How much savings should you have at a particular age?

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Forums › Finance and wealth management › How much savings should you have at a particular age?

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#1698934 5-Jan-2017 16:39

alasta:

Yes, although residential property is generally a leveraged investment, so people are getting returns on the full value of the house rather than just their equity. The problem with leveraged investments is that you're assuming that your return exceeds the cost of debt (i.e. mortgage rate) which is probably true in the current environment but, again, not sustainable over the long term.

Very true. I believe you can also borrow to invest in the sharemarket, but I doubt too many casual investors/savers do, and banks probably aren't all that keen on lending either, as they probably see it has far higher risk than property. eg. if they lend on a house, banks can always sell the house to get their money back, as long as they didn't lend more than the house is worth. That however is potentially a problem in a property bubble...

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GregF

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#1698969 5-Jan-2017 18:30

alasta:

Also, for anyone who doesn't already have a system in place, I would strongly recommend getting some decent budgeting software and put aside a whole day to learn how to use it effectively.

Any suggestions / experience with these? I use good ol' Excel at the moment for personal stuff - something purpose built might be worth a crack.

Cheers, Greg.

Masterpiece

247 posts

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#1698972 5-Jan-2017 18:42

This is a trick question because you need to know how long you will live, but then would you want to know when you come to an end?

Actually I feel the argument of how much money you have now or retirement is largely irrelevant. It should be a debits verse credits argument.

If you are in positive credits verse debits until your demise, well consider yourself the fortunate.
If you are one to one at the end, with nothing left over, well bugger me you have budgeted well!

I've never earned much, enough though I guess (would like more as all do), but I can't complain as I own my new home and a modest nest egg. Helped the daughter into a degree and stuff.

Personally I never got into debt for anything except the home, if I wanted something I saved. This seems to be a novel concept to the modern population, alas debt makes others rich not you.

Although I'd say it has never been more difficult to own a home, the debt/income ratio is arguably not sustainable. However whilst there is just enough income and punters to support the ever growing property market it will continue to grow.

Doesn't matter how much you have, it is always a debits verse credits argument.
The issue arises when you want to live beyond your means.

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mb82

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#1698995 5-Jan-2017 19:43

As much as you need for the life you plan to live afterwards

khull

1245 posts

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#1699019 5-Jan-2017 20:09

Plenty of rules out there - find one that suits your current situation.

General rule to start, forget the $4 daily coffee runs

ANglEAUT

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#1699066 5-Jan-2017 20:59

nzkiwiman: ... (not sure what is in my Kiwisaver - either $6k or $16k depending on what graph I look at) ...

That's why I like Kiwiwealth from Kiwibank (previously Gareth Morgan Investments). They provide a monthly report instead of a quarterly report like others. They also introduced a new landing page showing you what to expect at your retirement age. (include bla bla bla projected earnings, ROI, estimates, etc.) What's nice about the landing page is that that it really hammers home the idea of 'Do I have enough?'.

Please keep this GZ community vibrant by contributing in a constructive & respectful manner.

mattwnz

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#1699068 5-Jan-2017 21:04

Can't recall where I read it, but someone recommended that at retirement, that to live a comfortable life, someone should have at least half a million at retirement age, in todays dollars. If super becomes means tested, I would expect that amount to be a lot more.

ANglEAUT

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#1699076 5-Jan-2017 21:13

GregF:

alasta: Also, for anyone who doesn't already have a system in place, I would strongly recommend getting some decent budgeting software and put aside a whole day to learn how to use it effectively.

Any suggestions / experience with these? I use good ol' Excel at the moment for personal stuff - something purpose built might be worth a crack.

Cheers, Greg.

Hi.

There are other posts on GZ about personal budgeting software. 'You need a budget' (YNAB) and 'PocketSmith' are often mentioned. I've always liked MoneyDance, but downloading & importing .CSV or .OFX files is a real p.i.t.a.

So far, my experience has taught me that it does not matter which system you use, but that you use it regularly and effectively. If Excel gives you the answer you need why look for something else.

Please keep this GZ community vibrant by contributing in a constructive & respectful manner.

ANglEAUT

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#1699087 5-Jan-2017 21:20

mattwnz: ... to live a comfortable life, someone should have at least half a million at retirement age, in todays dollars. ...

I've heard that (most likely) you will downsize somewhat when you retire. So plan on requiring 80% of your current state. Take that 80% value and multiply it by 20yrs retirement. That's the value you should be aiming for. Simple enough.

Please keep this GZ community vibrant by contributing in a constructive & respectful manner.

NorthernZone

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#1699184 6-Jan-2017 08:53

I retired 10 years ago and feel financially comfortable. Yes, I saved steadily for retirement for almost 40 years. I invested in a rental property in the 1970s (but sold it after 12 years because it was too much work and stress and have essentially been in managed funds ever since – more recently favouring passive funds with low fees. After we paid off our mortgage and the kids left home our savings increased rapidly (ie after 50 our nest egg quickly made retirement more viable). There are of course very many advisors telling us how to save and invest, but there’s bugger all info out there on how to draw down on your nest-egg and how much you can spend in your retirement years. I found it a psychological challenge not to keep on saving! And I reckon the biggest change to our budget has been we no longer need to save. In the last 10 years of my working life we saved about 20% of my gross income, so without that “cost item” our expenditure has handily dropped even though we still have significant discretionary spending and could cut our budget quite easily if necessary. And here’s another experience of ours: while expert advice is always that we should spend all our money and plan on leaving nothing to the kids, and our heads accept that advice, our hearts are not happy to do this and in reality we’d still like to leave them a useful sum when we die.

jonherries

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#1699185 6-Jan-2017 08:55

alasta:
The graphic that Fred99 shared above has a few really fascinating revelations;

- Net worth doesn't appear to consistently increase towards retirement age and then decrease beyond retirement age, particularly for individuals.

- Up to 49 years of age couples appear to have at least five times the net worth of individuals. Is there some social phenomenon here whereby people with successful careers or investments are more likely to have partners?

- Net worth around retirement age appears much lower than what I would expect to need when I eventually retire.

It's really hard to know how much you're going to need because you don't really know what assumptions to make around how much the state pension is going to be when you retire, how long you're going to live, at what age you're going to need to retire, what will be your return on investment and the rate of inflation, etc. What you can be sure of is that the more you save when you're young, the better off you'll be long term because of the power of compounding returns.

Key qualifier on the graph (p18 2nd para)

"Central to this report is the following key concept: Net worth of a couple is the combined net worth of both partners."

This means presumably that to get comparable net worth for each individual in the couple category you would need to divide the black bars in half? Seems a bit misleading.

Re: trends I can see benefits to a couple early on as you wiuld share a bunch of things than a single person might have to buy each of - eg. Fridge, couch, lawnmower etc. Also presumably %age of income spent on accomodation for each individual in the couple is less.

What is fascintating to me is the 70-74 age group... where a couple effectively has the same assets as an individual - guess this is the impact of higher likelihood of couples having children (p15) and the cumulative cost over time of this?

Jon

frankv

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#1699193 6-Jan-2017 09:01

jonherries: What is fascintating to me is the 70-74 age group... where a couple effectively has the same assets as an individual -

My guess was that that was because people were "shifting" from the couples category to the singles category as their partners died.

jonherries

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#1699203 6-Jan-2017 09:17

frankv:
jonherries: What is fascintating to me is the 70-74 age group... where a couple effectively has the same assets as an individual -

My guess was that that was because people were "shifting" from the couples category to the singles category as their partners died.

Seems young given current life expectancies, but is definitelty plausible. Might also reflect the avoidance of cost (means testing) when one of the couple ends up in a resthome?

Jon

alasta

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#1699541 6-Jan-2017 19:29

IcI:

GregF:

Any suggestions / experience with these? I use good ol' Excel at the moment for personal stuff - something purpose built might be worth a crack.

There are other posts on GZ about personal budgeting software. 'You need a budget' (YNAB) and 'PocketSmith' are often mentioned. I've always liked MoneyDance, but downloading & importing .CSV or .OFX files is a real p.i.t.a.

I am personally a big fan of YNAB. It has been very effective for me.

alasta

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#1699542 6-Jan-2017 19:30

mattwnz:

Can't recall where I read it, but someone recommended that at retirement, that to live a comfortable life, someone should have at least half a million at retirement age, in todays dollars. If super becomes means tested, I would expect that amount to be a lot more.

This doesn't surprise me at all. If you look at what you get on current NZ super you would have to conclude that you need either a freehold property or sufficient savings to top up your rent. It's a real eye opener when you actually sit down and crunch the numbers.

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