Mary Holm: Separated at 60, soldiering on

It's a good idea to share your home - whether owned or rented - with students or other boarders. Photo / Chris Skelton

Home-buying tests

I've just separated at age 60. I have a job and will end up with only about $30,000. I have work super and will join KiwiSaver.

My thinking is to flat for a year and save enough money to buy a house and then get a couple of students, or rent a place and get some students. Would appreciate your thoughts.

You're in an unenviable situation. But you sound like someone who is prepared to do what it takes to set yourself up for retirement. I bet you'll succeed.

Your first step should be signing up for KiwiSaver, which will give you thousands more dollars to put into your home. This does mean that you may have to wait three to five years before you buy. But it will place you in a stronger financial position for retirement.

There are two ways you may be able to use KiwiSaver. Let's look first at getting the maximum out of the scheme - if you are eligible.

Many people don't realise that KiwiSaver offers considerable help to not only first-home buyers but people in a similar financial situation to first-home buyers, even if they have previously owned a home.

If that sounds like you, you'll need to check with Housing New Zealand to make sure you qualify. There are two tests of this:

* You must be able to get a mortgage from a commercial lender.

* Your "realisable assets" must total less than 20 per cent of the house price cap for the KiwiSaver first-home subsidy. There's more on the price cap below, but 20 per cent of it comes to $60,000 or $80,000, depending on where you buy.

"Realisable assets are belongings that you can sell to help pay for your house," says Housing New Zealand, which runs the subsidy.

It gives the following as examples: "Money in bank accounts (including fixed and term deposits); shares, stocks and bonds; investments in banks or financial institutions; building society shares; net equity in property or land (not being used as your home); boat or caravan (if the value is over $5000); other vehicles (such as classic motorbikes or cars - not being used as your usual method of transport); other assets valued over $5000." Net equity is the value of a property minus any mortgage on it.

If you qualify, you may be able to withdraw money for your home and also receive a subsidy.

The withdrawal can be made regardless of your income, the house price and how much you have contributed to KiwiSaver. After three years in the scheme, you can include in your home deposit all the money you and your employer have contributed to KiwiSaver, plus all the returns - interest, dividends and so on - earned on the whole account.

The government's $1000 kick-start and annual tax credits will stay in your account until you can access the money in retirement. At your age - over 60 - that will be five years after you join KiwiSaver.

The subsidy - which is added to your deposit - is $3000 after three years, $4000 after four years or $5000 after five or more years. To receive the subsidy, an employee joining KiwiSaver must:

* Earn income of less than $100,000 - and if two people buy the home, their total income must be less than $100,000.

* Contribute at least 2 per cent of pay for at least three years. (Before April 2009, the minimum contribution was 4 per cent.)

* Buy a house costing less than the house price caps, currently $400,000 in Auckland City, North Shore City, Rodney District, Wellington City or Queenstown Lakes District, and $300,000 in all other areas.

For more details see Housing NZ's brochure "Buying your first home with KiwiSaver". It's available at www.hnzc.co.nz/kiwisaver or by ringing 0508 935 266.

What if you're not eligible for the withdrawal and subsidy? All is not lost. Because you'll join KiwiSaver when you are over 60, you will be able to take part fully - receiving compulsory employer contributions and government contributions - for five years, even though by then you will have passed your 65th birthday.

After that, you can take out all your money and do anything with it - including using it as a deposit on your home, or as an extra mortgage repayment if you have already bought.

Whichever way you go - with or without the subsidy - make sure you contribute at least $1043 a year to KiwiSaver, to get the maximum matching tax credit. Top up your contributions, if necessary, before June 30 each year.

In the meantime, I like your idea of sharing your home - whether owned or rented - with students or other boarders. It might be worth living close to a tertiary institution to attract people.

Second time around

My wife and I are second time rounders. We are both in our 40s and started from scratch eight years ago with five children between us.

We are desperate to escape the rent trap. However, we have limited cash savings. We were really excited about the prospect of being able to use KiwiSaver and my TRSS (teacher super) for our deposit. However, we now find we are precluded as we have had previous interests in housing, even though we didn't gain financially from this, leaving the properties with respective ex-spouses!

After rebuilding our lives and remarrying we find ourselves in exactly the same, if not worse position than any first-home buyer. However, we seem to be penalised by this particular clause.

Is there any way round it? I have talked to IRD, Housing Corp, TRSS and my wife's KiwiSaver provider, and no one can give me any advice. The standard answer seems to be, "We just administer and don't make the rules".

Hope you can help.

You sound like ideal candidates for the assistance outlined above. The snag might be that you have "realisable assets" of more than $60,000 or $80,000.

But wait, there's hope. In researching the Q&A above, I asked Housing NZ whether savings in a work super scheme would be included in realisable assets - particularly if the money is accessible, which it sometimes is when you turn 50 or 60. They replied that such savings are not included, and nor are KiwiSaver savings.

That got me thinking, and I fired off another question: "If a previous home owner who no longer owns a home was planning to buy one, they could sell their realisable assets and put that money, including bank account savings, etc, into their KiwiSaver account, as a lump sum deposit.

"Assume that, after doing that, their realisable assets (which exclude KiwiSaver money) total less than 20 per cent of the house price cap for the KiwiSaver first home subsidy. Would they then qualify for the KiwiSaver first-home withdrawal and subsidy?"

Housing NZ's reply: "I understand where you are coming from, but confirming the rules and confirming a scenario are two different things. We are happy to confirm the rule that money in superannuation schemes, including KiwiSaver, is not included in the assets test for previous homeowners. However, we are not going to confirm your scenario."

I'm not here to encourage people to rip off the first-home subsidy scheme. It's my money, and every other taxpayer's money, that makes up the $3000 to $5000. In light of that, I rather expected Housing NZ to say, "Perhaps we'd better change the rules to prevent that trick." And they might well be working on that now.

In the meantime, though, if you just miss the $60,000 or $80,000 cut-off, I wouldn't blame you for trying what I've suggested. Or, if you are willing to wait a few years before buying a home, you could at least increase your contributions to KiwiSaver, with the aim of getting your realisable assets below the limit.

It might be wise, though, to keep an eye out for any rule changes on this.

Turning to your teacher super scheme, the material online says you can withdraw money for a first home, but I can't see any mention of previous homeowners.

However, it does say you can withdraw some of the money - for any purpose - at age 50. So that's another reason you might wait before buying - although you could also simply use that money to repay a chunk off your mortgage.

A third reason to consider waiting is that it sounds as if you are not in KiwiSaver yourself. I suggest you look into signing up, perhaps suspending payments to the teacher scheme if you can't afford both.

There will be pros and cons of doing this, which the scheme people should be able to outline. But if it means that after three to five years you - as well as your wife - could get the KiwiSaver first home subsidy, that's likely to make moving to KiwiSaver worthwhile.

After you buy the home, you can always take KiwiSaver contributions holidays and go back to the teacher scheme if it's better at that stage.

Emerging markets

In response to one of your reader's questions, I'd just like to note that there are other options to the HSBC BRIC fund you mentioned. For example they could purchase an exchange-traded fund (ETF).

Wiki has a list of all available ETFs, including the Australian listed ETFs. Of these the iShares IBK and IEM give exposure to Brazil, Russia, India and China. The IEM gives exposure to other emerging markets as well.

There is also the Vanguard All-world Ex-US VEU, which has about 25 per cent of its investments in emerging markets.

I believe these ETFs are available to everyone at standard brokerage, although there may be a minimum trade volume required.

Thanks for this. Again, I don't know much about these products, so I can't recommend them. I think we've now given readers enough emerging market options to explore.

Getting somewhere

Just to update you. In response to your reply to my email, which you put in the newspaper last week, I checked that my employer had filed the Employer Monthly Schedules.

They have been now, so the Government has honoured my contributions, and they are in the process of crediting them to my KiwiSaver account. The employer contributions are of course outstanding!

Prior to me contacting you I was getting nowhere with the IRD and doubt the matter would have been resolved (even if only partly) so quickly. So thank you. At least with your involvement the IRD has taken the action it should have taken many months ago.

It's hard to know whether Inland Revenue acted faster because of my intervention. Still, it's great to hear you are making progress. Here's hoping you also get the employer contributions in due course.

Mary Holm is a freelance journalist, part-time university lecturer, consumer representative on the board of the Banking Ombudsman Scheme, seminar presenter and bestselling author on personal finance. Her website is www.maryholm.com. Her 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 mary@maryholm.com or Money Column, Business Herald, PO Box 32, Auckland. 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.

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Send questions to mary@maryholm.com or Money Column, Business Herald, PO Box 32, Auckland.