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A Reverse Mortgage Can Top Up Your Pension Without A Big Lump Sum
•Zebunisso Alimova
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A reverse mortgage can sound like a last resort, but the real story is more nuanced, especially here in New Zealand where so many people retire owning a home yet still feel squeezed month to month. We sit down with James, our reverse mortgage specialist, to talk about who is actually asking for equity release right now and why the usual stereotypes miss a big chunk of the market.
One of the most eye-opening threads is the rise of enquiries from sole traders in trades and construction. They’ve often done well during working life, but without consistent KiwiSaver habits and without an “asset” to sell at the end, retirement can arrive with an uncomfortable gap. We unpack what happens when the body can’t keep doing physical work, New Zealand Superannuation doesn’t stretch far enough, and the family home becomes the main source of financial flexibility.
We also get practical about structure: why taking a massive lump sum early can supercharge compounding interest, and how a smaller, disciplined drawdown can act as a pension top-up instead. From the “golden years” of travel and independence to the fast changes many people see in their 80s, we talk through the lifestyle decisions, the trade-offs, and how extra funds can even support care at home.
We finish with a frank note on retirement inequality for women, including how pay gaps, caregiving breaks, and widowhood can leave people financially and emotionally unprepared. If this sparked questions for you or your whānau, share the episode, subscribe, and leave a review so more Kiwis can find it.
We are back talking about reverse mortgages. So if this was a topic of interest for you before, listen up. We've got more information for you today. I've got our reverse mortgage specialist in the house. Hello, James.
SPEAKER_01
Aloha.
SPEAKER_00
And he drops a pan. All right, James, you've been busy.
SPEAKER_01
Oh my God. So this year, I mean, I had an amazing year last year getting into this role. And then as the year rolled on, I just started I've been spending a lot of time around older people and what their needs are and all that kind of stuff. And just the things that I've been learning. And every week there's something new. And last week, last week just blew me away because out of the woodwork came all a completely different target market for reverse mortgages that I just would not have thought of.
a huge percentage of sole traders, people who work for themselves in a trade or in construction, stuff like that. And so they've worked for themselves most of their lives, and now they're getting to sort of close to that age of 60 or 65, and they're starting to think about, you know, you know, because they're in they're in physical draining job jobs. They're quite so the top types of jobs that those tradespeople are doing and the builders are doing, it's it's not something that you can easily do in your older years. No. So we're getting we're getting beginning to get a lot of inquiries from people because when they sell their businesses, unfortunately they're the business. So their businesses is not necessarily gonna when they sell those businesses, high value. Yeah, it's not necessarily gonna provide them for retirement, but they've often made quite a lot of money throughout their working lives, but because they're sole traders, they haven't really put it aside in Kiwi Saver or s or anything like that. So you're getting people needing to retire, say a bit earlier than the 65 age
because of physical demands, but they don't have necessarily the money to do so. So this really surprised me. But it makes a lot of sense once you start thinking about how so let me get this right.
SPEAKER_00
They've worked hard all their life, they were self-employed, they missed out on the benefit of having a kiwi saver. Now they've retired, they sold a business or shut it down, they may not have sold it from much, and they suddenly realized they don't have that golden nest egg at the end of their retirement.
SPEAKER_01
Yep. And the ones I'm talking to aren't at haven't retired yet, they're thinking about it. Yeah, they're beginning to think, oh God.
SPEAKER_00
So thank God they found you.
SPEAKER_01
Yeah, well hopefully, yeah. But they just get they're almost at that point, and now they're starting to see, oh, what am I gonna do? I mean, because they're you know, they're in their 60s, right? They've still got twenty plus years, 20 20, 30 years ahead of them potentially. And they they can't necessarily carry on with what they're doing right now for too many more years. So this is when a reverse mortgage could be beneficial for those types of clients. And the main way I the my in the main way it could be is that it it could be used as a top-up of the pension. So you get I think you get four or five hundred dollars per fortnight on the pension, something like that. Well, the way a reverse mortgage can can work is you can get a you can draw, as long as you're own your home free free hold or nearly free hold, it doesn't have to be completely free hold. You can get a you can draw down the equity in your house to support your retirement. Now, you don't have to do that in a big lump sum. You don't have to draw down a hundred thousand dollars right at the beginning. But what you can do is draw down, say, a thousand dollars a week or I sorry, a thousand dollars a week, a thousand dollars a month to top up your pension. And that that way you're not incurring huge interest costs right from the beginning. Whereas if you were to draw down a couple of hundred grand in your early sixties, that's gonna that's gonna compound compound away in in in into your eighties when you go to sell the house, it's gonna be a big loan once they add all the interest on it. But if you're in a situation where you just need your we just need your pension tip topped up for, you know, you it might not be for long, it might just be for a few years, that can help you just have the lifestyle that you want to have, or just do those things that outside the basics.
SPEAKER_00
Because we also talked about, right, how you retired 65,
usually, and then about until 75, you've still got those golden years to be traveling, to do all the fun stuff, you're still in a good, healthy, yep, relatively healthy mode. And you said you've noticed that, that all your parents' friends that 10 years ago they were much more physically able to do things, and now that you met them at your mum's funeral, you were blown away by how much they changed.
SPEAKER_01
Difference between 70 years old and early 80s, just I'd almost didn't recognize people, it was such a difference because I hadn't seen them at all during that time, and in the early 70s, they're all going on river cruises and all the you know, massive train trips all over the world and doing all those kinds of activities. That's just you know, now they're losing their licenses because they you know they can't drive anymore, so their whole independence is is pretty much been eroded away. And so sometimes some of these people want options to like my parents were able to they were able to afford to have care come into her their house so they didn't have to go into a hospital or anything like that. So yeah, it there's a there's a bit of a spin-off. I mean, you've got to weigh it all up. I would be suggesting if people are looking at a reverse mortgage in the early 60s to help top up the to top up the pension that you that you're really disciplined about how you do that. So that's something that you can maintain for a you know a reasonable amount of time.
a seminar coming out on 19th of March, two o'clock in Naman Ubaikanai.
SPEAKER_01
Yeah.
SPEAKER_00
So for those that are local and interested, come in, you know, come register, it's free. You will learn more about this product because we will have a reverse mortgage specialist there.
SPEAKER_01
Yeah, absolutely. And he's really, really good. And he can he'll be able to answer all your questions. And if you want to register, just look up me online, james.buchan at macpero.co and just put who I work for there. That's all right. But yeah, we're more than happy to get any queries.
SPEAKER_00
So beautiful. Awesome, James. Thank you so much. I think you really highlighted a real issue in New Zealand. And I will just
add in from my point of view that women are even worse off. Yeah. You know, we've got men that are feeling the pinch, but then women are feeling it even more because of the pay gap, because they usually took the time off work to stay home and look after the babies, and then by the time they return to workforce, you know, they're not earning the same amount as their counterparts. So what we're finding is by the time the women retire, they are suffering a lot financially. So, how do we change the narrative?
SPEAKER_01
And so, yeah, I'm actually dealing with a reverse mortgage client who is older and her husband's passed away. Absolutely, yeah. And now she's like, she wasn't involved in any of this kind of stuff. So it's uh it's a really big thing, it's a really big hurdle to um in this case she's okay financially, but she had she doesn't have the background sort of expertise because her husband did everything. So, absolutely. I just encourage women to get involved in whatever. As early as possible. Exactly.
