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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1726 posts

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#2007960 4-May-2018 16:25

Fred99:

I don't know how old you are, but as you get older, the reality of this will inevitably sink in through either your own experience or from the experience of others around you - and that is that increasing the pension age will be incredibly cruel and unfair to some people, and this despite that may have been the best intentions and efforts of those people when they were younger.

The trouble is, there is no avoiding this, by 2050, the number of the population over 65 is expected to be 25% of the population. Double the current percentage. So that existing workforce will have to pay for it. I think about 600,000 currently receive the pension, that is expected to rise to over double. There just simply won't be enough taxpayers to fund it as it is at present. Imagine what the personal tax rates will be then.

The number of people aged 85 years and older will more than triple, from about 83,000 in 2016, to between 270,000 and 320,000 in the next 30 years. Those aged 65 years and older will roughly double, from about 700,000 now to between 1.3 and 1.5 million in 2046.

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Fred99

13684 posts

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#2007976 4-May-2018 17:12

mudguard:

Fred99:

I don't know how old you are, but as you get older, the reality of this will inevitably sink in through either your own experience or from the experience of others around you - and that is that increasing the pension age will be incredibly cruel and unfair to some people, and this despite that may have been the best intentions and efforts of those people when they were younger.

The trouble is, there is no avoiding this, by 2050, the number of the population over 65 is expected to be 25% of the population. Double the current percentage. So that existing workforce will have to pay for it. I think about 600,000 currently receive the pension, that is expected to rise to over double. There just simply won't be enough taxpayers to fund it as it is at present. Imagine what the personal tax rates will be then.

The number of people aged 85 years and older will more than triple, from about 83,000 in 2016, to between 270,000 and 320,000 in the next 30 years. Those aged 65 years and older will roughly double, from about 700,000 now to between 1.3 and 1.5 million in 2046.

Yes there will be.

Stuff will likely happen to the economy over that 32 year period that will potentially have far more dire consequences than a mere small increase in tax needed now to allow for something entirely able to be forecasted. If the generation that has to pay for this now (lest suffer the consequences for not paying later) is bleating about addressing the blindingly obvious, then god help them if something not able to be forecasted happens.

Just FWIW, Japan has had this issue already for decades, due in part to not allowing much immigration - which compensates for low birth rates. The headline horror of low national GDP growth needs to be taken in context of "per capita" GDP growth, people aren't starving, and in NZ most people are even driving the discarded old cars of ordinary Japanese people. The property market has tanked - as it needs to do here, and the pension age remains at 65.

Jase2985

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#2008001 4-May-2018 18:06

Fred99:

Jase2985:

or it be means tested

It should be left alone and as it is.

and how do you preclude the government of the day pay for it? what services will you cut?

Aredwood

3885 posts

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#2008020 4-May-2018 18:41

Fred99:
Yes there will be.

Stuff will likely happen to the economy over that 32 year period that will potentially have far more dire consequences than a mere small increase in tax needed now to allow for something entirely able to be forecasted. If the generation that has to pay for this now (lest suffer the consequences for not paying later) is bleating about addressing the blindingly obvious, then god help them if something not able to be forecasted happens.

Just FWIW, Japan has had this issue already for decades, due in part to not allowing much immigration - which compensates for low birth rates. The headline horror of low national GDP growth needs to be taken in context of "per capita" GDP growth, people aren't starving, and in NZ most people are even driving the discarded old cars of ordinary Japanese people. The property market has tanked - as it needs to do here, and the pension age remains at 65.

Treasury has forecast that government debt will peak at around 200% of GDP to cover pension costs if nothing is changed. Politicians who refuse to look at raising the pension age have their heads in the sand. (Yes John Key, Im looking at you, although Labour are not completely blameless) Either we do something about it now, and gently phase in some changes. Or we will be forced to suddenly make drastic changes. Look at Greece for an example. They had to make big cutbacks to their pension payments and other government spending. As the rest of the world stopped lending them money. There is no way that overseas lenders will ever lend that much money to NZ. So do we want to make the changes when it suits us? Or will we ignore it until we get forced to.

Japan is a basket case as well, just not as bad. They have has chronic deflation for ages. And their central bank prints yen had over fist. Which is how they get money for government spending. Along with previously acquired wealth. And they have their vehicle export industry. But if China or another country overtakes them for vehicle exports, they are stuffed. Especially as they don't have much natural resources. (and China controlling most of the supply of materials needed to make EV batteries) I certainly wouldn't call Japan as a model for NZ. Imagine trying to save money with 10%+ yearly inflation while you get 1% if you are lucky in a bank account.

They need to raise the pension age now. But raise it at a slow rate such as 1 or 2 months per year. So those who are close to getting it now won't have to wait much longer. And avoid any unfair rules if your age happens to just fall on the wrong side of the implementation date. Raising the pension age is still fair if you compare the gap between the pension age and life expectancy today, Vs say 30 years ago. Or even 50 or 100 years ago.

Increasing the pension age is much preferable to either means testing, or reducing the amount of the pension payments. As my understanding is that it is currently linked to average wages. Which is important for keeping elderly poverty low.

Let's say that the pension age is say 70 years (or even 75) by the time I get that old, and I'm unable to keep on working after 65 years old. I then have just a fixed number of years that I will need to support myself for until I qualify for the pension. Which I can save and plan for. Which is far easier than having to plan for supporting yourself until you die. As I may not even make it to 70. But improvements to medical care etc may mean that I'm still alive at 110 years old. Having a larger pension payment (even with an older entitlement age). Makes planning far easier. As the government takes the risk instead of you of how long you will live for. It is very difficult to plan around a possible 40 year difference in how long you will live for.

Because of the above government debt problems, Something will have to change. How am I supposed to plan for a change when I have no idea what the changes will be?

Fred99

13684 posts

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#2008061 4-May-2018 18:59

Jase2985:

Fred99:

Jase2985:

or it be means tested

It should be left alone and as it is.

and how do you preclude the government of the day pay for it? what services will you cut?

How about you prepare yourself for the possibility that tax rates may need to rise? The longer it's deferred, the bigger those rises are going to be, and the more harm they'll do.

The USA is a classic example at the moment, yuge tax cuts based on a false hope that massive economic growth will reduce debt to <100% of GDP, despite the forecasts that growth is low, inflation is low, both for the long term, debt is increasing, and there's no buffer at all to cover for whatever the next "shock" will be.

Fred99

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#2008074 4-May-2018 19:13

Aredwood:

Let's say that the pension age is say 70 years (or even 75) by the time I get that old, and I'm unable to keep on working after 65 years old.

You probably won't like this, but the statistical probability is only slightly better than 50:50 that you'll even make it to 75, and a hell of a lot of people struggle to be able to keep working until they're 65. I know you're working in trades and I although I know people like my wife's uncle, who retired at 90 from the building trade recently after one of his hips gave way for the second time, but these people are truly exceptions. Plenty fall by the way.

So no - don't preach popular neoliberal theory being promulgated by individuals arguing that they need to "balance the books" - so we'll "all" need to tighten our belts. They won't be.

tdgeek

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#2008091 4-May-2018 19:51

Soi many variables. Trump and his tariffs and how we trade elsewhere, retail diving as per the other thread in relation to NZ purchases. Unemployment in the future as globalisation takes effect. Climate change we may be a leading wine producer by volume from Dunedin to Auckland. Just hope we recognise the future and adapt before then and not then.

Jase2985

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#2008121 4-May-2018 20:33

Fred99:

Jase2985:

Fred99:

Jase2985:

or it be means tested

It should be left alone and as it is.

and how do you preclude the government of the day pay for it? what services will you cut?

How about you prepare yourself for the possibility that tax rates may need to rise? The longer it's deferred, the bigger those rises are going to be, and the more harm they'll do.

avoided the question i see.

how do you tell that to someone on minimum wage, or the benefit?

how far do you think tax rates will have to rise to support it? and then whats acceptable?

JimmyH

2820 posts

Uber Geek

#2008239 4-May-2018 21:56

frankv:

I don't think that "increased health costs" is actually true.

It is. Details here

Fred99:

Just FWIW, Japan has had this issue already for decades, due in part to not allowing much immigration - which compensates for low birth rates. The headline horror of low national GDP growth needs to be taken in context of "per capita" GDP growth, people aren't starving, and in NZ most people are even driving the discarded old cars of ordinary Japanese people. The property market has tanked - as it needs to do here, and the pension age remains at 65.

I don't think Japan's wrecked public finances are something we should aspire to.

Fred99:

So no - don't preach popular neoliberal theory being promulgated by individuals arguing that they need to "balance the books" - so we'll "all" need to tighten our belts. They won't be.

I'm not sure how you equate prudent financial management with neoliberal ideology? Unless you think that we would be better off by recreating our own version of the Venezuelan and Greek economic miracles?

Government's can't simply let spending run ahead of revenue for ever with reckless abandon and not experience consequences eventually. And those consequences can be severe - see Greece, Zimbabwe, Venezuela, etc.

mattwnz

19381 posts

Uber Geek

#2008244 4-May-2018 22:42

tdgeek:

Soi many variables. Trump and his tariffs and how we trade elsewhere, retail diving as per the other thread in relation to NZ purchases. Unemployment in the future as globalisation takes effect. Climate change we may be a leading wine producer by volume from Dunedin to Auckland. Just hope we recognise the future and adapt before then and not then.

I think the global economy is really at odds with solving the problems with climate change. That is if climate change is actually related to CO2 etc, and not just part of a cycle, as the earth has had this sort of thing before, eg the ice age etc, and that had nothing to do with human impact. Global economy means a lot of inefficiencies with moving things around the world. In Europe they talk about food miles on foods, and wanting to buy stuff that is grown closer to the point of consumption to reduce the carbon footprint on that food item. In NZ, we produce raw materials in NZ, ship it to be processed in China to add value to it, and then ship it back to NZ to consumers. So each item has a carbon footprint attached. When that could all be done in NZ. Although of compliance and labour costs probably make it unaffordable. But that is the global economy.

Fred99

13684 posts

Uber Geek

#2008309 5-May-2018 08:35

JimmyH:

I'm not sure how you equate prudent financial management with neoliberal ideology? Unless you think that we would be better off by recreating our own version of the Venezuelan and Greek economic miracles?

Government's can't simply let spending run ahead of revenue for ever with reckless abandon and not experience consequences eventually. And those consequences can be severe - see Greece, Zimbabwe, Venezuela, etc.

Because the concept that "prudential financial management" in this case is not prudential financial management at all. It's lack of forward planning resulting in a knee-jerk being promoted as "the only fiscally viable solution" by people who it won't affect - and using the Venezuelan / Greek example is an extremely disingenuous scaremongering tactic.

Prudential financial management would be to use the demographic forecasts and start doing what may be needed now to allow for those expenditure increases later.

If there was a demographic trend indicating that there was a coming baby-boom. then costs for schools and will skyrocket. Your neoliberal version of "fiscal financial management" would require a cut to universal free education as the solution, rather than start now on a plan to recruit and train more teachers, build more classrooms.

If you were running a household budget, and realised that in 12 months time your fixed-term mortgage loan was going to be rolling over at a higher interest rate, you'd be planning on throwing your own kids out on the street.

BlinkyBill

1443 posts

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#2008317 5-May-2018 08:54

tdgeek:
acetone:

tdgeek:

acetone:

BlinkyBill: Genuinely surprised at the general low level of financial literacy shown in this thread so far, except for Rikkitic.

Yet offers no positive or constructive feedback of your own.

Yes. I took it as sarcastic. There has been a wealth of literacy shown here

If that was the case, then my apologies... I shouldn't reply to things on the internet first thing in the morning.

OTOH you should not need to have to reply to a sarcy post, not your fault. If it was a sarcy post then its a put down on a pensioner who does not have the same immediate need to plan ahead

I wasn’t being sarcastic towards Rikkitic; the thread is about saving for retirement and Rikkitic is retired already.

I was attempting to get across the point that there were, to this point, a fair bit iof poor financial literacy shown in the comments. Apologies for my poorly considered post.

Here’s my advice for the average person: be in KiwiSaver and save the maximum, either whatever you can afford or up to, say 10% of your income. The rationale is it is a regular investment stream and forces a discipline.

But select your KiwiSaver carefully, don’t simply accept the default. It is worse to be in the wrong KiwiSaver fund than not in KiwiSaver.

If you have property and a mortgage, the #1 priority should be to pay down the mortgage; but before that priority pay down credit card or HP debt. If you are uncomfortable with risk, don’t leverage your own home to invest in second properties.

Diversify - don’t rely on just property, or just KiwiSaver, or just the nz Stockmarket, or just shares.

Don’t try and trade to beat the market - unless you have expertise and time you are gambling, and if you are expert and have time you are mostly gambling (this advice is from Warren Buffet, i’m not taking credit for it).

Save every pay check.

If you do feel the need to get advice, make sure the adviser is independent and certified. Understand tax, which in NZ, is straightforward.

Fred99

13684 posts

Uber Geek

#2008337 5-May-2018 10:16

BlinkyBill:

Save every pay check.

Actually that's about the only direct answer to the thread title - about "saving". Much of the rest is about "investment" be that from "savings" or "borrowings".

Getting rid of debt should be #1 priority, regardless of the recent blip where some investments (housing, shares, bitcoin) have returned more than the cost of borrowing - leading to the unrealistic expectation that it will continue to be that way.

BlinkyBill

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#2008349 5-May-2018 11:10

Cheque

mdav056

580 posts

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#2008554 5-May-2018 21:54

Before I retired, I saved very hard, and was able to get into KiwiSaver for a few years. Now, what I saved is in the bank arranged as ladder deposits which come due every 5 years; I take out what I need for the next year, and reinvest the remainder for 5 years.

But here's something about which we have been thinking: Selling up our house in East Auckland, and moving away to someplace cheaper (which would give us a decent amount of capital) BUT this would mean moving into another hospital area, away from Auckland hospital. The data we have collected from family members who get sick is that this would be a really bad thing to do--expertise in the smaller hospitals seems sadly lacking, and if you are lucky you'll get sent back to Auckland to get the fix.

So maybe saving by buying a house in Auckland is not the best thing to do. You may need more than that.

Another thing to consider is that if you have private health insurance, the premiums increase at MUCH more than the rate of inflation when you're over 65. I'm currently paying about .25 of my government super on a slimmed-down version of my previous reasonably good, but by no means top notch, policy. Not sure how long I'll be able to go on doing that, so that's another reason for staying in a good hospital area.

gml

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