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My saving and investing
“Money’s only something you need in case you don’t die tomorrow.”
Carl Fox (Martin Sheen) Wall Street
You may think that KiwiSaver has nothing to do with you if you are over 65, but not so fast!
If you joined the scheme while you were working, then there’s no need to abandon it just because the calendar has notched up your 65th birthday. You can leave your money in if you don’t need it immediately and it will carry on working for you.
But don’t ignore it completely. Think about the fund you’re in (usually conservative, balanced, or growth) and talk to your provider or financial adviser about whether you should move it to a fund with a different level of risk and return.
Investors over the age of 65 usually opt for conservative funds, but if you won’t need the money for a number of years, particularly if you are still working, then get some advice about whether that’s the right choice for you.
Another option is to leave it where it is but arrange with your provider to receive a regular payment to top up your NZ Super and other income.
- If you don’t know who your KiwiSaver provider is, find out by calling Inland Revenue.
- If you don’t know what fund you’re in, ask your provider.
- We’ve got a tool that shows you how much income your KiwiSaver funds could give you each week. Just pop in your date of birth and how much you’ve saved.
- See our guide for more information or visit the Inland Revenue KiwiSaver website.
- The Commission has recommended to the government that people over the age of 65 should be allowed to join KiwiSaver. This would provide access to a lower-cost managed fund for those who have not previously joined. More details are available in our Review of Retirement Income Policies. Watch this space for more.
Of course, KiwiSaver isn’t the only place you may have invested your money.
- Bank deposits, including term deposits, are relatively safe places to park your savings and earn interest, although returns aren’t as high as other types of investments. See more about the returns and risks in our guide.
- Or you may have managed funds, where your money is pooled with other investors’ money and spread across different kinds of investments. This guide explains the types, risks and benefits of managed funds and how to buy them.
- Lots of people own rental property, hoping to benefit from the double delight of rental income and an increase in the value of the property over time. That sounds great and we all know the phrase ‘safe as houses’, but property investment isn’t risk-free and it may not be as quick as you’d like to access your money when you need it. More information can be found here to help you weigh up the pros and cons.
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“Debt is normal. Be weird.”
We’ve been borrowing money since the dawn of civilisation – literally. Back in 3500 BC, poor farmers in ancient Mesopotamia would borrow from rich merchants. If they couldn’t pay them back they’d sell their wives or daughters to settle the debt.
That may be tempting if you find yourself with a mortgage after 65, but it’s probably illegal and would certainly put a dampener on family Christmases in the future if you flogged off one of the kids.
Research by Colmar Brunton found almost a third of people won’t have paid off their mortgages by the age of 65. Most said they would either work longer, use their KiwiSaver to pay off the debt, or down-size their house and hope to release equity in their homes to pay off the loan.
Here are some other things you can do to help with your mortgage:
- Make the term as short as possible to save yourself interest. The mortgage calculator shows what a difference it can make to the total amount you’ll pay.
- Have a clear understanding of the interest rate you are paying and negotiate for the lowest rate you can.
- Don’t try selling your relatives.
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“I am indeed rich, since my income is superior to my expenses, and my expense is equal to my wishes.”
So you’ve made it to retirement and, not only that, you’ve paid off your mortgage, saved a nest egg and drawn up a wishlist of things to do, places to visit and people to see now that you’ve got that priceless commodity – time – on your hands.
But pause for a moment before you get started on that wishlist: have you thought about the D-word? Decumulation. After a lifetime of accumulating assets and savings, you need to think about how you are going to decumulate and get an income from those investments that will last as long as you do.
Not everyone has investments to live off, in fact half the people we surveyed aged 60-64 years said NZ Superannuation would be their main source of income in retirement. If you’re unsure how much that is, Work and Income lists the payment rates.
But what other options are there?
- You could down-size or, as we prefer to say, right-size your family home. Buy somewhere that’s smaller, easier to maintain and frees up some money. But be aware that finding a suitable home isn’t always as simple as it sounds.
- Move to a retirement village, again it might free up some money, but make sure you are aware of all the financial implications first, including the ongoing costs of retirement village living.
- If you’d rather not move, you could opt for a home equity-release product, which allows you to borrow money against the value of your home and is repaid when you sell the house or die. It’s worth getting legal or financial advice before you do this.
- You can get your hands on your KiwiSaver once you reach 65 but it’s up to you how much you take out (if any). You could choose to withdraw a regular amount, rather than a lump sum. Chat to your provider to find out how.
- A less common option is to buy an annuity product with your savings, which gives you a regular income from a financial provider based on how much you invest with them.
- Our retirement planner estimates how much of a regular income you can expect when you have built up a certain amount.
- We’ve said it before and we’ll say it again, when you need to make important decisions about your money it is worth getting professional advice.
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“All I ask is the chance to prove that money can’t make me happy.”
Personal debt in New Zealand has reached more than $15.5 billion and that doesn’t include mortgages. If you break that down, it is the equivalent of every man, woman and child owing $3,500 each.
The debts can be personal loans, hire purchase, credit cards or money owed to payday lenders. That’s a lot of money going in interest that you could be putting to other uses. So what can you do to bring your debt down?
- You could start by using this budgeting tool to see exactly where your money is going each month and how much you have left over to reduce your debt. If the answer is none, you can play around with some of the numbers and see where you might be able to trim your spending to give yourself some wriggle room.
- If you have a number of debts at different rates, try to pay off the one with the highest rate first.
- Use the debt calculator or get specialist advice about how to balance the demands on your finances.
- You could consider consolidating your debts (taking out a new loan to wrap all your existing debts together and paying them off at once), but there are some risks spelled out in this guide. A key point is to find out the total cost of consolidating before you sign up, so you don’t end up paying more than you would have with separate debts.
- If you’re struggling to keep up with repayments, talk to the person or organisation that loaned the money as soon as possible. They may be able to work out a new repayment plan and help you avoid penalties for late payments.
- If you have a low income or financial problems you might be able to get help with rent and other housing costs. You don’t need to be on a benefit to be eligible for help - find out about accommodation supplements and government help with housing if you are over 65.
- You can also apply for a rates rebate or reduction if you are on a low income and pay the rates on your home. These are administered by your local council and more information about how to apply is available here.
- Don’t forget everyone is eligible for the SuperGold Card once they reach the age of 65. It offers discounts and concessions for seniors and veterans in recognition of your contribution to New Zealand society.
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“Fun is like life insurance; the older you get, the more it costs.”
Frank McKinney Hubbard
Have you heard the one about the motorist who drove home to the wrong address and crashed into a tree that he didn’t have?
Or the snail that ate its way through an elderly man’s carpet?
Fortunately, both people were insured, though they probably didn’t expect they’d be making claims like that when they took out the paperwork.
And that’s the thing about insurance: you never know what might happen to you or your belongings. And when it does, your savings could be eaten up alarmingly quickly if you don’t have any cover.
Making sure your most important assets are covered is a vital part of any financial plan.
Insurance can be split into two areas: general and personal.
- Before you buy a house, make sure you can afford to insure it too.
- Check it is insured for the right amount – enough to rebuild if the worst were to happen. Use this online calculator to help you work out the cost.
- You’ll need separate cover for your contents and your car and don’t forget travel insurance whenever you book an overseas trip. Covered has more information about all types of general insurance.
- The Insurance Brokers Association can help you find a broker, who will be able to offer the widest variety of products.
- And if you have a complaint or problem that you can’t resolve with your insurer then get in touch with the Insurance Council to find out the next step.
- As your circumstances change it is important to review your level of cover to make sure you are not under or over-insured: life insurance is important when you have a high level of debt, but as you get older and your debt reduces you don’t need as much – if any - cover.
- Other types of personal insurance to consider include cover for health and trauma. Life-info.org.nz offers a guide to these and information about maintaining your policy and making a claim.
- Shop around when your insurance is due for renewal, but make sure you are getting the same type of cover, and consider the financial strength of the insurer and their claims paying rating.
Insurance isn’t the only paperwork you need to organise. You may be astounded by the number of New Zealanders who do not have a will, let alone one that is up-to-date.
Are you one of the 50 per cent of adults without one? Poor decisions can be made when people are at their most vulnerable after a bereavement. Making sure you have a will helps avoid this and protects your family at a difficult time.
If you die without a will, all your assets do not automatically go to your partner and/or your children. The government has a formula to divide them up.
If you die with more than $15,000 in your KiwiSaver account, the provider will need a letter of administration from the courts before they can release it. This usually costs $2,500 and can take up to eight months to process.
While you’re sorting out your will, ask your lawyer or trustee company to help you arrange enduring powers of attorney, in case you become unable to make decisions for yourself.
- Making a will doesn’t have to be complicated: you can talk to a lawyer, find out more from the NZ Law Society or even buy a will kit from a stationery shop and do it yourself.
- Enduring powers of attorney are really important too. This legal document gives someone else the power to act for you if you lose the ability to make decisions yourself. There are two types: one for property and finances and the other for personal care and welfare. Age Concern has a downloadable booklet with more information.
- Don’t let snails in your house.
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“It is more easy to be wise for others than for ourselves.”
Francois Duc de la Rochefoucauld
They say advice is like mushrooms: the wrong kind can prove fatal.
While we wouldn’t go that far, it can certainly wreak havoc with your savings and mess up life after work.
The trouble is, most of us are more likely to get advice from our friends, colleagues, even the man we sat next to on the bus, than from a qualified financial adviser. You know, someone who actually knows what they are talking about.
Professional advisers can help you work out what your goals are, what kind of risk you can stomach, and then match your needs with suitable products and services.
They should give you a disclosure statement, which tells you how they get paid, what their level of education is and the services they provide.
The Financial Markets Authority has a list of authorised financial advisers and links to other organisations that can help, but how do you know who to trust?
Here are some questions to ask when looking for an adviser:
- Can you give me personal advice that takes into account my situation or just give me general advice?
- Can you recommend products from any company or just from a few companies? (If your adviser only offers a limited range ask why and whether they can still offer advice on products you already have.)
- Have you helped other people with the same sort of goals? (Some advisers may be experienced in retirement planning, others in property investment or helping young families.)
- Do you belong to a professional body like the Institute of Financial Advisers or the Professional Advisers Association? (These have codes of conduct their members are expected to follow.)
- How are you paid? (Some advisers charge a fee for their work, others charge a commission or may receive sales-related incentives.)
- What sort of research do you use to find the best product for me?
- How, and how often, do you update me on my insurance and investments so I know I am still on track?
- What are the total costs of your service, initially and ongoing, and what happens if I stop using you – is there a penalty?
Here are some more helpful tips:
- Financial advice can be most valuable during times of change, eg when you marry, divorce, stop work or are thinking about down-sizing your home or moving to a retirement village.
- Be open and honest about your tolerance for risk: if you are nervous about investing it’s okay to say so.
- It is important that you trust and feel confident in the person you have chosen to give you advice. If you don’t feel that way then look for someone else.
- If you’re confident about doing your own homework then this Sorted site has calculators and tools to help you plan, budget and work out your mortgage repayments.
- You can also get information from your bank, insurance companies, and superannuation funds.
- Think about leaving mushroom harvesting to the experts.
Scams can come in all sorts of ways - in an email, on the telephone, in the post, even someone knocking on your door - but they all have one thing in common: they are trying to con you out of your money.
Scammers are forever coming up with new ways to defraud you and they’re pretty clued up on technology.
Some try to befriend you first, becoming part of a group that you belong to such as a church group or community organisation.
So it pays to bear a few things in mind:
- Never invest solely on the recommendation of a member of your group. They may have been fooled into believing that the investment is legit. It’s important to check for yourself.
- If an investment seems too good to be true, it probably is. Be wary of promises of unusually high returns!
- Avoid any investment that is said to have no risks. This is a classic sign of fraud. There’s always a trade-off between risk and return – higher returns come with higher risks.
- Get it in writing. Be particularly suspicious if you are told to keep the opportunity a secret. (That’s usually to keep the authorities from knowing.)
- Take advice from an authorised financial adviser who is independent from your group and can focus on your interests.
- Do your own research. Not just to cover yourself, but to look out for your group, too. And don’t feel pressured to rush into an investment before you have a chance to really look into the “opportunity”.
Pre-warned is pre-armed – know the “red flags” and common scams by checking consumerprotection.govt.nz. And if you think you’ve been scammed, report it to Scamwatch. You might help others avoid being caught out.
Remember that anyone, of any age and ethnicity, can be a victim of a scam, so keep an eye out for your family and friends.
How to avoid being scammed:
- Look after your personal details in the same way you would your wallet and other possessions.
- Be cautious – if you get an unsolicited call or email and the caller/writer requests personal information, it may be a scam. Hang up and verify who they are independently.
- Banks, corporate businesses, government departments like Immigration New Zealand or Inland Revenue never email, call or SMS customers to ask for money. If you receive a request like that, it’s a scam.
- Don't reply to, click on any links, or open any files in emails unless you are sure you know who they are from and what they are about. Don't call any numbers in spam emails.
- If you get a cold call from someone claiming you are entitled to a grant, refund, have won a holiday or have a virus on your computer, hang up immediately.
A hoverboard and a home brew beer kit probably aren’t the first things that spring to mind when you think about must-haves in retirement.
But we all have hobbies and passions that we don’t want to give up just because we’re getting a little older.
24% of New Zealanders work full or part-time over the age of 65. Some do so out of necessity, others out of choice because they enjoy the fulfilment and social contact that their job brings.
This may be something you want to consider, including the type of work you’d like to do and whether any re-training is required.
Others like to do voluntary work, giving something back to the community they live in.
- Many people want to travel once they’ve got more time on their hands. If that’s you, it could provide the motivation you need to save a little harder while you’re still working.
- Have something big on your list, whether that’s writing your memoirs, touring the country or launching yourself into a completely new challenge.
- Look after your health: have regular check-ups, embrace healthy eating and exercise.
- Don’t forget your mental health too: nurturing relationships with family and friends, staying connected with your community and generally staying positive and being grateful that you’ve got that far.
- Consider where you want to live: both geographically and in terms of the size of your home. Some people down-size to release equity or make property maintenance easier. Others move to regions where property prices may be lower.
- Another option to consider is retirement villages. The Commission runs free seminars to help people who are considering moving themselves or their parents into a village.
- Have a look at the SuperSeniors.msd.govt.nz website. It is run by the Office for Seniors and contains a wealth of useful information and links to services for seniors.
- Think carefully and don’t rush into buying a hoverboard unless you’re ready for some bumps, bruises or worse.
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