More than just a product - Lifetime Home as a planning tool

As rising living costs continue to put pressure on retirement budgets, financial advisers are increasingly helping clients answer a difficult question: how can they stay in the home they love when their assets are locked away in property, but their cashflow is coming up short?

This month we’re sharing a Lifetime Home Case Study Master Class to show how advisers north and south are using Lifetime Home to benefit clients.

For Christchurch adviser Gemma Pope, of Chris Pope and Associates Ltd, Lifetime Home has become a useful part of the financial planning toolkit, and something she often discusses with clients long before they might actually need it.

Pope discusses Lifetime Home as a potential option within a long-term retirement strategy, particularly for couples who could face a significant drop in income if one partner dies.

"Lots of people don't actually realise how big a loss it is to go from a couple to a single on NZ Superannuation," she says.

"It's a difference of about $14,000 or $15,000 a year."

The impact can be substantial. Pope estimates that someone in their 60s may need around $300,000 in additional savings to generate enough income throughout retirement to replace that lost NZ Super.

To help protect against that risk, she often encourages clients to retain life insurance cover until the younger of the couple is around age 70 and Lifetime Home becomes an option. Beyond that point, as stepped life insurance premiums become increasingly expensive, Lifetime Home can form part of the safety net instead.

Pope says that by introducing the concept early and revisiting it during regular reviews, clients have time to become familiar with what remains a relatively new retirement income solution.

"It's something that sits in the plan and can be discussed over time rather than being introduced when people are already under financial pressure," she says.

Lifetime Home is a home reversion product that allows homeowners to unlock some of the value in their property without taking on debt, a mortgage or interest payments. Homeowners sell a share of the house in exchange for regular income payments while continuing to live in and retain ownership of the remaining portion of their home.

"Everyone's always said, 'you can't eat your house', which is true, but this gives you the option to," Pope says.

More than a product

Lower Hutt adviser Robbie Schneider, of Succession First, says Lifetime Home can be particularly useful for older homeowners whose wealth is concentrated in a mortgage-free property, with widows living alone on NZ Super a common example.

"There are a number of people in mortgage-free homes who don't want to move and don't want another partner in their life if they're in their 70s and 80s," Schneider says.

"They simply want to stay in the home."

He says family members are often supportive of this goal.

"The children want them to stay in the home because of all of the comforts of their community nearby," Schneider says.

He says adult children are often less concerned about protecting an inheritance than many parents assume.

"Usually it gets to the point where the children say, 'Look, we're fine. We don't need you to leave an inheritance for us. We just want you to have all the things that you need and to be independent.'"

A bigger conversation

For Schneider, conversations about Lifetime Home rarely focus solely on finances. Instead, they become broader discussions about estate planning, aged care, family relationships, inheritance and long-term wellbeing.

He says that even when clients don't proceed with Lifetime Home, the conversation often helps families explore options they may never have previously considered. He prefers family members and lawyers to be involved wherever possible.