Moving into retirement can call for a change in the functionality of your home. The physical effects of ageing may cause you to begin considering home safety features, even if it is just for your peace of mind, while the transition from work to retirement could result in altered requirements of home spaces. Whether you need inspiration to create a hobby room in your home or want to know about the costs involved in renovating your bathroom for retirement, you can find the answers below.


How your home can contribute to your retirement plan Back to top

Although 2.8 million people are investing for retirement via KiwiSaver, balances are small and with 59% of households living in owner-occupied dwellings, Statistics NZ points out the house we live in is our biggest asset. Australia and the United Kingdom are similar even though, unlike New Zealand, both countries have compulsory superannuation and well-developed private pension markets.

The growth in property values is hard to ignore and the reward for renovating a home is significant. Low-interest rates make it cost-effective to dip into higher home equity to add a bathroom, a deck, garage, extend a living room or add an entire new floor in the roof space or basement. It’s a win-win situation. Growing families benefit from a spacious well-insulated home and the renovation pays for itself quickly in a rising housing market. The flipside is bigger mortgage repayments eat into the household budget and longer loan terms cramp the ability to save for retirement. Some retirees still have mortgages. 

So is it any surprise there is a growing reliance on the home as a key part of a retirement strategy? It can be as simple as deciding to sell and downsize. But moving from a suburban family home to a townhouse or city apartment may not result in releasing much capital. These days living in the city close to cultural amenities, parks and transport routes is top of the list for many retirees. Competition drives up prices and, to release significant capital, you may need to relocate to a smaller town. 

Not everyone wants to uproot at retirement – there’s enough upheaval leaving the routine and stimulation of the workplace. It pays to think outside the box and there are definitely other ways to tap into home equity.

You can stay in the family home and earn by letting part of the house permanently or for short term accommodation. You’ll need planning permission to create a separate dwelling for tenants – potentially easier in Auckland under the latest Unitary plan – and an income stream will add value to your property. Rental income is taxable but you offset a portion of costs such as mortgage, rates, insurance and maintenance.

Renting out rooms in your home to flatmates, boarders or foreign students is the simplest solution and not taxable if you apply the standard cost method and charge no more than $257 per week for each boarder, up to two at a time. If you don’t always want someone in the house though, running a bed and breakfast or Airbnb allows you to pick and choose. However, flexibility comes with more work - operating a website, dealing with inquiries and visitor movements, keeping cost records and paying tax.

Having strangers stay to generate revenue is not for everyone. If you’re not ready to move when you retire but need to access money for medical care, house maintenance or that dream round the world trip, you can borrow again. It could be a simple line of credit from your bank on a revolving credit facility. Or, for anyone over 65, some banks and insurance companies offer specific Home Equity Loans or Reverse Annuity Mortgages. There are rules around how much you can borrow depending on the value of your debt-free home and your age. With no need for repayments, the interest will definitely grow the debt but you benefit also from house price increases. The key advantage to look for is a promise that no matter how long you live, you will never owe more than the value of your house when it is sold. 

With healthcare improvements, retirement can last 30 years and we see definite phases with different spending needs. The first energetic decade is for travel, sporting and leisure pursuits, with a slower reflective stage from age 75. Many run down the retirement fund in those active years and then in their eighties, move into a retirement village. At that point, you are actually trading homeownership for a licence to occupy a townhouse or apartment in a village. You live in a comfortable new property with fixed overheads, including all house and garden maintenance. In return, you forsake an agreed amount of the purchase cost, often up to 25%. 

In effect, you are tapping into home equity twice by moving to a retirement village – first when you sell the family home and again when you die. Yes, your children will inherit less, but most retirees in their eighties value the ability to live independently with the security of onsite help if they ever need it.

For more by Deborah Carlyon, read The A to Z to financial knowledge. 

Deborah Carlyon is an Authorised Financial Adviser. This column does not provide personalised advice. Her Disclosure Statement is available on request and free of charge by [email protected]

How to make your home retirement friendly Back to top

According to statistics presented by New Zealand’s Ministry of Health, much of New Zealand’s older population live with a disability. With the home being a place of comfort and sentiment for many, it makes sense that many retirees wish to stay put rather than relocate. 

Renovating your bathroom for retirement

Bathrooms are a common area of concern for many retirees, as renovation specialist Lia Boersma discovered when she carried out a bathroom renovation for a couple who opted to renovate their existing home rather than move into a retirement village. In consultation with Lia, the Wellington couple decided that a walk-in shower would provide an easy and safe alternative to their original shower cubicle. 

“An easy, accessible shower without any step-overs is best”, advises Lia. “Go with level shower designs for wheelchair access. You want the shower design to be easy for people to go in and out. So no bath. Take the bath out.”

Lia also recommends adding extra support in the bathroom. 

“It really depends on the health of the client and what stage of retirement they are in, but grip-bars for showers and even for the toilet offers something to hold on to for balance if a client is at a stage where it is getting harder to walk.” 

“It’s also a good idea to consider adding in a slightly higher, raised toilet”, notes Lia. “People find it quite hard, as they get older and stiffer, to sit down on a lower toilet. Standard toilets are slightly low but you can choose to have a higher model installed. If there is room, it helps to have walls on either side of the toilet with grip-bars attached, so that individuals can pull themselves back up.”

Future-proofing your kitchen

Kitchens are the most popular room to renovate and are high on homeowners’ lists of projects as they make the move into retirement. Low cupboards and poor layouts often call for simplified designs and easier access. 

“I’ve done a couple of kitchen renovations for retired clients”, says Lia. “It’s very much about having very easy to open drawers and cupboards because of arthritis.” Lia recommends using, “handles that make it easy to open cupboards.”

The benefits of smart home technology

According to The Telegraph, smart technology offers family, friends and carers a better idea of what support a senior requires. Particularly if you live alone, smart home sensors can be installed to notify loved ones when you might be in need of assistance. The Telegraph also suggests that smart homes make it easy for seniors to manage home security, heating and lighting settings; all from a remote or cellphone. 

Future-proofing a two-storey house

If you live in a two-storey property, stairs are an area you may wish to address. One option is to have the stairs demolished and an elevator installed. Alternatively, if you have the space, you could convert your upstairs and downstairs into two separate living areas. You could then rent out your upstairs area, a great idea if you would like an additional income that contributes toward saving for retirement. 

Renovations to make before you retire

Removing any potential trip hazards is another important aspect to future-proofing your home. Health Quality and Safety Commission New Zealand states that 25% of people over the age of 85 have made an ACC claim due to a fall. Removing stairs, installing well thought out lighting designs and slip-resistant flooring are all ways to reduce these risks. 

Home office renovation

While safety is a significant consideration in retirement renovations, retirement is also a time to focus on the areas of life that you enjoy most. If you have just retired and have spare time, why not invest it in a new hobby? Creating a hobby room or a functional home office can provide a space where you can joyfully transition from working life into retirement. This can be achieved through a few simple home alterations. 

When it comes to future-proofing your storage, Lia focuses on three basic solutions, “Easy levels, easy access and easy to open.” 

How much does a renovation for retirement cost? Back to top

There are many different areas to consider when looking into renovating for retirement. Flooring, lighting, layout and ease of access are all important. We’ve broken down the costs involved to show you what you may be able to achieve on a small, medium and high-range budget. 

Future-proofing your home on a small budget 

Lighting and rewiring

A good lighting plan is important to a safe home. It reduces the chances of bumping into sharp furniture, tripping and falling. Within an $8,000 - $10,000* budget, you can purchase a new LED lighting plan, along with rewiring and a new switchboard, depending on the size of your home. If you live in an older home ask for an electrician to carry out a home inspection to see what rewiring work might be needed in order to keep your home safe. Registered electricians generally charge between $45 - $90* per hour, depending on their level of experience as well as the complexity of the job.   

Bathroom

Bathrooms are one of the most popular rooms in the home to renovate and are usually one of the first areas of the home to be considered for future-proofing. Two essential areas to look at are your bathroom flooring and shower. Is your bathroom floor slippery? Investing in non-slip tiles is an important safety investment which can be achieved for around $90+*, per square metre, including labour. For around $20,000* you can remodel your bathroom, in addition to retiling and installing new lighting. You may also want to consider having support bars or a handrail installed in the shower.

Kitchen

When designing a kitchen renovation on a tight budget, focus on your priorities. Often the first point of interest will be your cupboards. Are they too low? Too high? Do they provide efficient storage? While changing the location of electrical and plumbing points will quickly increase the price of your kitchen renovation, changing the layout of your cupboards and installing new flooring, lighting and countertops is possible within a $20,000 - $30,000* price range.   

Flooring

If you want to start with the basics, flooring is a good place to begin. If any flooring throughout your home is slippery or damaged, it’s time for something new. When you begin to look at flooring options for your home, focus on materials which are non-slip, easy to clean and, where possible, offers some padding in the event of a fall. $55 - $85* per square metre is generally what you can expect to pay for synthetic carpet installation, which provides padding but can be difficult to clean. Vinyl flooring is another affordable and easy to clean option, which could cost you between $110 - $140* per square metre to have installed.  

Warm-up your home

A decrease in blood circulation, among other factors, lead many people to feel increasingly sensitive to the cold as they age. For this reason, a warm home is essential in the retirement years. There are a few ways to affordably achieve this. Insulation is a great place to start, with prices starting around $75 - $140* per square metre for ceiling installation. Thermal curtains make for another affordable way to keep the warmth indoors, with prices starting from around $100* each. An all-round warm-up renovation can easily be achieved within a $10,000* budget.   

Home automation

There is a huge range of smart home options available on the market, many designed with retirement-friendly renovations in mind. You can control your security system, garage doors, door locks, lighting and media system all through a remote control or smart application. Home automation designs usually start at around $1,000* and electricians tend to charge approximately $140 - $150* per hour for automation installations. All costs included, you could be looking at $10,000+* for a basic home automation installation. 

Future-proofing your home on a mid-range budget

Lighting and rewiring

If you have $15,000 - $20,000* to work within, you can add a bit of style into a practical lighting design. When looking at electrical work, think about what rooms are most likely to require additional outlets in the future. You can have a bit of fun with lighting selections, choosing styles that suit your taste. Expect to pay around $160* per light for both the fitting and installation. 

Home office conversion

Dedicating a room in your home to projects and hobbies can be helpful when transitioning into retirement. For $15,000 - $20,000+* you can update the flooring, lighting, wiring, decor and shelving, in an office or spare room, in order to create a creative space.   

Bathroom 

On a mid-range budget, you can renovate your bathroom to allow for easy and spacious shower access. Entry-level or wet room showers are a functional and trendy choice for any age but can especially make showering easier later on in life. Wet room showers require floor-to-ceiling waterproofing, usually through tiling, which can cost $125+* per square metre, not including waterproofing or substrate. It’s a worthwhile investment as this shower style removes the risk of tripping upon entry or exit and provides plenty of space to move around. For $35,000+* a wetroom, new bathroom layout and remodel are possible.  

Kitchen 

As the heart of the home, it’s no surprise that kitchens are the most popular room to renovate. Modern designs are providing increasingly effective kitchen storage solutions, which is extremely useful to anyone with limited mobility. A budget of $30,000 - $50,000* will allow you to create a practical, innovative and stylish space. Within this price range, you can redesign your kitchen layout and have custom-designed cabinets installed. Style really comes down to using materials which suit your unique home style, and there is a range to choose from.   

Flooring 

Aim for practicality and quality when selecting future-proof flooring materials. Solid timber flooring will be easy to maintain and can be installed for approximately $65* per square metre. However, carpet provides much more padding should you have any falls, which is extremely common in senior years. You can purchase this for around $55 - $85* per square metre. Flooring experts Cavalier Bremworth offer some great online tools to help you select the right carpet for your home.  

Smart home installations

On a budget of $25,000 - $45,000+* you can have some really helpful smart home appliances installed. This should include design, installation and wiring, home security options as well as remote control of basic home functions such as lighting and heating. There are some innovative appliances to make day-to-day life so much easier, such as smart fridges which can remind you of what needs to be added to your shopping list, as well as motion sensors, which could serve as a home security function.

Open plan

Open plan designs can be beneficial for those who rely on walkers or wheelchairs to get around the house. Not only does it allow you to easily flow between rooms, it will also provide extra space to do so. If you have $40,000 - $70,000* to work with you can adjust parts of your home’s layout, have minor extension work carried out, bring in a decorator and perhaps add in some spacious french doors. 

Future-proofing your home on a high-end budget

Elevator installations/home additions

If you live in a two-storey home you may reach a point where you have three options: downsize, install an elevator or renovate to create separate upstairs and downstairs dwellings. Home elevator installations start around the $40,000 - $60,000* mark, with prices increasing along with design and specification requirements. 

Chair lifts are another option which will allow you to maintain your independence. Costs range from between $5,000 - $18,000*, including installation; with straight stairlifts being more affordable than curved. Your GP or occupational therapist will be able to advise you on whether or not you qualify for funding through the Ministry of Health.  

If you would prefer to renovate your upstairs area and rent it out, the required renovation work might include bathroom, kitchen and bedroom additions, as well as potentially building a separate upstairs entrance in order to maintain privacy. Budget for at least $60,000* per room for extension work, and $50,000 - $100,000+* per room, for a high-end renovation.

High quality electrical, lighting and sound

On a high-range budget, you can enjoy designer lighting, high-quality media systems and smart wiring. For high-quality designer lighting, set aside at least $200* per light installation. A $100,000* budget will allow you to enjoy a luxury home entertainment system experience, potentially even a home cinema. Smart wiring installations begin at around $2,000*, which then makes it easy to automate your home lighting, heating, security and entertainment. 

Kitchen

A budget of $50,000 - $100,000+* will allow you to completely redesign your kitchen into your ideal long term cooking zone. Change the layout of cupboards, benches, your oven and fridge. Optimise storage through a scullery installation and choose luxury materials and appliances.

Flooring

If optimum presentation, easy maintenance and functionality are at the top of your flooring priorities, solid timber flooring is likely to be high on your list of options. Solid timber flooring can be installed for $100+* per square metre. If you are interested in something with a bit more padding, high-quality carpeting can be purchased for around the same price.  

Bathroom

Whoever said “growing old isn’t pretty” clearly didn’t have access to a luxury style bathroom. For $285 - $360* per square metre you can have your choice of designer, non-slip tiles, a level-entry shower is a must-have, and built-in storage can add extra practicality. You also have the option of bespoke bathroom models and lighting. A budget of $100,000+* is ideal for this type of renovation. If you’re not sure where to start, companies such as Robertson Bathware provide bathroom showroom viewings which offer plenty of information and inspiration.  

Keep in mind that renovation costs do vary and are dependent on the project size, the materials used and the labour requirements. For a cost estimate accurate to your project, get in touch with a Refresh Renovations specialist.  

*Please note: These costs are rough estimates only and are subject to change.

How well can KiwiSaver provide for both a first home and retirement? Back to top

Juggling short and long term goals is challenging. In your twenties; having fun, building a career and finding a partner are the priorities, then buying a house and eventually retirement planning.  It’s almost impossible to think about being old when you are young. However, automatic KiwiSaver enrolment forces long-term thinking.

Just how well does saving two or three per cent of your income help? If you withdraw to buy your first home, how will that impact on your retirement goal?

It’s easier to visualise with an example, say $52,000 annual employment income before tax. After five years, you could now have $16,000 to $19,000 in your KiwiSaver fund. The difference depends on what type of fund you were in and how well it performed. 

At this point, KiwiSaver is probably becoming more interesting! Why? Because the sums are growing and you can withdraw most of your balance to buy a first home. Specifically, contributions you and your employer made plus fund growth, but you have to leave the government contributions invested. In our example, $6,000 would have to stay allowing withdrawal of $10,000 to $13,000. 

By mid-2012 around 7,440 people had used the first home option with the average withdrawal being $9,640. You have to have been in for three years minimum.

It starts to be meaningful when you consider that a couple could withdraw $20,000 to $26,000. Or a group of friends or siblings could get together to buy a house and be flatmates in their own home instead of a landlord’s house. For such sharing arrangements, make sure you have appropriate legal agreements in place to avoid arguments when someone wants to sell.

If you buy a house for under $300,000, you may also qualify for a subsidy from Housing New Zealand: $1,000 for each year of KiwiSaver membership up to five years. That’s potentially $5,000 each for our couple boosting the deposit to between $30,000 and $36,000.  In Auckland, Wellington and Queenstown, the Housing New Zealand subsidy applies for houses costing up to $400,000 so you’d need to save a bit more to meet usual bank requirements of 10 per cent deposit.

Back to the financial planning: a couple, both 30-years old, buys a house with a $360,000 loan. Repayments will be $2,395 per month for 30 years. I’ve used a rate of 7 per cent because interest rates won’t stay at current low levels forever. If they are earning an average of $50,000 each, deducting tax and KiwiSaver this results in $6,570 per month jointly leaving $4,175 after mortgage repayments. That’s $50,100 per year for living expenses including homeownership costs and life and income protection insurance. 

KiwiSaver contributions will increase to 3 per cent from April 2013 but your employer has to deduct tax from their part now. You will be investing $1,500 per year, your employer $1,050 and the government $520.  So are retirement savings of $3,070 per year enough?

The www.sorted.org.nz website has a simple calculator where you plug in retirement lifestyle expenses. By entering your age, planned retirement age and life expectancy, the calculator works out the money you need by retirement plus required savings each month. Compare your savings target with the total going into KiwiSaver from you, your employer and the Government and you’ll see how close you are. 

Our couple investing $6,140 annually into KiwiSaver (assuming annual increases for inflation) should have $200,000 by age 65 from which they can draw $12,000 per year for twenty years (all the money will be used up). Along with NZ Super, they will have $40,000 per year to spend (in today’s money). There will be variations in earnings over the years through time off for children but also salaries may increase more than inflation, allowing for higher savings or repaying the mortgage faster. There’s no doubt KiwiSaver is a great base to build on. 

Deborah Carlyon is an Authorised Financial Adviser. This column does not provide personalised advice. Her Disclosure Statement is available on request and free of charge by emailing [email protected]

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