Will I have to pay for my husband's rest home care if we have a contracting out agreement? Ask Susan

Send your questions to susan.edmunds@rnz.co.nz

I was interested in your response to "I'm 60 and my husband is 20 years older" with regards to her KiwiSaver and means testing for government subsidies for care. How does this work if you have contracted out of the Relationship Properties Act?

We only have one joint asset and that is our house. I certainly don't want to see my assets eroded away for anything other than my own care. How does this work please?

I'm afraid I have bad news. The Ministry of Social Development tells me that unless you're actually separated, the contracting out agreement won't have an effect on your situation.

On the Work and Income website, it says that: "Even if the partner regards their assets as their own separate property, they are still included in the means assessment. If they are subject to a Property (Relationships) Act 1976 agreement, then the separate property assets will still be counted unless the couple have separated."

I'm wondering if, now I'm 65, I should use my KiwiSaver towards my mortgage. My thinking is that I can then pay my mortgage off faster and then put the money back. I'm still working part-time and am planning to do so until I'm 70. I have a second house, worth about $1 million, which I want to sell. My mortgage is $220,000 and my KiwiSaver is $127,000.

Rupert Carlyon, founder of Koura Wealth, says there are a few things you can think about here.

The first is the cost of the mortgage versus the potential return on your KiwiSaver fund. Depending on the type of fund you're in, your mortgage may be costing you more than your KiwiSaver fund is making.

"By paying down her mortgage, she will be saving herself 5 percent to 6 percent per year in interest costs," he said. "A balanced KiwiSaver fund - I assume that is where she is, due to her age - is expected to earn 3.5 percent over the long run."

Carlyon says you might also think about your tolerance for risk. Paying down your mortgage is risk-free.

"By remaining invested in her KiwiSaver, it could have some great years where it goes up by 10 percent or 15 percent per year, though it could also fall by 10 percent to 20 percent in any given year. Over a 20-year horizon, the loss scenario is extremely unlikely, though may cause some undue stress."

He said you might also think about what you'll do with the $1m you get from the other house. You might have 30 years of retirement to fund.

"She will want to stretch out the $1m house sale by keeping it invested. She should not be simply putting it into a bank account."

So when it comes to deciding whether to pay off your mortgage, he says it won't make a lot of difference whether you pay off the mortgage now or next year, when you sell the other property.

"The key is making sure that she finds somewhere to invest the house sale proceeds and I suspect her KiwiSaver account might be a great destination for this as they are typically low-cost, well-diversified funds. And over the age of 65, a KiwiSaver fund simply becomes an investment fund.

"My advice would be: leave the mortgage and keep the KiwiSaver where it is for the moment. When she sells the other house, use that money to pay down the mortgage. She will then need to figure out an appropriate investment strategy for the remaining $800,000 of the house sale.

"I suspect the easiest and lowest-cost option for her might be to simply put it in her KiwiSaver."

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