One of the biggest financial risks faced by retirees is that they will run out of money before they run out of time. A pension is only enough for daily living costs and those who have just a small sum saved can run out of money once they have had to replace a car and pay for home maintenance. There are a number of options for retirees who need to supplement their retirement funds.
First of all, check with Work and Income to ensure all available benefits are being received such as accommodation supplements and disability allowances. Check with the local council on eligibility for a rates rebate.
If a large sum of money is needed, the cheapest option to consider is to borrow from family members. This should be done with the assistance of a solicitor to prevent any problems with gift duty or issues that might arise on death. Unfortunately, children don’t often have money to lend. Borrowing from a bank is a possibility and can usually be done by way of an interest-only loan. While this will help keep repayments small, they still need to made and this can be stressful.
Selling the family home and buying a cheaper house is another way of getting access to funds. This can be an expensive option once all the costs associated with selling, buying and moving are taken into consideration.
Home equity release schemes are proving to be very popular as a last resort option. If you need funds for home improvements, such as a new roof or painting, then taking out a loan will enable you to preserve the value of your house. Choosing a home equity release scheme is something that needs to be done with caution and is best done with independent financial and legal advice.
Liz Koh is a financial adviser. Her disclosure statement can be obtained free of charge by calling 0800 273 847. Author of Your Money Personality; Unlock the Secret to a Rich and Happy Life, Awa Press, March, 2008. For free eBooks, go to www.moneymax.co.nz and www.moneymaxcoach.com