So how is everyone saving money for old age?

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Forums › Finance and wealth management › So how is everyone saving money for old age?

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#2007166 3-May-2018 14:45

Parents started a pension when I turned 21 $50/month which I took over once working. Rubbish returns barely making inflation but it keeps trickling along in the back ground.

Once my then employer starting offering a managed pensions scheme I added max contributions which ended up 6% of salary. This rans for ?10 years.

Have been smart shares index savings plan about 300/month for last ?15 years or so with all dividends reinvested. (NZ, AU, US) Plus a number of lump sum purchases from overtime lump sums once the mortgage was paid off.

Current job started a kiwisaver plan on managed growth plan which is 8% total.

Equivalent of 3 months salary in revolving term deposit

Own part share of a house with my parents. Interest now covered by tenants and running it for long term gain.

I pay into my other halfs pension plan until she returns to work.

Can now save more as mortgage and student loan free. ie about 10% of net pay is saved.

I plan to work full time til at least 65 then part time (?50% til 70).

Started kiwisaver plans for my children when they were born under growth plan $50 per month.

I wince with envy when I see my father pension scheme from working for multi national overseas for 40 years. ie final salary scheme.

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#2007169 3-May-2018 14:50

afe66:

I wince with envy when I see my father pension scheme from working for multi national overseas for 40 years. ie final salary scheme.

Same here - my dad in the UK retired in his late 50's on a final salary pension and he and my mum are pretty comfortable.

antoniosk

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#2007180 3-May-2018 15:14

acetone:

What do you mean by "3% is taxed", everything you put into kiwisaver is taxed.

tripp:

Just want to ask the question...

Are you doing it via kiwisaver (and if so how much %) or are you using your own savings account with a bank/3rd party? Or are you in the frame of mind you won't make it to 65 so spending it all now?

Currently I am doing mine buy kiwisaver at the max % (8% + 3%, 3% is taxed however). I also keep a smaller savings account around for buying toys.

I guess what he meant is that your kiwisaver contributions, say 8%, are from your net income. Your employers contribution, say 3%, is a gross amount and is subject to ESCT tax depending on what your income is... so if you earn over $84k a year, the 3% contribution is subject to a 33% tax rate (so 1.98 net).

Any gain your kiwisaver makes is subject to tax as well, most funds use Portfoliio Investment Entity (PIE) method which is a straight 28% of the gain, although some funds could in theory charge at your personal tax rate, which is useful if you earn under the threshold for the top rate of 33%.

Fun, right?

________

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mattwnz

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#2007193 3-May-2018 15:26

Fred99:

How many %? That means , as sure as bitcoin, that if you bought it for $850,000 as your own home, borrowing at an interest rate of 6% over a 20 year term, once you'd paid it off then the house would be worth $161.4 million, but you'd have only had to pay back $2.7 million, giving you a $158.7 million tax-free profit - if you can find a buyer of course.

That is the problem, finding a buyer. At the moment property prices are being pumped up due to a lack of supply and a population bubble fueled by a lack of workers and record immigration numbers. But how long will that last. Someone may say their house is worth $x, based on the RV and homes expected sale price range. But if the buyers aren't there at the time you are selling it and you need to sell, then it could be worth a lot less.

mattwnz

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#2007194 3-May-2018 15:30

The question also needs to be asked, is how much do people need to save for retirement? Super is going to be around for a long time now that they aren't raising the entitlement age. The problem with such huge property inflation, it means that if you don't own a house, you could be badly affected if you want to move into a retirement village, as it will narrow down your options. Being old and renting isn't ideal for security. But with house price inflation so high, the amounts needed for reirement could be very high. In 20 years will a retirement unit cost $1 million? Some probably do already.

mattwnz

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#2007203 3-May-2018 15:47

Batman:

Sorry I had the impression it is mainly the cost of building that seems to be driving prices up. I mean, 2.5k/m2 for the most basic of houses! SOrry I don't know how that has changed between 2010 and 2018. I thought you could build a basic house for 1.5k/m2 in 2010. A 70% increase.

It seems that people expect houses prices to double every 10 years these days. So 70% is nearly that in 8 years. But a sqm rate on housing is a crude tool to calculate the cost. There are also now a lot more complaince costs and costs to the council. Also things like health and safety costs, such as scaffolding etc. But it is also not helped by the lack of competition in the building materials market, where we seem to pay a lot more for many materials than Oz and the US.

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kryptonjohn

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#2007206 3-May-2018 15:50

And supply is so constrained too. It can take weeks to get a truck scheduled to deliver a few m3 of concrete. Just try and get scaffolding installed at the moment!

mattwnz

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#2007207 3-May-2018 15:54

kryptonjohn:

And supply is so constrained too. It can take weeks to get a truck scheduled to deliver a few m3 of concrete. Just try and get scaffolding installed at the moment!

The market doesn't seem to be working properly, and it doesn't seem to be able to handle fluctuation of demand very well. I wonder if we need the government to step in and buy materials etc, similar to pharmac, so NZers can get better buying power. Or some form of regulation. All the government seem to be doing at the moment is window dressing, and labours policies on this aren't really any better than nationals were IMO

kryptonjohn

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#2007212 3-May-2018 16:01

mattwnz:

kryptonjohn:

And supply is so constrained too. It can take weeks to get a truck scheduled to deliver a few m3 of concrete. Just try and get scaffolding installed at the moment!

The market doesn't seem to be working properly, and it doesn't seem to be able to handle fluctuation of demand very well. I wonder if we need the government to step in and buy materials etc, similar to pharmac, so NZers can get better buying power. Or some form of regulation. All the government seem to be doing at the moment is window dressing, and labours policies on this aren't really any better than nationals were IMO

I'm a bit skeptical that the government could do business better than the business world. So I think the government needs to look at why the market isn't responding. Sometimes it is the government that is creating the barriers. For example if the OSH and RMA requirements can become burdensome barrier. Sometimes it is anti-competitive behaviour by dominant businesses that are causing the problems.

I do see a NZ group has setup in the bulk buying business now: https://www.stuff.co.nz/business/103471682/builders-coop-cuts-costs--but-will-consumers-benefit

Be interesting to see how that goes.

[Edit] as mentioned in the comments GSB etc have been around for ages.

KiwiSurfer

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#2007447 3-May-2018 20:21

Currently both myself and my partner are contributing 8% (plus 3% from both our employers) into our KiwiSaver accounts. We're currently paying down the last of our debts and will very soon start saving for a deposit on a house. The short-term plan is to use our KiwiSaver plus our savings for the house deposit—so we're both on conservative KiwiSaver plans (with different providers to spread the risk).

We haven't gotten around to making a long term plan post-house-purchase. My thinking at the moment is to focus on paying off the house as fast as possible (while building up a rainy day fund—possibly using split mortgage with one portion offset/revolving to take advantage of having easy access to funds while saving interest when we don't need it in the mean time) and putting the minimum 3+3% into growth KiwiSaver plans.

When KiwiSaver first started I was initially skeptical of it. The tipping point for me was reading a KiwiSaver book which pointed out it's better to participate and get the kickstart, 3% from employers and the tax credits. While I'm still not entirely sure of the value of KiwiSaver from a govt policy perspective—from a personal perspective I might as well grab the free money (rather than refuse it just out of principle).

Batman

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#2007452 3-May-2018 20:29

anyone recommends investment advisors?

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#2007461 3-May-2018 20:43

KiwiSurfer:

When KiwiSaver first started I was initially skeptical of it. The tipping point for me was reading a KiwiSaver book which pointed out it's better to participate and get the kickstart, 3% from employers and the tax credits. While I'm still not entirely sure of the value of KiwiSaver from a govt policy perspective—from a personal perspective I might as well grab the free money (rather than refuse it just out of principle).

The way I see it, if you're not in Kiwisaver then you're subsidising everyone who is.

acetone

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#2007492 3-May-2018 20:58

antoniosk:

acetone:

What do you mean by "3% is taxed", everything you put into kiwisaver is taxed.

tripp:

Just want to ask the question...

Are you doing it via kiwisaver (and if so how much %) or are you using your own savings account with a bank/3rd party? Or are you in the frame of mind you won't make it to 65 so spending it all now?

Currently I am doing mine buy kiwisaver at the max % (8% + 3%, 3% is taxed however). I also keep a smaller savings account around for buying toys.

I guess what he meant is that your kiwisaver contributions, say 8%, are from your net income. Your employers contribution, say 3%, is a gross amount and is subject to ESCT tax depending on what your income is... so if you earn over $84k a year, the 3% contribution is subject to a 33% tax rate (so 1.98 net).

Any gain your kiwisaver makes is subject to tax as well, most funds use Portfoliio Investment Entity (PIE) method which is a straight 28% of the gain, although some funds could in theory charge at your personal tax rate, which is useful if you earn under the threshold for the top rate of 33%.

Fun, right?

Both the employers contribution and the employee contribute are being taxed at the same rate (governed by how much you earn). If you earn 1000 for the pay period you are still paying tax on that 1000 even though 8% is going to kiwisaver. It isn't 1000 - 8% and then only paying tax on 920.

Linuxluver

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#2007499 3-May-2018 21:12

tripp:

Just want to ask the question...

Are you doing it via kiwisaver (and if so how much %) or are you using your own savings account with a bank/3rd party? Or are you in the frame of mind you won't make it to 65 so spending it all now?

Currently I am doing mine buy kiwisaver at the max % (8% + 3%, 3% is taxed however). I also keep a smaller savings account around for buying toys.

I have a Kiwisaver fund with Kiwibank. It's the old Gareth Morgan fund. They bought it. I contribute the max.

I own a few houses.

I have some investments.

I have a couple of old super plans from previous jobs that I don't contribute to, but they have been growing steadily.....though putting the money in a savings account might have been more reliable as far as returns go. The GFC cut one in half and it took several years just to break even.

Five years and 3 months to go.

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I've been on Geekzone over 16 years..... Time flies....

Rikkitic

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#2007504 3-May-2018 21:19

Not. I'm already old. I scrape by okay on my pension, though.

Plesse igmore amd axxept applogies in adbance fir anu typos

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