A large portion of people over the age of 65, having to survive on superannuation alone to get them through retirement, are making extreme cutbacks in spending to cope with cost-of-living challenges.
The Retirement Commission has released new research around what retirement looks like in 2024, two years on since it last looked at the finances of people over 65 in 2022.
The Commission conducted quantitative and qualitative research with more than 1,450 New Zealanders aged 65 and over earlier this year, finding that financial situations for 37% of those surveyed had worsened over the last two years.
Almost half of survey participants (46%) are now missing out on social activities, while 26% said they were putting off medical appointments or treatment.
More than a quarter of those surveyed (28%) were making “radical” changes to their shopping habits, like buying less food in order to try and bring costs down.
While “belt-tightening” for those over the age of 65 on middle incomes has generally been a sufficient way to curb costs, the Commission's report said there was “growing unease” about when things would return to normal as middle income retirees are eroding their nest eggs sooner than they originally planned to.
Older New Zealanders who are on low incomes and completely reliant on NZ Super have moved past “tightening the belt” and into “day-to-day survival” to cope with the higher cost-of-living, the Commission’s report said.
Almost 40% of participants in the Commission’s survey said they were completely reliant on NZ Super for their income compared with 48% of participants who lived with their spouse/partner and owned their homes mortgage-free.
Retirement Commission Research Lead Jo Gamble said people over the age of 65 who were renting, had experienced “life shocks” after 50 or had disabilities or long-term health conditions, and were struggling the most financially.
“These groups typically have fewer financial assets and are therefore less likely to be financially resilient,” she said.
“The findings illustrate the significant financial buffer being mortgage-free provides compared to those renting. In addition, people with investments and/or KiwiSaver were nearly twice as likely to feel their financial situation was comfortable compared to those without.”
The report noted that 43% of mortgage-holders in the survey said they didn’t have any investments, savings or KiwiSaver compared with 10% of people who were mortgage-free.
The Commission’s report said 14% of over 65s didn’t describe themselves as ‘retired’ and over a third (36%) of working older people are still working because of financial pressures.
When the Commission last undertook this research back in 2022, it found 29% of working older people were still working because of financial pressures so that rate has climbed 7% in two years.
Retirement Commissioner Jane Wrightson said there has tended to be a ‘golden assumption’ that people over the age of 65 are “mortgage-free couples living in relative comfort on NZ Super” and this latest research stood as a reminder that things were not always as ‘golden’ as some may assume.
“These insights provide us with valuable evidence to help identify practical policies and interventions that could lead to better retirement outcomes for New Zealanders in the future,” Wrightson said.
68 Comments
They get a rebate from the council for being a pensioner, and this is the real world. If they cannot afford it then they need to consider downsizing and considering ling term what they can afford. won't be too long at this rate until many elderly cannot afford to live out the yesteryears in the 4-5bedroom centrally located houses they had their children in. Sad, undoubtedly, but practical for the rest of the population who would benefit form being able to access more of these sized homes with families in tow? Absolutely. The kicker is that these retirees/elderly benefitted most from ever rising house prices and now it is coming back to bite in terms of rates. You can't have your cake and eat it. Perhaps if they means tested super there would be more money available per week to pay those that need the pension so they could afford to stay in their homes vs play money for those who planned well and have sufficient means to self-fun their retirement comfortably.
I think this sounds a bit simpler than it actually is, whilst downsizing may free up more cash it doesn't result in a significantly lower rates and insurance bill , whilst not a pensioner - i live in one of those big houses you describe in l the hutt valley our rates are 6.5K a year and insurance is 3K.
Elderly friends live a couple of suburbs away and there 2 and 1 villa attracts rates of $4K a year (after the rebate) and then insurance is another $2.5K on top of that - with proposed increases of 10%+ over the next 5 years for rates and insurance you can clearly see why pensioners are struggling.
Downsizing doesn't necessarily mean your everyday costs significantly drop.
That 'more cash' can easily be hundreds of thousands (or several hundreds of thousands) of dollars; noting the price difference between a 3-4 bedroom freestanding and a 1-2 bedroom unit anywhere in NZ. Which should certainly remove most if not all pressure from those ongoing property costs.
Makes much more sense to use your equity to fund living costs, instead of scrimping to fund mostly empty spare rooms...
So, you could pay 30% less annually, while pocketing the presumably hundreds of thousands of dollars difference would make no difference?
One thing I've noted is a lot of retirees are really really unwilling to spend down their nest eggs. Even those who speculated on investment properties.
I've looking at downsizing for the last five odd years and aside from the rates insurance etc not being that much lower for a downsized house, the capital cost of the next size down, in my case from 3 to 2 bedrooms does not warrant a change, even if I'm $50-75k better off in capital.
I looked at downsizing from a 4 bedroom 2-story house to a 2 bedroom single story house of a similar standard in the same area. It was going to cost me $300k more to buy, and my rates would have been the same. Its not like they are building single story 2 bedroom homes in good areas any more.
I think that's a bit simplistic. The 2 bedroom houses/apartments you are insinuating here don't exist and if they do they are occupied by those needing a 3-5 bedroom house but can't yet afford it. Most elderly will downsize but the housing stock just doesn't exist the way we need it. Also we do not want to force people out of houses because unreasonable price increases are wreaking havoc on everyone. There is a problem here but I think the solution is far more complex and multi pronged than this.
You spend decades paying down an asset which, if you bought practically any time before 2021 has appreciated in value exponentially, which is cashflow you can access via reverse mortgage, selling and downsizing + banking the profit, and hence funding lifestyle, medical costs, food, rates + insurance, whatever. Most who are sitting in larger homes need to do the finances and realise the opportunities their parents had are possisbly not on offer to them today, just as the opportunities they have are likely not going to be on offer for their kids. And the root cause? Excessive house prices of course, coupled with slowly dwindling resources. As I said, they can't have their cake and eat it too, if they don't wish to downsize as their preference is a smaller standalone house, and the stock isn't there due toa bulge in the population all demanding the same thing, then logic will dictate there needs to be a change in preference based on realism.
An often overlooked but very valid point. Those that have saved and have assets will pay all but about $239K to the government for elderly hospital care, dementia for example. Those that haven’t got any assets become an immediate cost to taxpayers. Our extended family has recently had two instances. The government is both efficient and hard nosed in auditing the whereabouts and size of any assets and that includes going after trusts in any shape or form.
Yes but at least they have options including downsizing/ relocating and or reverse mortgage. My neighbour lived a miserable retirement in her later years due to not spending but died wealthy thanks to the house. The house is not the entitlement of the kids. Spend it.
To do this is like not paying off the mortgage. Which is fine for some. But there are those out there who detest the idea of owing anybody anything. Our child will inherit the house. But by then I suspect that its going to be one of those overgrown, unmaintained wrecks that you see around the place. ie demolition material!
Sad to say that the foresight of Norman Kirk’s third Labour government in introducing compulsory savings for a pension is now being acknowledged. In those days there was an abundance of private superannuation schemes offered by employers, the National Provident fund and even tax rebates given for such as endowment life insurance policies. Yet, New Zealanders were abysmal savers and largely have remained so. Would venture, that lack of sewing is why too many folk these days have insufficient to reap and is at the core of the issue(s) this column explains.
Yet, New Zealanders were abysmal savers and largely have remained so.
Precisely, the scheme was scrapped by popular vote of NZ'ers, and now many of those that voted to scrap it are regretting it in hindsight because they didn't have the foresight to think further than the now and whatever benefitted them. So now we have a slowly crumbling pension scheme and it;s expected we keep importing more workers to keep the status quo which is, quite frankly, ludicrous.
Hard to muster any empathy for the generation that started the trend of creaming it and pulling the ladder. They got their overinflated house prices and low tax rates. Now they get to deal with the flimsiest of safety nets in their most vulnerable years - crumbling healthcare infrastructure, a pittance of a pension, zero alternative transportation once they can no longer drive, ACC hellbent on declining every fall injury they have, scarce home help, and community organisations shutting down everywhere you look.
The ones that have creamed it and pulled up the ladder mostly won't be the ones struggling, still paying rent and putting up with crumbling healthcare. They will be the ones *earning* rental income while relying on private healthcare. Your schadenfreude is misplaced
I disagree.
There is no such thing as private acute medical care - if you have a stroke/heart attack, broken bone, infection, you end up in the same hospital as Luxon's "bottom feeders". Private waiting lists are longer than public ones were just a couple of years ago. Private insurance is becoming unaffordable for even those that are reasonably well off. Most would struggle to fork out 50k for two new hips.
Lack of alternate transport still applies - boomers that cannot drive will be stuck in their homes with no where to go.
Rest home placements are increasingly difficult to come by. There is a shortage of qualified caregivers and nurses in said rest homes.
Home support services for those that want to stay in their homes are stretched beyond thin. Family members that may have otherwise been able to look after them have been driven overseas by pro-boomer policy. There will be no visits from the grandchildren for the same reason.
Those that are "wealthy and sorted" as Luxon would put it will certainly be more comfortable, but it is overall a crap time to be a retiree.
NZ Superannuation is not enough for those who need it, and too much for those who don't.
Some over-65s are wallowing in wealth; others are trudging to the City Mission soup kitchen.
The net (after-tax) Super rate for an over-65 couple needs to be raised to the higher of 80% of the net average wage or 100% of the median wage, with other rates raised in proportion.
To temper the cost of that increase, a surtax needs to imposed on all other income received by people who enrol for NZ Super.
https://www.auckland.ac.nz/assets/business/about/our-research/research-…
All depends on how you look at it. Super is fair because everyone gets the same. Those with money worked hard for it and made the right decisions in life so I have no problem with them getting Super as well. Some peoples lives have been a stream of bad mistakes and from what I have seen they just don't change or learn from them either.
There are legions of people who are unmotivated to better their situation in a legal way. There are also some who in other situations may have motivation but are not able to do this due to say medical issues. There needs to be very different treatment of these two categories.
Isn't the easier fix just to raise the age? So many people get to 65 perfectly capable of working. Super is meant to kick in when you can't work.
The age should be calculated each year just like the amount is. Something like: the age where 70% of the population no longer work full time. People who can't work full time before that age but are over 65 should get a special benefit of the same value, but it should be income tested.
That's easy to say for someone who passes the age of 65 healthy and in a well-paying non-physical job that might continue for another decade.
Many of the people who most need their pension are physically and perhaps mentally broken in their fifties. For them even 65 is too old.
NZ Super is a universally available social welfare benefit, not a bonus to cap a lifetime of successful wealth accumulation.
Those in their 50's who cant do a physical job anymore can retrain for another job. How hard is it to sit on your backside all day driving a bus? Or working in Bunnings? Or making phone calls? Or selling real estate? I dont really understand how people feel entitled to just go on welfare for the rest of their lives at the age of 50 based on "I cant do my current job anymore". Get another one.
I think you missed my point. I am suggesting that people STOP doing their physical job, and RETRAIN to do a non physical job like being a bus driver or call centre operator. A family member in his late 40's has recently stopped being a builder (too physical) and is now an insurance assessor. I've changed careers several times - just because you start your work life doing one thing doesnt mean you have to keep doing it until the end of your work life.
The Superannuation scheme that NZ has is excellent. It is simple to apply, you have basically paid for it yourself because you have spent (increasing) years paying taxes etc. It doesn't discriminate. Any deviation from that means we need to bloat the management of Super. That means the $$$ you pay in are now being spent on admin not given back to you to spend.
So for all those complaining rich people get Super think of the consequences. You may see it as fairer but in the end it will mean EVERYBODY will get less and we'll just have more and more Govt.
There is an important message in this.
One needs to make sure that they make sound financial decisions which includes planning so that they are not part of the 46% who struggle in retirement.
Unfortunately the needs for retirement for a thirty year old - or even someone in their forties - is not a current need so is often (46%?) given little consideration. In my twenties and thirties I was a governemnt employee and there was the generous Government (i.e. public servant) Superannuation Scheme - but the vast majority of those of my age didn't bother as it was not seen as relevant.
I suspect that there are now many with the same attitude to KiwiSaver as a default situation. It is only a fool who thinks that they will survive comfortably on any government pension means tested or not.
Wrong. That is the way of conservatives (Neo Libs). Their motto is the individual controls it all. "You are responsible for your own fortunes". That is a blatant lie. Most people are born into their circumstances and research has proven time and again that breaking out of your "class" is next to impossible. It is much more likely you will end up poorer than your parents. The solution to that is social programs that try and level the playing field. Lassez Faire economics and politics like the world has had since the 1980ies generates exactly what we have now. A larger portion of the populace having less and less while a select few get richer. The only way out of this is artificially constricting the top end while subsidizing the lower end. There is enough solid research on the topic to prove that it works and works to the benefit of all without anyone resenting what is going on. BUT it means you need to be "Woke" i.e. care for the people around you and not only look out for yourself. To acknowledge that there is a community and an obligation to care for the old & retirees. And they have worked hard for what they get. The guys that screwed the later generations are people with power not the grannie next door. But that is exactly the message the powerful and conservatives would like you to believe. Let's have the victims blame the other victims while we get the rest. Classic deflection technique. Reminds me of pickpockets.
I agree. But as I have said above, the age of entitlement needs to be adjusted due to the fact we are much healthier at 65 and most jobs are not so hard on the body. Having a fixed age is a stupid idea, it needs to self adjust. Just like having a fixed amount that didn't adjust to inflation would be stupid.
Who is the 'we' in 'we are much healthier at 65 and most jobs are not so hard on the body'?
I'll say it again:
That's easy to say for someone who passes the age of 65 healthy and in a well-paying non-physical job that might continue for another decade.
Many of the people who most need their pension are physically and perhaps mentally broken in their fifties. For them even 65 is too old.
NZ Super is a universally available social welfare benefit, not a bonus to cap a lifetime of successful wealth accumulation.
They worked their entire lives to fund their parents pension as it is not a piggy bank, the money comes in and is spent each week. Worked fine when the average family size increased post war and there were more workers per pensioner, but today and with steeply dropping birth rates, the entire system is faltering as it assumes each generation will be bigger than the last. Structural reform is a necessity, not a choice and we will b forced to do so in due course.
I think what we will see become a problem is that we're getting more like Europe, where people never own property and are renters for life. Depending on country but in Europe that is 50-75% of normal people. That changes the vulnerabilities of the elderly and the way finances must be structured. NZ is not (yet?) geared up for that. Never mind that there is a cultural mind shift that needs to happen. But even if we could cope, the price increases -especially for govt and essential services- are immense even accounting for inflation. My council rates went up nearly $2k in a year (~20%+ increase) in ONE year. I have had 0% pay increase. Admittedly I am lucky to have so much that I have to pay so much council rates BUT even for a well earning family what has been going on this year is unsustainable. Something has to give. Rates coming down is good but it doesn't completely do away with every price increase. Low income & retirees must be REALLY hurting and have a bleak view of the future. National govt with their conservative stance is making things even worse.
I don't see why. If interest rates go down to say 4.5% (I think this will happen), and if house prices don't go up, the repayments on a lower quartile NZ house are $570 a week after a 20% deposit. That is probably less then rent, and it is surprisingly exactly what we had to pay when we bought 18 years ago!! That was in Auckland with 7.5% interest rates and a 25 year term, so not exactly comparable. But wages are about double what they were then, so it should be a doddle.
Yes you also need the deposit and to pay rates and insurance etc. Use Kiwisaver for most of the deposit, we didn't get that option back then.
Just did the calcs on a lower quartile Auckland house (ours was lucky to be that). At current interest rates (I used 5.6%), it would be $842 a week.
So only 50% more than we paid when wages are now about double. Houses are significantly more affordable than 18 years ago, and should become even more affordable as rates go down.
A fair chunk of that $842 a week is principal, that is an investment. Also you can't rent an upper quartile property in Auckland for $842.
You may be right, that might be the better thing to do. But it still doesn't change the fact that it is potentially easier to buy a house today than 18 years ago. People have fallen into the trap of "that sounds like a big number", without actually looking at wages which have also gone up a lot.
The minimum wage when we bought was $10.25, it is now $23.50
I often hear people complaining about people on jobseeker support living it up large at the taxpayer's expense. But jobseeker rates are around 2/3 that of Super. So these older people should talk to those younger people on jobseeker support and they might learn how to manage their money better.
Australia's Government has a reverse equity mortgage option, which they run, using low interest (Govt borrowing) rates for it and a careful limit on the amount one can borrow. Payments are linked to the same fortnightly cycle as the Age Pension.
It's a very good scheme, from the looks of it. Examples are available, you can use their calculator to see how it works. It is not possible to use up half one's equity under this scheme, for example. I think we should just borrow the idea and software if they will offer it, and establish a similar scheme here. Heartland Bank (which does reverse mortgages at about 10%) would be left with a different market and a lot of the problems of rising rates and insurance costs talked about here would be dealt with, while leaving a lot for 'inheritors'.
Be under no illusion. Basic NZ Super is a pittance, reduced to substance level by many retirees not being eligible for the accommodation supplement. It is further reduced by deduction of any overseas pension received plus NZ super is taxed so the in-the-hand amount received is at poverty levels. After rates, insurances, medical, transport costs, inflation, starvation rations is all that remains. Retirees have been sold a pup by successive government's over 40 years. Shame on politicians of all colours.
We should follow Australia's example.
Retirement age 67, they are currently looking at 68.
Means test the NZS.
NZS is costing over $21B, it is unstationable in its current form.
Both Lab and Nat should get together and agree to the above.
If 1 party attempts to make the changes it will be suicidal.
Its the Govt's responsibility to look after old people right - seems to be the gist of the article and most of the comments
want to get ahead in life -dont rely on the govt to deliver
and what about kids, community and neighbours - and work.
lift the age of eligibility and remove the "baubles" - gold card use on Auckland ferries and energy winter payments. A trade off to an increase in age could be an increase in payout further enhanced by voluntary delays giving even greater weekly payment. And I appreciate some need govt assistance -thats what Winz benefits are for which could apply regardless of age for those that need assistance
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