Retirement planning

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rayonline

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#171057 3-Apr-2015 20:44

I am still in my 30s but is it crazy to think about this already. Been working at a good couple of office environments and 50 or 55yr old workers are not many and that is 15-10yrs before the pension, also it limits the time you can rack up the savings. Where did they go to? So many of them could'nt have all gotten different jobs elsewhere, or fortunately enough to retire early or decided to downscale and work at a lesser role like at a rest home, gardning centre, Bunnings or supermarket checkout operator and not everyone owns their own accounting / law office or is a teacher. Or could they?

I had a look at the stats department and DOL website but they only collected age groups 40-65 and 65+.

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#1276954 3-Apr-2015 23:02

No idea you would have to ask them..!

I did note that NZers seem to work a lot longer (in years) than Europeans. This may be because generous company pensions etc do not appear to be very common here. I remember my first job out of university with the UK Ministry of Defence. There were colleagues of mine there age 45 (I was about 22 so they seemed ancient!) who said to me that they could not afford to leave because the pension was too good! (It was a non-contributory Final Salary scheme, which would have given them 50% of the average of their last 3 years salary index linked for life, as well as death in service benefits of 3.5 times annual salary etc) At the time I thought they were all mad and left after 5 years. Now, I can see their point (although I would have gone gaga had I stayed there for the last 24 years!).

Even my 5 years was index linked on the day I left and is now worth about $10,000 a year.

The biggest things about retirement are IMV (a) make sure you own your home outright by that time at the latest and (b) when you look at how much money you think you will need to live on, double it and add some more.

Jase2985

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#1276998 4-Apr-2015 08:47

there are not many in places that you would regurally see.

Office managers of small buisnesses, warehouse and distribution staff, the kinda jobs where you would never see them unless you had to directly deal with them.

rayonline

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#1277071 4-Apr-2015 11:02

With the numbers though ... All those younger lot would become older ... could most of them move just like that?

Fred99

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#1277112 4-Apr-2015 13:20

You need to keep in mind that "selling fear" is a sales technique (in this case fear of living in poverty as elderly).
My father managed to live in relative misery for years, a lifetime of parsimony and preparation for the future led him (mentally conditioned him) to believe that he couldn't afford to do many of the things he'd hoped to do in retirement. When Mr Alzheimer finally stole his mind (not a small one, Rhode's Scholarship, polyglot/polymath) and I invoked EPOA, I found a notebook full of scrawled notes detailing bank deposits for which there were no other corresponding documents, and had to trudge between banks with EPOA documents in hand in order to uncover some hidden treasure chests.
One of the most important things to (hopefully) ensure a long happy life is to have a positive mental attitude. Spending your life worrying about the future is about the surest way to ensure that you don't achieve that goal. Stories propagated by the pension/super industry that you need x millions of $ to be secure in retirement are self-serving propaganda. Pragmatism is needed.

JimmyH

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#1277146 4-Apr-2015 15:22

1. No, it's not too early.

2. Build a spreadsheet. Put in some assumptions about when you are likely to die (be optimistic, you don't want to wind up old and destitute), when you are likely to retire, and your salary (use your current one unless you are confident of getting a better job). Plug in some tax, what you plan to live on while you work (with income-spending = savings), and accumulate the savings in a column. The run it down when you assume no more earnings and drawing on savings retirement. If savings get to zero before assumed death date, then you need to spend less now, or lower your retirement ambitions.

3. They use the spreadsheet to do some "what ifs" around income growth, early retirement etc.

This will give you a good basis to plan.

timmmay

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#1277147 4-Apr-2015 15:25

It's definitely not too early - start in your twenties for the best retirement savings, this stuff adds up over time and compounds!

Jase2985

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#1277199 4-Apr-2015 18:25

https://www.sorted.org.nz/calculators/retirement

They are not to bad to work out figures

Hatch

Trade NZ and US shares and funds with Hatch (affiliate link).

Aredwood

3885 posts

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#1277232 4-Apr-2015 20:39

Fred99: You need to keep in mind that "selling fear" is a sales technique (in this case fear of living in poverty as elderly).

Spending your life worrying about the future is about the surest way to ensure that you don't achieve that goal. Stories propagated by the pension/super industry that you need x millions of $ to be secure in retirement are self-serving propaganda. Pragmatism is needed.

Exactly this.

As soon as I get my mortgage paid off. Im not going to bother with doing any long term retirement type savings. (am almost 30 now, on track to have mortgage paid off at 40). As the risk is that by the time I get to retirement age, There will probably be some form of asset testing applied to the pension. And that is assuming that I don't die before then due to workplace accident / heart disease / cancer.

Im getting sick of having to go without to meet my mortgage payments. While I see others my age living it up. So I will be living it up myself when the mortgage is paid off. It will then be there turn to struggle with forever increasing rents. Or with taking out a mortgage at 40, and hoping that they can pay it off before retirement.

afe66

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#1277342 5-Apr-2015 09:10

Why bother with mortgage as they will asset strip it.

Aredwood

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#1277381 5-Apr-2015 11:05

afe66: Why bother with mortgage as they will asset strip it.

Because a mortgage is a hedge against inflation. Due to lower interest rates, Im both paying less per week and also paying it off faster. And when it is fully paid off. Will have approx 25 years of very low accommodation costs before retirement. And then there are the non financial benefits of being able to do renovations, not having to worry about getting kicked out for no reason. Being able to sign up to UFB without needing to get consent from anyone.

And any asset testing will probably exclude the family home. Much easier for politicians to sell a policy by saying "we will make those rich business owners and greedy landlords forego the pension." Instead of everyone who happens to have assets above a certain value.

afe66

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#1277463 5-Apr-2015 13:56

My comment was very much tongue in cheek.

I disagree with your approach.

As the population ages, we all agree that there will be less money to go around as so the government will start to place restrictions on who benefits and those benefits will be less generous than in the past, the pension will most likely be smaller too.

By not saving for your retirement you are hoping that you can survive on the standard pension alone, which is a gamble I'm not prepared to take.

Currently its only $374 for a single person, which doesnt leave much for expenses, ie in your post you mention UFB which at say $100 per month works out to be 6% of your entire income on the pension.

If you dont trust the government to change the conditions of kiwisaver to their benefit which has some merit, then dont save the money in kiwisaver.

Save it in shares, units trusts, or some other asset that you can sell/use in what ever manner you want which allows you to sell/liquidate it more easily should government rules change.

Average life expectancy for a man in nz is over 80, sure you might already have poor health and are expecting to die before the average, but what is you live til 90.

On one hand you dont trust the government to not fiddle the pension system but you trust them enough to expect them to pay a pension when you are old.

By then public opinion might have changed against universal pensions especially in those who chose not to contribute, (provable by showing your tax receipts)

In my opinion (other are available of course) you are running an unnessary risk.

A.

mattwnz

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#1277487 5-Apr-2015 14:52

afe66:
As the population ages, we all agree that there will be less money to go around as so the government will start to place restrictions on who benefits and those benefits will be less generous than in the past, the pension will most likely be smaller too.

By not saving for your retirement you are hoping that you can survive on the standard pension alone, which is a gamble I'm not prepared to take.

Currently its only $374 for a single person, which doesnt leave much for expenses, ie in your post you mention UFB which at say $100 per month works out to be 6% of your entire income on the pension.

Don't assume everyone agrees, because I don't agree. There shouldn't be any reason for there to be less money tp pay pensions....if everyone pays their taxes, and these overseas companies operating in the NZ market also pay their taxes. The fact is that it costs 100k to keep a prisioner in prision, but it only costs 1/5 of that for pay someone the pension (which people have paid for in the taxes they paid over their working life to pay for anyway).

The media seems to be conditioning NZers that there will be restrictions on pensions, such as means or asset testing. This maybe because our media companies are overseas owned, and overseas they have restrictions, and they look on NZs system with envy. But in NZ we pay high taxes, and earn low incomes, and one reason for our high overall taxes is that we do have a universal pension scheme, which is fair to all. Otherwise why save, if the government are going to discentivise the pension by asset testing it. Income testing will just mean that people will go out buying more houses, so they are not earning an income off their investments, which will make houses more unaffordable.The baby boomers may put stress on it, but that will be a bubble that will end, and we do have the super fund to offset that cost. Unfortionately National stopped paying into it. Bring on a capital gain tax that applies to all property, and get tougher on people and companies not paying their share of tax.

mattwnz

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#1277490 5-Apr-2015 14:55

Aredwood:
afe66: Why bother with mortgage as they will asset strip it.

Because a mortgage is a hedge against inflation. Due to lower interest rates, Im both paying less per week and also paying it off faster. And when it is fully paid off. Will have approx 25 years of very low accommodation costs before retirement. And then there are the non financial benefits of being able to do renovations, not having to worry about getting kicked out for no reason. Being able to sign up to UFB without needing to get consent from anyone.

And any asset testing will probably exclude the family home. Much easier for politicians to sell a policy by saying "we will make those rich business owners and greedy landlords forego the pension." Instead of everyone who happens to have assets above a certain value.

Asset testing doesn't currently exclude the family home when it applies to rest home subsidies. I believe from memory you have have about 200k in assets, including the family home, before the subsidies are removed. So I would expect that to carry across into other forms of asset testing.

pctek

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#1277670 6-Apr-2015 07:04

50 or 55yr old workers are not many and that is 15-10yrs before the pension...Where did they go to? .

Home to exist on the dole.

Can't get hired, can't get pension. Stuck in the middle.

One I know (on his own) lost his house, then killed himself.

Me, I'm lucky, husband being older now gets pension.
So we survive, pretty damn hard with a mortgage though. We had moved back to Akld so I could get work.
So much for that idea..........

If he dies? Well...I might as well copy, can't see a way out.

Fred99

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#1277681 6-Apr-2015 08:04

mattwnz:
Aredwood:
afe66: Why bother with mortgage as they will asset strip it.

Because a mortgage is a hedge against inflation. Due to lower interest rates, Im both paying less per week and also paying it off faster. And when it is fully paid off. Will have approx 25 years of very low accommodation costs before retirement. And then there are the non financial benefits of being able to do renovations, not having to worry about getting kicked out for no reason. Being able to sign up to UFB without needing to get consent from anyone.

And any asset testing will probably exclude the family home. Much easier for politicians to sell a policy by saying "we will make those rich business owners and greedy landlords forego the pension." Instead of everyone who happens to have assets above a certain value.

Asset testing doesn't currently exclude the family home when it applies to rest home subsidies. I believe from memory you have have about 200k in assets, including the family home, before the subsidies are removed. So I would expect that to carry across into other forms of asset testing.

Those subsidies are also means tested against income - so if you have paid into a scheme, your superannuation and pension will be used before you receive any subsidy. The removal of gift duty does not mean that you can gift-away assets - if that reduced assets to below the threshold, then they'll assess those assets as still yours and take them anyway. There's some catch-all clause about gifting stating that they determine that it's being done for avoidance if the amount is "more than would ordinarily be expected to be given as a gift" - or $6k per annum - not sure if that still applies (gift duty used to kick in at $27k PA - which is why people (supposedly not) setting up trusts to avoid asset testing etc would gift assets including the family home etc to a trust over a decade or more)
Rest home cost is about (over) $50k per year. Demand is driven by cultural mores - bunging old folks into paid care when they're merely infirm (as opposed to being incapacitated by illness) is an alien concept to other cultures. Some are bloody awful. If that's going to be your fate (to end up in a crappy rest home), pray that you're sufficiently non compos mentis to not know where you are, why you're there, how long you're staying, and who put you there.

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