We also have about $40,000 savings in term deposits. And my KiwiSaver balance is $105,000 in a growth fund with Simplicity.
We are currently covering the mortgage repayments through mortgage replacement insurance, and the rest of our expenses come out of my salary. We still have a teenager at home.
We might have some unexpected expenses related to my husband’s health situation. And we’d like to be able to make the most of the time we have left together by travelling or having some fun experiences. In a way he’s been forced to retire early so we’re not sure how to manage the situation.
A: Gosh, a tough situation for your family. But good on you for considering all your financial options.
It’s great that you’ve got mortgage replacement insurance, and obviously you will keep using that for as long as it lasts. But I assume it will run out after a given period.
At that point, it’s hard to know whether it would be better to pay off the mortgage in one lump sum from your husband’s retirement fund or leave the money in the fund earning a return, while continuing to make regular mortgage payments from the fund.
It depends on whether the mortgage interest rate will be higher than the fund returns will be – and you can’t know that in advance. So go with whichever appeals to you both. I can imagine that going into the future with a mortgage-free home might feel good for you in particular.
Then, with your KiwiSaver fund likely to grow considerably by the time you reach 65, especially if you keep contributing to it, you should be able to retire fairly comfortably.
In the meantime, you’ll still have about $38,000 in your husband’s retirement fund. I would love to see you two spend a chunk of that on travel and fun, while perhaps keeping some aside for the not-so-happy spending on his health.
You’ve still got the $40,000 in term deposits. Some of that could also go on health spending if needed, but it would be good to keep at least some as a general rainy-day fund.
The tricky part is that your family’s situation will keep changing in ways that can’t be predicted. So you might want to find a good financial adviser to guide you along the way. See the next Q&A on how to find one.
I hope everything goes as well as it can for you two.
How to hire an adviser…
Q: I’m in need of disinterested financial advice about investing versus paying down my mortgage versus selling up and renting. I’m on a high income, but low savings, age 67. Don’t know who to trust!
A: It’s great to see the word “disinterested” used correctly – meaning unbiased, having no stake in an outcome.
It doesn’t mean uninterested – although so many people now use the word that way that it’s starting to be an alternative meaning.
I suppose we have to accept that language is forever evolving. “Nice” used to mean lewd or wanton. “Bully” used to mean a sweetheart of either sex.
Okay, on with your question, before my editor tells me off for straying from personal finance! I just thought I’d better explain your meaning in case some readers think you’re seeking an adviser who will be yawning as they talk to you.
You’ve no doubt heard or read of financial advisers who receive commissions for putting your money into certain investments.
If you ask them your question about investing versus mortgage reduction, it would be pretty surprising if they went with the latter, even though it’s a perfectly valid option. And if you asked where you should invest, again their reply might well be biased.
Some advisers who receive commissions get angry if I say that, claiming they always act in the best interests of their clients. Really?
It’s far better to find an adviser whose only income is from the fees that clients pay them. Sure, you’ll be out of pocket by paying those fees. But in the long run it’s highly likely you’ll be better off.
How do you find an adviser who is paid that way?
Some years ago, I started a list on my website of fees-only advisers. At first it was short, but then it grew and got out of hand, with some advisers complaining that others shouldn’t be on the list, and so on.
When MoneyHub showed an interest I gladly passed the list over to them to run. You can find the list if you Google “MoneyHub Adviser Directory”.
However, I’ve kept some tips on choosing an adviser on my website, at maryholm.com/advisers/. You might want to read that.
Once you’ve narrowed your list down to a few people, I recommend you interview them for the job of helping you look after your money.
Most will offer a free first meeting, or at least a free phone call. Choose one who not only ticks the boxes on how they are paid, but who seems trustworthy and interested in you and your situation.
… and how to fire an adviser
Q: I have been with a well-known investment advisory firm for more than a decade. They manage my portfolio of single shares and bonds. The fee is about 1% per year plus brokerage/transaction fees.
Lately I have been thinking that it might be better to sell all these individual shares and move my money to a passive low-fee index fund (yes Mary, I have been paying attention!).
It would also simplify my finances. At the moment I need an accountant to fill out my tax return every year as the FIF tax rules are too complicated for me. Do you have any tips on how to break up with one’s financial adviser?
I have been with the same person for many years and do not have any issues with her. It is just that at this stage of my life I feel I need to pursue a different investment strategy.
A: Time for an honest conversation. Or if that feels too difficult, perhaps send your adviser an email. You could base it on what you’ve written to me.
You might want to ask for her to help you sell your shares and bonds first – but you will probably need to explain why.
I fully understand where you’re coming from. Keeping things simple is good. And the beauty of it is that you could well end up better off as well, especially after we take into account the fees you pay, including an accountant’s fee.
If you feel bad about breaking up, how about buying her a box of chocolates or some flowers to express your thanks for her past work? But beyond that, you’ve got to look after yourself first.
KiwiSaver in your 80s
Q: We are both over 80. My wife has a KiwiSaver fund into which we have maintained monthly contributions, no withdrawals. (I was too old to qualify).
We are considering depositing a recent windfall of $100,000 in her fund for a better return, rather than deposit with a bank.
Obviously, we may need to withdraw funds in small tranches when necessary, but we’re unsure if there are tax obligations on any appreciation of the $100,000. Are there other matters to consider?
A: This is an interesting twist. Not many people over 80 are regularly putting money into KiwiSaver, as opposed to withdrawing it.
But as long as you two have enough income to enjoy life, good on you!
I can’t think of any reason not to put the $100,000 into your wife’s KiwiSaver account. Even if she is in a low-risk fund, the after-tax return will tend to be higher than in a bank deposit, although it may dip occasionally.
She may, of course, be in a higher-risk fund, where the return should be higher again over the long term, but will wobble around, with losses sometimes.
To avoid those wobbles, I suggest she moves the money you think you might withdraw in the next few years into the lowest-risk cash fund. The rest could stay in medium risk, to be transferred gradually to the cash fund over the years.
The first time your wife withdraws money from her KiwiSaver account, the process will probably take a couple of weeks, so I suggest she makes even a small withdrawal now so you get that behind you. After that, withdrawals should be pretty straightforward. (For more on the first withdrawal after 65, see my April 11, 2026 column.)
On tax, the $100,000 will, hopefully, grow in KiwiSaver. But the provider takes care of tax on that return each year, withdrawing the money from your balance. You can see the tax amount in your annual statement. There’s no tax on withdrawals.
By the way, on your comment that you were too old to join KiwiSaver, in the past you had to be under 65 to join, but that’s no longer the case. Anyone of any age can join.
Don’t forget tax
Q: It was interesting to read in your last column your analysis of the benefits of renting a home and investing the capital rather than living in an owner-occupied property.
However, the discussion overlooked one important factor – the impact of tax.
If the capital released by selling the house is invested in the share market, the income generated by that investment will be taxable.
Assuming the couple have other income, the investment income could be taxed at a marginal rate of 33%. That would reduce the annual return of $90,000 to around $60,000 after tax.
By contrast, the financial benefit obtained from living in a mortgage-free home is effectively tax-free.
If the house would cost $800 a week to rent, the owners are receiving an economic benefit worth about $41,600 a year simply by occupying their own property. Under current New Zealand tax law, no income tax is payable on that benefit.
This is a significant but rarely acknowledged advantage of home ownership. Owner-occupiers effectively receive the rental value of their homes tax-free, while someone who sells their home, invests the proceeds, and rents generally pays tax on the resulting investment income.
Any meaningful comparison between the two strategies therefore needs to be made on an after-tax basis.
A: You make some good points.
If the proceeds of selling your house were invested in a share fund as I suggested, the PIE tax would be somewhat lower. But still…
* Mary Holm, ONZM, is a freelance journalist, a seminar presenter and a bestselling author on personal finance. She is a former director of the Financial Markets Authority, the Banking Ombudsman Scheme and Financial Services Complaints Ltd. 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 mary@maryholm.com. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.
Catch up on the debates that dominated the week by signing up to our Opinion newsletter – a weekly round-up of our best commentary.