Why can’t I use my KiwiSaver to pay for a hip operation? Ask Susan

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I am only 57 years old and in desperate need of a hip joint replacement. We have worked and saved carefully and managed to buy three cheap investment properties that we did a lot of DIY to keep the mortgages affordable for us. These are our retirement investments. We already own our own home freehold. As well as this I have $83,000 in KiwiSaver. We are asset rich and cash poor, I have taken leave due to pain. I will run out of leave if I have to wait on the public list. I realise I am lucky to be able to organise private surgery with a mortgage top-up. Is it fair that I now have to pay approximately $43,000 for this loan with interest included? It makes sense to me to be able to use my KiwiSaver or even some of it. To make matters worse, I will need a knee replacement soon also.

I can understand why this feels tough.

My first thought was that you might be able to make an application to withdraw money from KiwiSaver under the scheme's hardship provisions but the problem you're going to encounter is that you are able to top up your mortgage. To qualify, people have to have tried all other potential sources of funds first. At the moment I think you're out of luck here.

Dean Anderson, founder of Kernel, said you should take heart that you are in a strong financial position.

"KiwiSaver is designed to fund retirement. Additional access options, such as withdrawals for a first home, have been added over the years, but its core purpose remains helping Kiwis support themselves in retirement and easing the long-term cost of NZ Super.

"Stepping back, the reader is effectively asking why KiwiSaver can't be treated as a general savings account. That's a slippery slope. Next it would be bathroom renovations or school fees, and the scheme would gradually lose its ability to do the one job it was built for. A mortgage top-up against their freehold home, such as a revolving credit facility, is likely to be a relatively low-cost way to pay for the privilege of getting treatment quickly through the private system."

I'm in my early 70s and am in the fortunate position to own both my home and a modest two-bedroom rental property mortgage-free. The rental, which I inherited, is worth about $500,000. The rent and NZ Super give me enough income to live reasonably comfortably. My home is well maintained, but the rental needs interior decorating and a new kitchen and bathroom. I have $25,000 in savings for emergencies. I'm currently in good health, and although I may need a hip replacement one day, I also may not. I gave up health insurance because the premiums were expensive and my routine tests generally cost less than my high excess of $3000. I'd like to replace my 12-year-old small car and do some travel, but most of my money is tied up in property. Would it make sense to sell the rental, set aside perhaps $100,000 for these plans and a cash buffer, and invest the rest to provide income? Alternatively, could I keep the rental and borrow against it, using the rent to help cover repayments? I'm not keen on a reverse mortgage on my home. My main questions are: what is the best way to free up some money while maintaining enough income, and how much cash should I ideally keep available for emergencies?

Anderson said you are a good example of a situation where some time with a financial adviser could really pay off. On the face of it, he says, you're in a strong position.

"I'd start with what you want your money to do for you. You say you live comfortably day to day, so the question is whether there's more you'd love to do: travel, spend more time with family, upgrade the car, give to your local community. Think too about whether you'd like to leave something behind, or whether you're happy to spend it and simply want the comfort of knowing you won't run out if life throws a few surprises at you. Once you're clear on your goals, it's much easier to then work backwards and set up your money to meet them," Anderson said.

He said he was seeing more people at your stage of life deciding to sell investment properties to make their money easier to access and use.

"There are good reasons that may suit you. Borrowing in your 70s can also be harder, as lenders tend to be more cautious. The interest is also likely to cost more than the rental earns after rates, insurance and maintenance, so you'd be taking on debt to stand still. Selling also means no more tenants, repairs or landlord obligations to manage as you get older.

"If you do sell, a simple approach is to split the proceeds into three parts. The first is money for your plans now, such as the car and travel. The second is a cash buffer. The rest gets invested in a diversified fund suited to your timeframe, from which you draw a regular amount. As for how much cash to keep, many planners suggest holding enough to cover one to two years of whatever you spend above NZ Super. That way you're never forced to sell investments when markets are down."

He said a good financial planner would be able to model a few scenarios for you so you can see how long your money might last in each.

"They may charge a planning fee of a few thousand dollars, but the guidance and peace of mind can be well worth it. It may also surprise you, and give you the confidence to go and have some fun and spend a bit more."

Liz Koh, founder of Enrich Retirement, said you would need to think about who was going to spend the $500,000 of wealth tied up in the rental property, and when.

"If you choose to retain the rental property until the end of life, someone else will have the pleasure of spending it. The purpose of wealth is to enable you to enjoy life, and by keeping it locked up in a rental property you are only able to access the income from it, not the capital.

"Another consideration is the net return you are getting from the rental after deducting all expenses and tax, taken as a percentage of the market value of the property. You may find that in the current environment the returns are not as good as other investment options.

"Finally, as you have found, rental properties occasionally need expensive repairs and it can be hard to find the cash to pay for them. Should you decide to sell, you should get professional advice on how to invest the proceeds, making sure you have some funds on hand for your planned spending and also making a decision about running down your investment capital in a planned way over time."

Over in Aussie you can buy shares through the Commonwealth Bank. Now that I have moved back to NZ, where is the easiest place to buy shares please?

CBA is the parent company of ASB in New Zealand, which also offers a sharebroking service. There are also options to buy shares through platforms like Sharesies, Hatch and InvestNow.

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