to see out their days and it contained many family memories she savoured. She also had great neighbours. She did not want to leave!
She was also not stupid! She had worked out that the cost of moving and relocating to a cheaper home - somewhere she did not want to be - would not only deprive her of her neighbours - it would cost a heap in Agents Fees - Legal fees - Removal charges et al. She correctly rationalized that that amount put into home maintenance would probably see her out!!
When we finalized the loan she said she was going to take great pleasure in ringing the Real Estate Agent to get her property taken off the market.
When last heard from, she was 86 and still going strong! Her home was warm and dry and she had a wee nestegg left for unexpected expenses - and a few treats as well. A much relieved and very happy client!
Almost invariably, long term clients tell me that although there was an immediate need for some cash (house renovations, car repairs/replacement, health issues, holidays, campervan purchase - very popular at present) the thing they value most is the money they will never spend.
To put that in perspective, REM Suppliers now offer what most know as similar to an Overdraft Limit.
If, for example, you qualify for say a $50,000 loan and only need $20,000 to purchase a replacement car - the remaining $30,000 would remain on call for you - indefinitely!
You may never ever draw that money down - but it will be available for both your lifetimes with no extra charge attached. That is why clients tell me it is the most important feature of REM. It is the money they may never spend which is most important.
Men,in particular, like to know that if they ‘go’ first (as is often the case) there is money available for “Mum” to draw if she ever needs it.
A prime example of 'just liking to know it is there' was a client who took out a loan - just to set it up.
I contacted him about three months later because there had been no drawdown and there is a no fee three month cancellation clause with some suppliers if you find you do not need the funds.
But he was adamant he wanted to keep the loan in place - mainly for Mum, because he had always looked after the family finances.
Anyway, he said “I will be drawing some down tomorrow".
"Why is that", I asked?
“Because it is the opening of the Bluff Oyster season and Mum and I love a good feed! But just on the pension we have not been able to these past three years".
Good on them - they can tuck in as much as they want now!
A lady rang me while meeting with her Dad.
Mum and Dad where in their mid-eighties, she said, and fiercely independent.
The house they had lived in for 50 years was in need of repair and he had been to the Bank for a loan.
The answer - No – "We simply don’t have a product for you", they said - hence the call to me.
He actually thought I would turn him down as well - not realizing that with a REM, the older you are the better!
He took the maximum advance (more than he needed to put in the heat pump) and make the place ship shape six months later.
How do I know this? Because, about a year later, his daughter rang me to say that in one of his last conversations with her, before he died, he asked her to ring me and thank me for the loan!! He had done up the house - and there was plenty left for his wife should she need future funds.
She told me he had died a happy man - his job was done!
But some months later she rang me again. She wanted to sell the house in Milton and move her Mum into a house in Mosgiel - very close to her.
She had no spare funds to help, but could her Mum use some of her advance to move to Mosgiel because there would be a shortfall on what she would get in Milton compared to her new home in Mosgiel?
A bit of work for me - but all done!
Tell me, where did Compounding Interest come into that equation anywhere?!
Without an REM, this story could not be told.
One very happy family!
Over the protestations of his wife, a client took out an REM to cover her heart operation!
She had gone to her Doctor because she had not been feeling well, to be told she needed surgery. The sooner the better - although it was not considered life threatening!
She had to go on a waiting list at a public hospital because with only the pension to live on they had cancelled their Southern Cross policy five years previously. In their 70s, the premium was increasing markedly and it had just got too costly for them. That happens to many in that age group!
Her Doctor was hopeful she would not have to wait too long.
Hubby was having none of that!!
“This is my best mate", he said when he rang me. "What if something happened to her on the waiting list – I couldn’t live with myself".
So with her complaining that she would be fine and the kids deserved the full inheritance, he went ahead with the REM and she had the operation privately.
Turned out her condition was worse that was thought originally. The Surgeon said she may not have lasted on the list.
“They probably all say that" he said laughingly to me when he rang to organize the payment.
"Better a live Grandmother and best mate than money for the kids" was his rationale - and it was hard to fault. There was plenty left for them anyway!
The irony was he died suddenly three years later.
I can imagine his last thoughts toward his BEST MATE would have been very endearing - and what a tragedy for the family if they were both gone so soon.
Rates Rebate
Government website that provides details regarding eligibility for Rates Rebates.
SeniorNet
Website that gives Seniors an opportunity to learn more about new communication and information technology.
Sorted
Retirement Commission website that provides independent information about Reverse Mortgage / Equity Release
schemes.