Retirement may still be a long way off, but the financial decisions you make today can impact the lifestyle you enjoy later. Like having a plan to pay off your mortgage before you stop working. If you want more flexibility in retirement, start thinking now about how your mortgage, savings and investments will support you in the years ahead. There’s no better time than today to check that your mortgage is on track for retirement.
NZ Super is helpful, but it may not be enough
Many New Zealanders are relying on NZ Super to get them through retirement. Currently, NZ Super pays about $538 per week if single and living alone, or $828 per week for a married couple who both qualify. Annually, that’s just $27,998 (single, living alone) and $43,074 (married, both qualify).
While NZ Super might provide enough to cover basic living costs, it won’t necessarily support a comfortable lifestyle. Most retirees will need to have some other income, such as investments and KiwiSaver or be mortgage-free.
KiwiSaver helps grow your retirement fund
KiwiSaver is one of the best ways to save for retirement, helping you build savings consistently. And the best part is, you’re not doing it alone. By combining your own contributions with those of your employer and government’s annual contribution, and investing in assets like shares and bonds, your money grows over time.
To make sure your KiwiSaver works as hard as possible for your retirement, check that you’re in the right fund, contribute regularly, take advantage of government and employer contributions, and review your fund every few years or as life changes.
Don’t overlook the value of your home
Your home is often your biggest financial asset and owning it outright means you’re building equity rather than simply paying rent. Going into retirement without a mortgage dramatically reduces your living costs and frees up income for everyday living and lifestyle spending.
While downsizing to a smaller home later in life could release equity to be used to support your retirement, there are ways to pay off your mortgage faster to ensure you’re debt-free before retirement:
- Make extra repayments when you can. Even small extra payments make a noticeable difference.
- Switch to fortnightly instead of monthly repayments. You’ll make an extra repayment every year and reduce your loan balance much faster.
- Increase your repayments when your income goes up or keep your repayments at the same level when interest rates drop.
- Use an offset or revolving credit loan to save on interest charges.
- Refinance to a shorter loan term if you can afford it. Your repayments will be higher but your loan will be paid off sooner.
- Regularly review your mortgage and compare your interest rate and loan structure to what’s available in the market to see how yours stacks up.
The earlier you plan, the better
The earlier you start planning for retirement, the more options you’ll have later. Whether retirement is in the distant future or just a few years off, focus on reducing your debt, building your savings and paying down your mortgage, as these will have the biggest impact on your financial security during your retirement years.
If you’re not sure how to start, get some help from Mortgage Express. Book a mortgage review and we’ll assess your current financial situation and help you plan for retirement.
