This article was published on 3 November 2012. Some information may be out of date.


  • Would trading down to a cheaper home help couple save for retirement?
  • Government’s questions about family trust fair enough
  • Two Q&As about couples who have no trouble living inexpensively in retirement

QI am in my late 50s and have a home in Auckland that will probably appreciate more than elsewhere because of the location. I am also in a low paying job since a failed business venture and cannot make any financial headway due to the two mortgages, although not going backwards.

The first mortgage is approximately $80,000, which is mine alone since I bought the home with my partner. The second, about $95,000, is left over from our business venture, which we are both paying. The home would be worth between $600,000 and $700,000 in today’s market.

My question: Is it better to sell down now and reduce the mortgage burden and then to save some money for retirement (if my health holds I don’t necessarily need to retire at 65)?

The second option is to stick with this home — which I am fairly sure will appreciate faster than cheaper homes — and sell down when retired. The business mortgage will reduce as my partner is on a higher salary. There is also a possibility that I can get back into a higher paid job if the economy recovers soon.

AFirstly, you are making some headway by repaying your mortgages, unless they are interest-only loans.

The answer to your question depends on several factors. But the dominant one seems to me to be whether you’re correct in thinking that a higher-priced house will appreciate more than a lower-priced one. And it’s not easy to answer.

University of Auckland property professor Larry Murphy sent me data about the Auckland house price booms in the 1990s and 2000s.

In both periods, “upper quartile real house prices increased first and then, as the booms progressed, lower quartile house prices increased. However, when prices for lower priced houses began to increase, they did so at a faster rate than higher priced properties,” says Murphy.

In the 2000s boom, the percentage growth ended up being bigger for lower priced houses. But keep in mind that a 20 per cent increase on a $300,000 house is the same in dollars as a 10 per cent increase on a $600,000 house — both gains are $60,000.

And, in any case, history may not repeat itself. “I should state from the outset that it is easier to say what has happened in housing markets than to predict what will happen,” says Murphy. “As you are well aware, house prices are influenced by a range of factors (migration, incomes, interest rates, lending policies, supply issues, household expectations…) so there is always uncertainty surrounding future price trends.”

Even if we could predict trends, individual houses don’t always follow the trends. Murphy says that in the 1990s, when property prices in Ponsonby had grown 30 per cent over a relatively short period, a study of houses sold more than once during the period showed that 10 per cent of the sellers lost money.

In other words, the answer to your question is “nobody knows”. So you might as well stay put, for several reasons:

  • It’s less hassle, and you save on the expenses of buying and selling houses.
  • You’ll live in a nicer place in the meantime.
  • If you get a better paying job, you’ll be able to make big inroads into the mortgages — so why not give that a chance to happen?

It’s really good to go into retirement with a mortgage-free home and some spending money. If you reach retirement and that hasn’t happened, you always have the option of trading down then — or moving somewhere where houses are cheaper. But with a bit of luck and good health that might not be necessary.

QI receive NZ Super, and for a few years have included my wife, who is under 65, and therefore we get income tested.

The last couple of years they have asked if we have a trust and whether we receive any monies from that. We have declared that we do have a trust and also that we don’t receive any money/income. The trust was formed in 2000 and only had a house. Since then it sold that house and built a new one on a section elsewhere.

This year’s return to Work & Income requires a six-page trust questionnaire. When did the criteria change to require this info? Is there an age that a trust is excluded?

It’s not that we have anything to hide, rather that we object to our personal circumstances being divulged if that isn’t required.

ATo be honest, I welcome the news that you’re being asked more questions about your trust.

I don’t want to reopen the debate in this column about why people set up trusts. Certainly there are good, honorable reasons to do so.

Nonetheless, some trusts have been set up at least partly to conceal income or wealth, thereby making people eligible for taxpayer-funded assistance. And the government has increasingly been trying to stop this.

The questionnaire you have to answer has been introduced in the last few years, say a spokesman for the Ministry of Social Development.

“Prior to this questionnaire, staff would ask clients for trust information which led to some clients being asked for more information than was needed, and for other clients not enough. In this way the Ministry ensures accuracy and can be confident clients are receiving correct information and entitlements.”

The questionnaire is used in several situations. “When anyone applies for a working-age benefit or other assistance Work and Income will ask them to declare all income sources, this includes trusts,” he says.

For people getting NZ Super, the questionnaire is used only if the person receiving Super has a partner under 65 included in their payments, “or where they apply for other income tested entitlements such as Disability Allowance, Accommodation Supplement, Community Services Card or Residential Care Subsidies.” For others receiving NZ Super, there are no income or asset tests and no questionnaire.

I do have some sympathy with your reluctance to disclose personal details. And it seems the Ministry does, too. “Gathering information on trusts and assessing entitlements can be a complicated process, and we are interested in making sure that we ask only for the information that the Ministry needs to make correct decisions,” says the spokesman.

However, in your case it seems that you don’t have to plow through the six pages. “If people only have a home in Trust, the current form only requires them to fill in the front page and sign the last page,” he adds.

That doesn’t seem too much to ask. After all, by including someone under 65 in your NZ Super, you as a couple receive more taxpayer money — which is available only to couples on lower incomes.

To put it bluntly, if you don’t like answering questions about your total income, you have the option of not including your wife, and waiting until she turns 65 and receives her own NZ Super. The rest of us taxpayers are entitled to know we’re not being ripped off. Sorry!

QThis is not a question but something that has been bothering me for some time. We are retired and have always lived within our means, so perhaps that has given us the advantage in life.

I tell my kids they have to presume NZ Super may not in the same form when they retire, but still I think there is an overemphasis on how much you need.

Bearing in mind the nest is empty, there’s only so many clothes you can wear, and not everyone wants to drive a Lexus.

AYou’re not the only one who thinks this way — although retirees’ attitudes to cars clearly vary. Read on.

QI don’t know if my wife and I are what you might call typical old age pensioners.

We are in our mid to late 70s. We own our house with no mortgage. We have a flash car (probably not typical, cost about $100,000 two years ago) that we hardly ever use (about 1000 kms a year). I just like to look at it every day.

We have quite a bit of money in the bank. We have never been big spenders, apart from me and that car. We basically live on the pension. Even though we have investment income, it just keeps increasing the bank balance.

We don’t travel. We went to Australia a couple of times a few years back, but travelling isn’t really our thing. We like the comfort of our own home and bed. We don’t eat out, we are quite happy eating at home. We don’t drink anything stronger than grape juice. Although we are not actually teetotal, I haven’t had so much as a beer for over 17 years. We are both non-smokers.

So apart from making the odd donation, what can we do? The bank balance keeps slowly increasing. I tried the sharemarket and other investments and lost probably over $100,000, so it’s only the bank for me now. I didn’t lose any money in those finance companies that went belly up.

So there you have it. Of course if either of us has to go into a home that will probably soak up quite a bit of our savings. You are only allowed to have so much cash, I understand. So if that happens I guess the old bank balance will get reduced somewhat.

Neither my wife nor I were big earners. In fact my wife only worked full-time until she was 25, although she did do some part-time work for a few years when she was in her late forties early fifties.

I retired at 60. The company pension kept me going until I received the government pension at age 64. My wife got her pension at age 65.

I always have a bit of a laugh when people say you need to have $500,000 or more in the kitty when you retire. Some people might need that, but we certainly don’t.

AGood on you! Your letter will be encouraging to many who struggle to save for retirement — although not everyone would be content not travelling, eating out or drinking booze. Then again, if they settled for a $20,000 car instead of a $100,000 one, that would free up a fair bit of money for fun.

It’s good to know, though, that you have money in the bank. You never know when you might need to spend more on your house or your health — or you feel the urge for a new automotive beauty to gaze upon.

No paywalls or ads — just generous people like you. All Kiwis deserve accurate, unbiased financial guidance. So let’s keep it free. Can you help? Every bit makes a difference.

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.