The Two Property Investment Strategies to Fund Your Retirement

Learn how to calculate how much money you need to fund your retirement through smart property investment.

Retirement is one of the biggest motivators for property investors, and for good reason.

Property offers leverage, capital gains, and long-term wealth-building potential that few other asset classes can match. But when it comes time to retire, how should you use those assets?

There are two main strategies property investors use to generate income in retirement:

• Consuming capital and income
  

• Living off interest only
  

Let’s break down how each approach works and how to know which one might be right for you to fund your retirement.

Why Retirement Planning Through Property Matters

Retiring with enough income to live comfortably is expensive. And “comfortable” is subjective. For some, it's $50K a year; for others, it’s six figures.

Regardless of your number, it takes a lot of capital to fund your retirement, especially if you don’t want to rely on the pension alone.

This is where property comes into play. Through smart borrowing and long-term holding, investors can grow their net worth substantially and later turn that into reliable retirement income.

But how you turn it into income is where the strategies diverge.

Strategy 1: Consuming Capital and Income

This is the most common strategy among Kiwi property investors.

What does it mean?

In short, you build up your portfolio during your working years, and in retirement, you gradually sell off some or all of your assets (consuming the capital) while also using the rental income they produce.

You are drawing down both the “tree” and the “fruit,” so to speak.

The downside? By the end of retirement, your portfolio may be gone, leaving little or nothing to pass on to your kids or beneficiaries.

That said, it’s a completely valid plan. This is the minimum retirement threshold: building just enough to fund your lifestyle.

Strategy 2: Living Off Interest Only

This is the ideal scenario for many investors. Here, you never touch your capital; you live only off the income your properties generate.

What does it mean?

You still build your portfolio in the same way: leveraging property, riding capital gains, and growing your asset base.

But at retirement, instead of selling properties, you keep them all and live off the rental returns alone. This allows you to:

• Fund your lifestyle
  

• Keep your portfolio intact
  

• Pass on wealth to your children or family

This is the "upper threshold" retirement model. It's harder to reach, but far more sustainable and legacy-focused.

Examples of how you can fund your retirement using these methods can be seen below:

Capital & Income on the left, and the Income Only approach on the right

How to calculate these funding models - a case study

Lower Threshold: Capital and Income

Let’s say John and Mary Smith are both 40.

They own their home, have modest KiwiSaver balances ($30,000 each), and want to retire at 65 with $100,000 per year until age 90.

To achieve this, they’ll need a lump sum of: $1,599,723 by age 60

Assuming their KiwiSaver balances grow to ~$296,000 each by age 65 (according to sorted.org.nz projections), that gives them about $592,000 in net assets.

This leaves a shortfall of $1,007,723, the amount they still need to build through property or other investments.

If John and Mary wanted to save their way to retirement, they would need to save $24,197 per year, every year, starting today.

Upper Threshold: Income Only

Using the same example - John & Mary want $100,000/year in retirement, they’ll need a net asset base capable of generating that income at a conservative yield.

Assuming a safe 4% return from rental yield, they would need: $2,461,572 in net assets.

After factoring in their projected KiwiSaver balances (~$592,000), their shortfall is $1,869,572.

Yes, it’s a bigger number. But the trade-off is lasting wealth, consistent income, and the ability to pass it on.

What Difference Does One Investment Property Make?

Here’s the kicker: even one well-timed property can significantly close the gap.

Let’s say John & Mary buy a $500,000 property today. With only a 5% annual capital growth (lower than the NZ average), the equity in that property alone would grow to around $1.19m by age 65.

That’s more than a million-dollar difference, from one decision.

The Bottom Line

Investing in property remains one of the most effective ways to fund your retirement in New Zealand.

Whether your strategy is to consume capital or preserve it, property gives you the leverage and compounding power to reach those goals, especially when paired with KiwiSaver and other investments.

Here’s what matters:

• Start as early as possible
  

• Stay in the market long enough to ride multiple growth cycles
  

• Use equity and borrowing power to keep growing
  

• Be clear on your retirement income target
  

• Reassess regularly as life and markets change
  

Whichever strategy you choose, have a plan and start executing on it now.

You can learn more about our property investment strategies by reading our comprehensive guide on how to become a property investor in New Zealand here.

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What do we do?

We help Kiwis build wealth through property investment. Our advisors will take the time to understand your individual needs and recommend suitable investment properties to help you build wealth and set up your retirement.

What does this look like?

We use a 3-step process:

1. We start with a Discovery Meeting where we learn about you, your goals, etc. and you learn more about us.
   

2. This is followed by a Strategy Meeting where we model your retirement plan, understand key investment concepts and briefly touch on some investment choices.
   

3. Finally, an Asset Selection Meeting where we discuss investment options in more detail and make any recommendation adjustments based on what we now know about you.

Who are we right for?

We help people with limited knowledge of the property market make smart investment choices and set up their futures. From first-time investors to experienced investors, we can cater to a wide range of people and help set up their futures through research-based property investment.

How much does it cost?

Nothing! We get paid a fee from the developer when a property is transacted so you are getting expert advice at no charge - it's a no-brainer!

How do I start?

Start the process now by booking a time to talk with our advisor by clicking here.