NZ Herald 13 December 2025

AThat’s tough losing your Mum at a young age. And it’s also not easy coping with a considerable inheritance at a stage in life when you have lots of other decisions to make.

Still, it’s great that you’ll be able to afford travel, buy a house in your 20s, and spend time at home with your children if that’s what you want.

I assume you and your siblings are renting out the jointly owned house. Or, if one of you is living in it, they are paying rent to the other two.

Either way, it’s likely that one or more of you will want to use your share of the money for something else in due course. I’ve seen families fall apart over this sort of situation. It would be wise to discuss this issue now, and agree well in advance on how to deal with it. It would probably be simplest to sell the house.

In the meantime, what should you do with the $230,000?

Often, in this column, I’ve suggested that retired people split their cash three ways. Put the money they expect to spend within the next three years or so in low-risk term deposits or a cash fund, the medium-term money in a balanced or bond fund, and the ten-year-plus money in a growth or aggressive fund, in or out of KiwiSaver.

The same applies to people of any age, except that those under 65 should choose non-KiwiSaver funds, so you can withdraw money at any time.

Note that your balance in the middle-risk fund will sometimes fall. And it will probably fall further and more often in the higher-risk fund. That’s why you don’t want money you’ll withdraw soon to be there. But in the long run, the riskier the fund, the more the money will probably grow.

It’s over to you to work out roughly how much money you will want, and when, for travel, a house purchase and so on.

What about your student loan? If you had credit card or other high-interest debt, I would use some of the money to pay that off straight away. But a student loan is different. As long as you live in New Zealand, and pay no interest, you might as well just make the minimum required repayments when you start work. Keep in mind, though, that interest charges start when you go overseas, so plan to use some of your inheritance to pay the loan off before you leave.

P.S. Just a thought: you and your siblings might like to spend a little of your inheritances on an “annual meeting”, ostensibly to discuss the house you all own, at a flash restaurant. You could all raise a glass to your Mum!

AThere are no government guarantees on KiwiSaver or any other managed funds. But the words of the Financial Markets Authority are reassuring.

“There are different regulatory regimes between the self-managed funds that failed in Australia and KiwiSaver and non-KiwiSaver MIS (managed investment schemes) in NZ, which have greater regulatory protections,” says the FMA.

“Firms can fail for a variety of reasons. However, under our MIS regulations the assets are held by a custodian, which provides an added element of protection.

“We would emphasise the importance of investing in the regulated (retail) sector and obtaining quality advice.”

The “retail” bit is important. Retail investments include KiwiSaver and other mainstream funds. Wholesale investments, on the other hand, “can promise attractive returns but don’t have the same protections of retail investment offers,” says the FMA.

“Wholesale investment offers are aimed at experienced investors, often with large sums of money to invest. Unless you are a very experienced investor, you should proceed with caution and talk to a financial adviser before investing in a wholesale offer.”

Often, when you read about retired people losing their life savings when a New Zealand investment fund goes belly up, they had been in a less regulated wholesale investment that went wrong.

ALet’s get your mother-in-law into a less stressful situation!

Selling and renting isn’t a bad idea. If renting a new, smaller place appeals to her, your plan would probably work well. But — and this is a big “but” — would she be happy to leave her home?

She doesn’t sound quite like the early 70s couple in last week’s column who are planning to sell and rent so they could travel more. And there’s another way to reduce her stress — through a reverse mortgage, sometimes called a reverse equity mortgage.

I put three questions to economist Cameron Bagrie, who runs the website equityrelease.co.nz that specialises in this area:

• If the mother-in-law really wants to stay in her home, would it be possible to get a reverse mortgage or home reversion in her circumstances, despite her mortgage and family debt?

The reply: “You would need to refinance the debt with the reverse equity mortgage provider, which would mean likely a higher interest rate. (It’s currently 7.99% at the biggest reverse mortgage provider, Heartland Bank)

“However, you would be able to access more funds beyond the drawdown to pay off the existing mortgage. At the age of 80 you can draw down up to 40% of the property value.”

In other words, while your mother-in-law would pay higher interest on her mortgage, she could borrow considerably more to repay the family debt and live much more comfortably.

Bagrie adds that the alternative, home reversion, wouldn’t be available as you need to be debt-free.

• If she got a reverse mortgage, after paying the debts she would have about $700,000 capital. She would then have much the same expenses as now, plus it sounds like some maintenance spending. This sounds workable to me. What do you think?

The reply: “Her expenses should be lower as the interest cost on the reverse equity mortgage will not impact near-term cash flow.”

That’s because she would make no interest or principal payments on the mortgage. Instead, the debt would gradually build up, to be paid off when the house is eventually sold.

• Would you advise her to sell and rent, as suggested?

The reply: “The choice of ownership versus renting is often personal. Will the person have stability of tenure if renting? How much does she want to stay in the home? Is it near close friends and amenities? Rent removes rate costs etc but you potentially lose out on any capital gain.

“A reverse equity mortgage provides flexibility to settle both debts, which I gather is a source of stress, but will come at an interest cost.

“$250,000 at 8% interest is $20,000 a year. If the house goes up in value by 3% (most economists seem to be saying around 5% over the coming year) her net wealth will not have gone backwards. But you need to be careful relying on projected house price gains.”

Bagrie’s point about house values growing is an important one that people sometimes overlook when considering a reverse mortgage.

In the reverse mortgage calculator on Heartland Bank’s website, you can check how higher or lower gains in house values over the years would affect a loan for your mother-in-law. I suggest you look into the idea, including reading the info on Bagrie’s website.

ASee the previous Q&A. I have some concerns about people getting reverse mortgages at 65, because there might be many years for the debt to grow before they or their heirs sell their home. But that issue isn’t nearly as big at 75. So a reverse mortgage could work well for her.

I suggest she, too, checks the website and the calculator mentioned above.

AGosh, life at your place doesn’t sound quite as much fun as the retirement village ads suggest! I hope there are few laughs between all the aches and pains.

You misread last week’s letter. The couple have about $300,000 in KiwiSaver but also expect to add another million dollars when they sell their home. With that total, I think it’s fine for them to spend considerable money on travel and luxuries. Unless they’re really extravagant, they should still have plenty left for taking care of medical problems.

There’s a quality-of-life issue here too. It seems to me that many people are overly cautious with their retirement savings. Obviously, you can err too much on the spending side. But you can also spend too little.

You raise a good point about sometimes having to move when renting in old age. But these days there are more long-term leases available. And I would think a retired couple would be desirable tenants, and therefore more able to negotiate a long lease than younger people.