Mary’s Q&A column appears in the Business section of the Weekend Herald. Mary was a finalist for the "Best Columnist – General" award for this column in the 2014 Canon Media Awards.
NZ Herald 22 April 2017
Q&As: Couple in their 60s could still get back into home ownership - helped by KiwiSaver
- Rest home subsidy rule unfair, but not easy to fix
- Benefit helped reader turn around his life
- NZ Super recipient shouldn't pick on beneficiaries
Question: Here's a challenge.
We have done well over our working life and 40 years of work. We consider ourselves entrepreneurs and have always been self-employed - buying and selling houses, businesses, adding value then flicking them on.
In 2007 we sold a large portfolio of around $700,000 including our house. We were renting while looking at what to do next. Then we promptly lost it in the downturn through a bad investment.
Time has gone on and we've had some money, but we are very stupid and got conned.
So, here we are. I'm 67 and my husband is 60. We are totally broke and embarrassed. We are like deer in the headlights. This is the first time in six months I can even write to someone about it.
I am on the pension and my husband has good work as a builder. But we have run out of time and at the rate we are going we won't have a chance at getting back on the property ladder. We are renting at $400 a week and fear that this is now our lot, right through until the end of our lives.
Do you have any suggestions as to what we could possibly do to advance our situation?
Answer: You've made an important first step - seeking help. Good on you!
I can't think of a miracle fix for you. But I've heard of people in tougher situations - some with huge debts - who have turned things around. If you're determined, I reckon you could still get yourselves a modest home.
The first step is to get your husband into KiwiSaver, if he's not already a member. Unfortunately it's too late for you, as you're past NZ Super age. But if your husband contributes at least $1043 a year - $87 a month - he will get the maximum annual tax credit of $521 for five years. That's not to be sneezed at.
If your husband is an employee, he will have to contribute 3 per cent of his pay. But he will also receive a 3 per cent contribution from his employer, further boosting his savings.
After five years, he'll be able to withdraw all his KiwiSaver money. And there may be more - a KiwiSaver HomeStart grant for previous home owners. If he contributes for five years or more, this totals $5000, or $10,000 for a newly built home.
Usually, the HomeStart grant is only for first home buyers. For info on that see www.tinyurl.com/NZHomeStart.
But if your husband doesn't have "realisable assets (assets that can be sold) totalling more than 20 per cent of the house price cap for existing/older properties in the area", he may qualify for what's sometimes called a second chance grant.
The realisable asset caps are $120,000 for Auckland, and $100,000 or $80,000 elsewhere. For more info see www.tinyurl.com/NZHomePrevious
Some further suggestions for the two of you:
- Get a free budget adviser through the NZ Federation of Family Budgeting Services at www.familybudgeting.org.nz. The adviser will help you work out where you can cut spending and set up a savings plan.
- Get yourself a full-time or part-time job, or set up a small business. I know it's harder to get work when you're not so young. (Note to other readers: Let's not get into more correspondence about that. We've done that a while ago.) But many people work into their early 70s, often by creating their own job. Perhaps you could make and ice great birthday cakes. Or give advice on gardens. Or offer child care.
- Be prepared to move to somewhere where house prices are cheaper.
- Do what you can to keep healthy - eating well, getting exercise and so on. That will keep you earning and keep your expenses down.
I realise all this might sound condescending. And you might not be able to do everything on that list.
But your history suggests you have drive and initiative and are not afraid of hard work. If you set yourselves ambitious but reachable savings goals - and allow for a bit of slippage occasionally without giving up - I bet you can do it.
Readers might have some other suggestions for you. Watch this space!
And by the way, not all con victims are stupid. I've heard of retired judges being scammed.
Question: Bill and Ben are brothers. Bill through his life trades up to a $3 million house. Ben is happy with a modest $500,000 house and $2.5 million share portfolio.
Both are married and need to go into care. What happens with their respective assets in relation to the residential care subsidy?
Answer: I can see where we're headed here!
We're talking about how much you can have in assets and still receive the subsidy for care in a rest home or private hospital. If your assets are higher than the threshold, you're expected to pay towards the cost of care.
The rules for a couple, according to the Ministry of Social Development website, are:
"If you have a partner who is not in care, you can choose whether the total value of your assets is either:
· $120,416, not including the value of your house and car.
· $219,889, including the value of your house and car.
"Your house is only exempt from the financial means assessment when it is the principal place of residence of the partner who is not in care, or a dependent child."
I assume people who don't own a house would go for the second option, because of the higher total for other assets.
But homeowners would surely always choose the first option. So both Bill and Ben and their wives would have to pay for their own care until their assets - except their house and car - get down to $120,416.
This happens right away for Bill, as he has only the house. But Ben and his wife would have to reduce their non-house assets - their shares - to $120,416 if they want to receive the subsidy.
This certainly seems unfair. And if Ben has children I'm sure they would feel hard done by compared with their cousins, who stand to inherit a much better house.
But if you were the government, what would you do?
It might seem reasonable to deny Bill the subsidy, saying he and his wife can trade down to a cheaper house and free up money to spend on care. But this has been their home.
And what should the cutoff house value be? In Auckland, many older couples live in fairly modest houses worth more than $1 million.
Should they be obliged to move - perhaps a long way from their social networks - to fund one partner's care? That could be a big ask of couples in their eighties or nineties.
They might be even angrier if their friends - in a house worth just below the cut-off point - can get the subsidy and keep their home.
And what about house price differences around the country? To be fair, the government would have to set regional cut-off values. What a nightmare!
This is why the "exempt house" rule is there.
P.S. Am I the only one reminded of Bill and Ben the Flowerpot Men?
Question: Thanks for sticking up for the unemployed last week. It's too easy to kick those that are down.
I don't know how someone can compare life and challenges from now to the 70s. It's a different planet.
I worked in international mining and saw thousands of qualified folk laid off over the last couple of years. A drop in commodity prices, and towns can be levelled.
I've had a great international career over the last decade, but every time I tried to move home people seemed to not be interested in a CV that moved around places like the Middle East, Kazakhstan and PNG.
So I have given up and have moved to a different sector, after spending thousands on uni courses to cover up my embarrassing and shameful, demoralising months of unemployment.
I didn't go on the dole for ages. It was not until I found myself 10 to 15 grand in debt, and the stress and pressure/advice from friends convinced me to. Nobody wants that. Every grown-up wants to stand on their own two feet.
So now, I've gone from earning $120,000 to $50,000, just so I can stay in the country. But I'm happy to be back on the rung.
There are a lot of weirder things that our tax dollars are going to than unemployment. I now have much more empathy for the homeless. I kind of feel closer to them than the landed gentry. And I'm white, middle class, well travelled, well read, all of that. I got every gift and advantage, so I have masses of sympathy for anyone who has different challenges to contend with.
Answer: You're a good example of what I was writing about last week - someone who needs the unemployment benefit for just a short time, until they can set off on a new path. What a great "investment" for other taxpayers to make.
Question: I was interested to read the correspondence from a reader who was "aghast" about the young woman living on a benefit. As you pointed out, benefits are related to income and stringently tested. They do not usually require people to liquidate assets.
We have a welfare safety net to help prevent people from suffering severe deprivation, as happens in many other parts of the world when people become unable to work.
As the reader was referring to having a family and working in the 1970s, by now he could well be a beneficiary himself - receiving NZ Superannuation.
This is the largest benefit category by cost to NZ taxpayers by a considerable margin. But there is very little criticism of asset-rich, multi-millionaire retirees receiving over $700 a fortnight of government benefits. It's a bit hypocritical to criticise others receiving benefit while receiving one.
Answer: An excellent point for last week's correspondent to ponder.
Total NZ Super payments are almost three times bigger than other core benefits, which include Jobseeker Support and emergency benefits, sole parent support and supported living payments. And on an individual level, some NZ Super payments are about double some Jobseeker payments. The dole ain't no gravy train.
Whether wealthy people should receive NZ Super is a whole other question. At first it seems crazy. But in other countries where you have to pass income and asset tests to get a pension, many people cheat. And some of the richest people - or their expensive lawyers - are the cleverest at hiding away their assets in trusts or other family arrangements.
Also, it costs much more to administer pension schemes with such tests. You could argue the money might as well go to middle-income retirees - who can't afford to set up schemes to hide their wealth - as to bureaucrats.
International experts praise NZ Super for its simplicity and fairness. I'm not convinced we should meddle with it. But I do agree that it can be hypocritical of recipients to be tough on welfare beneficiaries.
* Mary Holm is a freelance journalist, a director of the Financial Markets Authority and Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. Her website is www.maryholm.com. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary's advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to firstname.lastname@example.org or Money Column, Private Bag 92198 Victoria St West, Auckland 1142. Letters should not exceed 200 words. We won't publish your name. Please provide a (preferably daytime) phone number. Sorry, but Mary cannot answer all questions, correspond directly with readers, or give financial advice.