How far off is your horizon?

I’m a big fan of being present in each moment and “living in the now”, as they say. It helps me be there for those around me and squeeze the most out of the 1,020 minutes or 61,200 seconds of a typical day.

But sometimes the best way to spend a moment is to look to the future and set yourself up for it right then, right there.

So let’s take this moment to look at a fundamental of investing: how soon you need your money back. This is hugely important for making decisions about where to put it for the long run.

If you’re investing for retirement, we know that we’re living longer, so we all want to make sure we’ll have an income for as long as we’re around. For most of us that income will come from NZ Super (keep that $401 a week in mind), then KiwiSaver, then whatever other investments we hold on top of that.

We also know that there’s not just one retirement, but rather three distinct stages with spending patterns of their own that trend more in the shape of a V – higher at first, then lower, then higher again as life slows down.

So you may be 30 years from retiring. Or you may be retiring already, with 30 years ahead to plan for. Again the question is: how long before you need the money?

The further away your horizon, the more you can invest in growth assets like shares and listed property, which tend to have values that can go up and down more but typically have better results overall. So you want to have enough time to ride out those bumps.

If time’s getting shorter, income assets like bonds and cash are more frequently used to make sure your money is there when you need it. So the idea is to dial up the growth assets at first, then eventually move into income assets for a more conservative approach.

For example, let’s say you had just retired with conservative investments that can lift your income above NZ Super to provide $800 each week for 25 years. After that, you’d be back to the NZ Super rate.

If you were to put your money in growth investments for the first 10 years instead, that $800 a week could stretch to almost 30 years. (You would be taking on more risk to get this better result, and much would depend on the unpredictable ups and downs of the market.)

The point is, unless you’re using your KiwiSaver to get into your first home and therefore need the money earlier, many of us have a lot of time in order to get better results through more growth-type options.

Investing a few moments in the KiwiSaver fund finder can lead to greater returns for your future. And that horizon, though far away, is looking better all the time.