You can't eat your house
Marg and Paul are in their mid 50s. They've lived in the same family home for 20 years, doing it up as the years went by. It’s now worth more than double what they paid for it and there’s only $7,000 left on the mortgage. They’re both still working and their youngest son is about to leave home for good. They’d both like to retire at 65.
Marg and Paul work out how much they’ll need to live on when they retire. They realise they just don’t have the savings to do it. All their money’s tied up in their home. They are starting to get nervous about making ends meet in their retirement.
The house is currently worth $356,000 and could grow in value. However, they feel there is a risk that within 10 years the biggest employer in town could move to a larger centre and house values could fall. They don’t want to move. They like their town and plan to stay there in retirement.
They sell their house and purchase a smaller but comfortable place for $250,000. After repaying the mortgage and treating themselves to a long-planned holiday in Queensland, they invest $90,000 in a balanced fund. They calculate that in today’s dollars that will grow to around $115,000 in 10 years. They are very comfortable knowing that with other savings they intend to make, and New Zealand Superannuation, they will get close to the income they want in retirement. Taking action now has taken a real weight off their minds.
