Deciding where the money will come from
Ideas for a retirement income to top up your New Zealand Superannuation.
Once you know how much extra money you’ll need to enjoy the retirement you have in mind, you might be wondering where the balance is going to come from. Here are a few ideas.
Savings and investments
If you’ve saved up a lump sum, now is the time to think about how that money is going to last and how it’s going to help replace your current wage or salary. Investing is one way you could make the money work hard for you. The idea is to leave the amount you have invested untouched and withdraw some or all of your investment interest each month as an income.
See our investment basics section PDF 1.43MB for more information or ask us about getting in touch with a qualified investment adviser1.
Selling a business
If you own a business, you could sell it and invest the money. Agreeing to stay on for a while to help the new owner get started, even on a part-time basis, can increase the sale price and give you a regular retirement income for a while.
Down-sizing your home and investing the extra cash
If you’ve paid off all or most of your mortgage, you can use the equity tied up in your home to generate an income. If you sell up and move to a smaller home, with a spare room for the grandchildren to stay of course, you could invest the cash you free up and create an income.
Home equity release
This is sometimes called a reverse mortgage or a lifetime mortgage. If you’ve paid off the mortgage on your house, equity release allows you to cash up some of the value of your home without actually selling it.
It’s a relatively new concept in New Zealand, so here’s how it works. You take out a loan against your home but you don’t make payments until the end of the loan period, which is usually when you sell your home or move out. As with any home loan, interest and fees are charged, but in this case they’re added to the balance you owe.
This means your loan balance can increase quite quickly, however there’s a possibility that the increase will be offset by the growing value of your property.
Part-time work
A good number of retired people enjoy part-time work. It can be a chance to keep using the valuable skills you built up over years in the workforce, or an opportunity to enjoy working in a completely different industry or role.
Many employers recognise that older workers are loyal, reliable, committed and have more experience. Receiving other income doesn’t affect your New Zealand Superannuation unless your spouse or partner is included in your Super payments, because they don’t qualify for Super themselves.
However, if New Zealand Superannuation is no longer your main (biggest) source of income, it could be taxed at the ‘S’ (secondary income) rate rather than the ‘M’ (main income) rate. For more information on tax rates and New Zealand Superannuation, visit ird.govt.nz and workandincome.govt.nz.
Small print
- BNZ Authorised Financial Advisers' disclosure statements are available on request and free of charge.
