This article was published on 26 March 2005. Some information may be out of date.

Q&As

  • Man in mid 50s can afford to drop out — but what about emotionally?
  • Is reader silly to stick with renting?

QI am mid 50’s and have worked hard all my life and been a relative success, but not without the corresponding crashes.

One major one last year has thrown me into the depths of depression through workplace stress and has meant that I cannot now work — at least for a while as my body and brain do a bit of serious repair. I feel that I may never work again, and sometimes wonder if I want to.

I was in the fast lane for a long time doing seven days a week, and as we all know you can’t do that forever and — burnout happened!

All I want to do now is live the slow life. But after turning myself into a workaholic this is indeed a difficult and very different challenge.

My situation is this: I have a cliff-top coastal mortgage-free home in the country, (approximately $0.5 million), and a dual apartment in the city (one up, one down) also mortgage-free ($0.5 million). I own with two others (mortgage-free) a coastal lifestyle block of about 10 hectares ($1 million), and I also own an investment property in an upmarket suburb that has perhaps a 35 per cent mortgage on it ($1 million), two life insurance policies, one payable at 60 the other at 65, and an investment that should mature in about three years yielding around $300,000.

All the properties are leased/rented out and I live in a rented shed.

It all sounds a bit silly when you see it written down, and I hear you say, “Well what’s the problem? Most people would be happy to be in your situation.”

Well, I felt as if I had a direction, once, now I don’t!

I just don’t know where to go next: sell everything and put it on the stock market, buy an annuity so I can have a perpetual income for the rest of my days, what about unit trusts? Shall I just go home and chill out, become a beachcomber?

My simple question is: ‘When is enough, enough?’ We turn ourselves into workaholics but we don’t know when to stop.

We all live such fast-paced lives — and we force our children and each other to do the same — that we don’t know how to slow down.

How much do we need to have a decent retirement? I know this is relative to each individual’s situation, but just to be comfortable for an average person.

Mary, I realise this is not your usual sort of enquiry. People usually ask how to speed everything up, I am strangely asking you the opposite.

AEnough is enough now.

I suggest you start by selling a property and buying yourself a lovely place to live. If you spend $1 million on it, why not?

By my reckoning, you’ve still got another $1 million in property, plus the $300,000 soon and the insurance policies.

For simplicity, let’s call it $1.3 million now. How well will that finance your retirement?

Going to the Managing Your Nest Egg calculator on www.sorted.org.nz, we learn that your life expectancy at 55 is 80, but we’ll be optimistic and change it to 85. (If you live beyond that, you’ll still have NZ Super, plus the proceeds of your insurance policies.)

Let’s say you invest $1.3 million in something that will give you 2 per cent a year after tax, fees and inflation — perhaps government stock and high-quality bonds.

The calculator shows that you could take out $56,900 a year for the next 30 years, leaving you with nothing at the end. That plus NZ Super — currently almost $13,000 a year after tax for singles — makes a tidy income.

Alternatively, you could take out $101,200 in the first year, and reduce that by 5 per cent a year to $22,900 in your 30th year, at 85.

Note that the calculations allow for 2 per cent inflation. All the amounts would grow by 2 per cent each year, to help you keep up with rising prices.

If you go for riskier investments, and assume their average return will be 4 per cent a year after tax, fees and inflation, you could spend $72,300 a year for the next 30 years.

Or you could spend $120,500 in the first year, dropping to $27,200 by 85.

You can plug other options into the calculator, such as spending only the income on your savings while preserving the capital, or preserving a portion of the capital.

Financially, then, you’re fine. What about emotionally? I’m no expert, but it seems to me that fulltime beachcombing won’t do it. You need a new challenge.

Maybe you’d like to study for a degree or write a book. Or how about getting involved in charity work, or mentoring people who run small businesses?

It sounds as if life has been good to you in many ways. You might find that putting something back into the community is highly rewarding.

QI am a 38-year-old single male and happy to keep renting.

Sometimes I feel as though I’m missing out by not jumping into property like so many other Kiwis, but I really can’t see the advantage of it when I’m paying less than $100 a week in rent.

Obviously I have no rate or insurance payments and no maintenance costs. If I took on a mortgage now I would be taking on all of this plus interest, and I would feel like I was throwing away the wealth creation potential of the $112,000 I have in shares and savings, especially in a less attractive, cooling property market.

Despite the pressure to conform and buy the quarter-acre dream, for now I’ll forgo the kudos of being a member of the propertied class. Or is my thinking flawed ?

ANo it’s not.

In some circumstances, renters can build their wealth faster than home owners — provided they invest the difference between their rent and what a home would cost them. And it sounds as if you are good at that.

Renting these days is a bargain. In the 1993–97 housing boom, rents grew at about the same pace as house prices. But in the recent boom, rent rises have been much smaller, according to BNZ data.

Now is probably as good a time as any to stick with renting.

Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to [email protected] or click here. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.