22 May 2024

Where will you live in retirement?

One of the most important decisions you’ll make when you retire is where to live. Your retirement location has a huge impact on your financial situation and your physical and emotional wellbeing.


City living costs more

We know from the Massey University Retirement Expenditure Guidelines, published annually, that living in a city comes with much higher costs. Key determinants are the cost of housing and the city lifestyle. The 2023 Guidelines showed that a couple living in metro areas with a comfortable (‘choices’) lifestyle spend around $335 per week more than a couple living in provincial areas. City living is not for those who want to make their retirement savings go further.

Rates and insurance are important considerations when choosing where to live. Local authorities have different rating systems and as a result, two properties of the same value but in different districts can have markedly different rates. Rural rates tend to be lower than those in urban areas as rural properties often need to have their own water and sewerage systems, however there is a cost to maintaining those systems.


What price insurance?

Insurance is becoming an increasingly significant factor in choosing a property. Insurers are becoming more risk averse as a result of climate change and natural disasters. While it’s nice to contemplate living by the sea in retirement, not all insurers are willing to insure coastal properties. Even if coastal erosion is not an issue, there is the threat of inundation as sea levels rise (possibly by over a metre in the long term) and of ponding as ground water levels rise and rainfall increases.

Calculate what you could draw in retirement.

A property in an ‘at risk’ area may still be insurable, but with a premium loading to reflect the increased risk. One insurance valuation specialist recently estimated that premiums for coastal properties could increase fivefold if sea levels rise by as little as 10cm. Of course, there are those who are convinced that there is no such thing as sea levels rising, however it would be a gamble to ignore the possibility when buying a coastal property.


Retiring abroad

Perhaps you are contemplating retiring to another country. If you move overseas permanently, you can’t continue receiving NZ Superannuation unless you meet certain criteria. If you do meet the criteria, the amount you receive will depend on where you’re moving to and whether New Zealand has a social security agreement with that country.

Thinking of living on a Pacific Island amongst the palm trees and coral reefs? New Zealand has a special portability agreement with around 22 Pacific Island countries which allows the NZ pension to be paid in full if you move to one of these.

Fancy living in the Greek Islands in your golden years? Good news: NZ has social security agreements with Greece and Malta, as well as Australia, Canada, Denmark, Ireland, Jersey, Guernsey, The Netherlands, South Korea, and the United Kingdom. However, each of these agreements differs slightly.

Australia is a popular destination for retirees. Australia and New Zealand have a pension agreement, however it’s likely that moving to Australia means you’d receive part of your pension from the Australian Government and part from New Zealand, depending on how long you’ve worked in each country. Australian pensions are dependent on your assets and income and the Australian component of your pension could be reduced to reflect this.

Further information on receiving pensions in other countries is available from the Work and Income website. Read more


Proximity to healthcare and social connections

Of course, financial considerations are only one factor in choosing where to live. While it’s nice to contemplate living cheaply in a provincial area or in perpetual sunshine in the Greek Islands, access to healthcare is something that cannot be ignored, at least in the latter years of retirement. For that reason, a two-stage approach might be more practical. Think about where you might want to live in your more active, healthier years, then plan to move to a different location as you begin to slow down.

Retirement villages offer a wraparound service for health and personal care later in life. While a licence to occupy offers a less favourable financial outcome than freehold ownership, the village life is about security, lifestyle and access to care, all of which are invaluable.

Finally, wherever you live, social connections with family and friends are crucial - without them even the most luxurious surroundings seem empty. There’s a lot to consider when deciding where to retire, so choose carefully.


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Written by:

Liz Koh

Liz Koh is a money expert who specialises in retirement planning. The advice given here is general and does not constitute specific advice to any person.

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