What's the best living option for retirement?

REDnews explores the pros and cons of different living options, from staying in your home to downsizing, renting and retirement villages. 

When it comes to retirement, everyone pictures something a little different. Maybe you’re dreaming of a low-maintenance lifestyle so you’ve got more time for travel and catching up with friends. Or you might be someone who values your independence and wants to stay in your own home for as long as possible. Then again, being close to your kids and grandkids could be what matters most to you.

No matter what your ideal retirement lifestyle looks like, money will have a big role in making it happen. Almost 40% of retirees rely solely on NZ Super to get by, and less than half are living with a partner in a mortgage-free home. So for many Kiwis, retirement means finding the right balance between the dream and what’s financially doable.

Let’s explore four living options to help you weigh up what might suit you best:

1.    Stay in your current home

If you’re one of the two-thirds of Kiwis aged 65-plus who own their home outright, or among the 13% who own with a mortgage, staying put might be a comfortable choice.

Upsides:

You’re already part of a familiar community. There’s no need to pack up or adjust to a new neighbourhood, which can be stressful.

·       If your home is mortgage-free or your remaining home loan is very small, costs can be very low.

·       You have the freedom to use the extra space for visitors, a rental opportunity to improve your cashflow, or to move in a member of the whanau who needs accommodation.

·       You could keep your food costs down by growing veggies or keeping chickens.

·       Another option to explore might be sharing your home with family to keep costs down. Between 2013 and 2023, multigenerational living grew by around 27%, with around 128,000 Kiwis living in homes of three or more generations.

Things to consider:

·       You might be “asset rich, cash poor”, with a valuable home but limited disposable income. What will your quality of life look like if all your money is tied up in a house?

·       Rising costs like maintenance, rates, and insurance can really add up, and keep rising. That’s especially true if you have more house than you need.

·       Accessing higher levels of care later on can be more challenging without a clear pathway to assisted living and aged care options.

2.    Downsize to free up cash

You could sell your current home and buy a cheaper one. That usually means a smaller house, one in a less expensive area, or both.

Upsides:

·       Done well, downsizing could leave you with a mortgage-free home and a large lump sum to boost your lifestyle or savings.

·       A smaller or newer home might mean lower upkeep, cheaper insurance and reduced utility bills.

·       Less time spent maintaining an older home might give you more time and energy for the things you actually enjoy.

Things to consider:

·       It’s not always as straightforward as it sounds. Often homes in your neighbourhood that are low-maintenance and modern can cost just as much as a bigger, older family home. Expect a few compromises.

·       Are you ready to say goodbye to your current community? Moving further afield could mean leaving behind familiar faces and support networks.

·       As with staying put, no pathway into aged care or assisted living later on.

3.    Rent

Renting is becoming more common among the over 65s. One in five Kiwi retirees were renting in 2022, and it’s estimated that rate will double by 2048 to reach 40%, or around 600,000 people.

Upsides:

·       More flexibility to choose where you live.

·       No worries about home maintenance, rates, insurance or repairs.

·       If newer options like cohousing and senior social housing gain traction, they could offer more community-minded living at an affordable price.

Things to consider:

·       Rent can take up a big chunk of your income and increases over time. Spending more on rent means less disposable income, which can make it hard to enjoy travel, hobbies or basic day-to-day treats.

·       Finding a reliable, long-term rental can be tough, and moving frequently brings its own stress and uncertainty.

·       You’re not building up equity in a property.

·       Most rentals won’t let you sublet or invite family to move in.

·       Again, no clear pathway into assisted living or aged care if your needs change.

4.    Move into a retirement village unit

More than 50,000 Kiwis have already made the move into a retirement village, where you can live independently in a villa, apartment or townhouse in a community designed specifically for seniors.

Upsides:

·       Enjoy a good quality of life with access to community amenities and shared spaces.

·       No more maintenance, gardening or home repairs.

·       Most villages provide a strong sense of safety and security, which is a big bonus for anyone feeling vulnerable.

·       Perhaps the biggest advantage is the ‘continuum of care’ offered by most villages. This allows you to transition into assisted living or aged care if your needs change. Spaces in these care facilities are typically reserved for village residents, giving you priority when the time comes.

Things to consider:

·       A premium lifestyle comes with premium pricing. Units in top-end villages now sell for over $2 million.

·       Weekly fees apply, and there’s typically a substantial deferred management fee when you move out.

·       You are typically restricted from inviting family to live with you or renting out part of the house.

·       You are not building up equity and there are no capital gains when you sell.

·       It can take time for the village management to sell the unit when you leave, which may delay access to your funds — and you may be paying weekly fees until the sale goes through. Delays and final payouts sometimes come as a surprise to departing residents and/or their families.

·       Contracts and terms vary widely. It is vital to understand exactly what you’re signing up for and what will happen when you leave, so comprehensive independent legal advice is essential.

Run the numbers

Before making any big decisions about your retirement lifestyle, it’s worth crunching the numbers. Forecasting your income and expenses across different scenarios can give you a clearer picture of how each option might work for you financially.

Talk to a financial advisor, an accountant, Money Talks or Age Concern for support on making smart choices in retirement.