Rental property gamble risky for near-retirees, KiwiSaver offers safer path

A couple in their late fifties, working part-time on a combined income of $100,000 a year, face a familiar crossroads: they have five years until retirement and $120,000 to invest. Like many New Zealanders approaching the end of their working lives, they're wondering whether that money will stretch far enough alongside the government pension. They've been lifelong travellers, and the prospect of scaling back appeals to them less than the prospect of having enough to live on.

Their instinct pulls them toward a rental property. They have renovation skills, some energy left, and the idea of buying a place, fixing it up, and letting it generate income feels concrete in a way that abstract investment funds do not. But financial columnist Mary Holm, responding to their question, gently redirects them away from that path—not because it's impossible, but because the math of rental ownership in retirement has shifted.

The core problem is straightforward: many landlords today find that once they pay the mortgage, rates, insurance, and maintenance on a rental property, they're putting money in rather than taking it out. For a couple already living on a modest income and relying on New Zealand superannuation, a rental property becomes a liability disguised as an asset. It locks up their capital in a way that leaves them vulnerable if something goes wrong—a major repair, a vacancy, a health crisis. In retirement, flexibility matters more than growth.

Holm presents three realistic options for the $120,000. The first is to place it in a balanced KiwiSaver fund. Yes, the balance will fluctuate, and yes, there's a real concern that markets could dip in the next few years. But balanced funds are designed to recover, and the couple would likely end up with more money to spend in retirement than they put in. The second option is to split the money across two or more KiwiSaver funds at different risk levels, allowing them to hedge their bets and compare how different providers perform. The third is to buy a property, renovate it, and sell it—capturing the value they add through their own labour without the burden of holding it long-term.

Of these, Holm favours the second and third options. A property flip, if the couple has the energy and skill for it, could genuinely boost their retirement nest egg. But it requires them to exit the market, not stay in it. The difference is crucial: they would own the asset temporarily, extract the value they've created, and move on. They would not be managing a mortgage and a tenant five years into retirement.

The broader lesson applies to anyone in their fifties or sixties thinking about real estate as a retirement income strategy. The old model—buy a rental, collect the rent, let it appreciate—works best for people with substantial other income or significant equity already in place. For those living primarily on superannuation, a rental property is often a trap dressed up as an opportunity. KiwiSaver, by contrast, offers simplicity, low fees (especially through providers like Simplicity), and the ability to access the money when needed without the complications of selling a property or managing a tenant.

Holm also addresses a secondary question about reverse mortgages, clarifies that holding multiple KiwiSaver accounts doesn't double your fees if both charge percentage-based rates, and explores ethical investing through index funds—all practical concerns for people trying to make their money work harder as they approach the finish line. The column's underlying message is consistent: at this stage of life, safety and simplicity often outweigh the promise of higher returns. The couple has not left it too late to save, but they have reached the point where the kind of risk they take matters more than the amount they invest.