NZ Herald - Plus Feature August 2023

Smartbudgeting strategiesforretirement

Budgetingforablissfulretirementtakes work.In2022,TeAraAhungaOra,the RetirementCommissionfound65% ofpeopleagedover55havenoplanoronly avagueplanofhowtheywillfundtheir retirement.

It’sdifficulttoliveonNZSuperannuation alone.Anyretireecantellyouthat.Andmost NewZealandersdon’thavethemagicalfigure of$1minsavings,whichmanyexpertssayis necessarytoliveincomfort.

Timeinvestednowinplanningand budgetingforretirement,canmakefora betterlifepost65.

Howtosetuparetirementbudget

Thefirststeptocreatingabudgetfor retirementistoworkouthowmuchmoney youneedtolive.Takeyourcurrentmonthly orannualspendingasastartingpoint.

Removeanycoststhatarespecificallyrelated towork,suchaspetrol,lunchesout,anda corporatewardrobe.Thenaddinextramoney foractivitiessuchasentertainmentand travel.Moretimenotworkingoftenmeans morespending.Rememberthathealthcosts and/orinsurancepremiumstendtorisein retirement.

Confrontingrealities

Therealityofaretirementbudgetcanbe confronting.Manypeoplefindtheyspend verylittlelessthanwhentheywereworking, andNZSuperpaymentsjustdon’tcutit.The questionthenturnstohowtomakeends meet.

Thatbudgetshortfallisoneofthereasons thatmoreandmorepeopleareworking beyond65.

BradOlsen,principaleconomistat

Infometricssaysoverthepast36years participationintheworkforcebythe65-69 agegrouphasrisenbynearly34percentage pointsfromonly14.5%ofthatagegroup activeinthelabourmarketin1987to48.4%in 2023.Morepeopleagedover70areworking thanusedtoaswell,saysOlsen.

Retireeswhoowninvestmentproperties, canearnincomefromthem,andwhenthe homesaresoldeventually,extracapital. Howevertenantsdon’talwaysprovidefor aquiettroublefreeretirement.Nor,asthey age,cansomelandlordskeepupthework involvedinmanaginginvestmentproperties.

Eatthehouse

OnecommonwaytosupplementNZSuper isto‘eatthehouse’.Thatusuallymeans downsizingtoacheaperhome,torelease capital,whichthenbecomesretirement

savings.

Orretireescan‘eatthehouse’bygetting areversemortgagefromproviderssuchas HeartlandBank.Thesearelumpsumloans againstcapitalinthehome,withnomonthly repayments.Instead,theinterestthatwould havebeenpaidbuildsupontopoftheloan. Reversemortgagesdon’tneedtoberepaid untilthehomeownersdie,orthehomeissold tomoveintoaretirementvillage,resthomeor otheraccommodation.It’satthatpointthat thecapitalisrepaidtothebankalongwithall theinterestthathasbeenbuildingupsteadily overtime.

Whattodowiththelumpsum

Thoseluckyenoughtoretirewithalumpsum ofKiwiSaverorotherinvestmentsneedto decidewhattodowithit.Manyaretempted towithdrawtheirinvestmentsandputthe

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moneyintermdeposits.Howeverinflation eatsawayatthecapitalovertime,and retireescanexpecttolivefor25to30years. Abetterapproach,sayexperts,istokeepa portionofthatretirementincomeingrowth assetssuchasKiwiSaver.

TheNewZealandSocietyofActuariesoffers severalrulesofthumbtomakepeople’snest eggslastaslongastheydo,providingan annualincometosupplementNZSuper.

•6%rule.Thisinvolveswithdrawing6%of thestartingsumofyourretirementsavings eachyear.Thisgivesahigherincomeatthe startofretirement,butmaynotleavemuch foraninheritance.

•4%rule.Reducingtheannualwithdrawal to4%,butincreasingthatbyinflationeach year,makesthemoneylastlongerwith leftoversforinheritances.

•Fixeddaterule.Eachyeartakeoutthe currentvalueofyoursavingsdividedbythe numberofyearslefttothatfixeddate.

•LifeExpectancyRule.Eachyeartakeout thecurrentvalueofyourretirementsavings dividedbytheaverageremaininglife expectancyatthattime.

Theserulestypicallyrelyonaproportion oftheoutstandingcapitalnotneeded immediatelytobekeptingrowthassetssuch asKiwiSaver.

Budgetinginretirement

Budgetingworksthesameinretirementas itdoesatanylifestage.Takeyourincome, anddivideitintocategoriessuchas housing,health,transport,entertainment, holidays,gifts,anddonations.Themore youcanbreakthisdownintosubcategories thebetter.Housing,forexample,coversa multitudeofexpensesrangingfromrent ormortgagepayments,toinsurance,rates, repairs,electricity,telephone,Internet andothercosts.Agoodplacetostart,ifin doubt,isbyfillinginthecategorieswith existingspending.

Whenbudgeting,don’tforgettoinclude amonthlyamountforannualcostssuch ashouseinsurance,andmemberships. They’reeasytoforget.

Youalsoneedtoincludesavingsfor periodicexpensessuchasupgradingthe car,replacingtheroofonthehouse,or takingthattripofalifetime.

Sorted.org.nz,thebanks,andother organisationsoffersimplebudget templates.

Ifthebudgetdoesn’tbalancethentake alonghardlookateachsectionandsee

whichcantakeahaircut.Otherwiseit’stime tolookformorewaystoincreaseincome.

Whenbudgeting,considerhowyour spendingwillchangeovertime.Kernel Wealth’schiefoperatingofficerStephen Uptonhasdonethenumbersforhisown parents.

Uptondividesretirementspendinginto threephases:theGo-GoYears(65isto 75ish),Slow-GoYears(75ishto85ish),and the(No-GoYears).

IntheGo-Goyearsit’scommontospend moneyonactivitiessuchastravellingand otherbucketlistactivities.

DuringtheSlow-Gomiddleretirement yearspeoplenaturallystarttospend lessmoney.Theytravellessandmight asUptonsaysswaptennisanddancing lessonsformodestsocialactivities,withthe grandchildrentakingcentrestage.

IntheNo-Goyears,peoplefind themselvesspendinglessandless, althoughhealthcarecanbetheexception. It’snotunusualatthisstagetofindyourself livingonnotmuchmorethanNZSuper alone.

Thecaseforchoosingqualityoverquantity

Scrimpingonqualitycanbeamistakeevenonalimitedincome.Qualityover quantityoftenpaysforitself.

Whilebuyingqualitymayrequireanupfront investment,thereducedneedforreplacement ultimatelysavesmoneyovertime.

CostEfficiencyintheLongRun

Itmightseemcounterintuitive,butbuying qualitycanactuallybemorecost-effectivein thelongrun.Whiletheinitialpricemightbea bitgalling,theextendedlifespanmeansyou savemoneyinthelongrun.Cheaperitems oftenwearoutquickly,necessitatingfrequent replacementsthatcumulativelyexceedthe costofinvestinginasingle,high-quality alternative.Ifbuyingqualitymakessense, andtheupfrontcostistoomuch,dowhat generationsofNewZealandershavedone beforeyou:buysecondhand.

Qualityitemslastlongerandaremore durable.Oneofthemostcompellingreasons tooptforqualityoverquantityisthelongevity anddurabilityofwell-madeproducts.Some thingsjustlastfordecadesandstandthetest oftime.

It’smoresustainable.Theclimateemergency isreal,andtheconsumerchoiceswemake playasignificantroleinshapingthefutureof theplanet.Buyingqualityoftenmeansbuying sustainable,thusreducingwaste.Sadlythe likesofKmart,thesoontoarriveIkea,andfast fashionlabelsencourageathrowawayculture thatcontributestopollutionandresource depletion.Whetherit’sbicyclelightsor dishwashers,buyingqualityshouldmeanyou buyfewersuchitemsoverthelongterm.

It’smoresatisfying.Goodqualityproducts aredesignedtoprovidebetterperformance anduserexperience.Whetherit’sanespresso machine,orproperleathershoes,the

satisfactionofowningsomethingqualitycan’t beunderestimated.Buyingqualityfeelsreally good.

It’smoremindful.Oursocietyisfocussed onconsumptionandthere’sacertainallure tobuyingmoreandmorestuff.However buyingqualityencouragesustostepback andevaluateourneeds.Buyingfewerquality itemshelpsuscultivatemindfulnessinour consumptionhabits.Thismindfulapproach tobuyinghelpsleadtoadeclutterlife,which comeswithreducedstressandastronger connectiontothethingsweown.

Qualityisresilient.Thegentleartof repairingstuffismakingacomebackinNew Zealand.RepairCafés,bicyclehubsand othercommunityorganisationsarereviving therepairculture.Whetherit’sornaments, clothing,smallelectricalitems,orbicycles, therearevolunteersaroundthecountrykeen toteachpeoplehowtorepairbelongings. Whetherit’safast-fashiondressoratoaster thatstopsworking,repairingbelongings makespeoplemoreconsciousoftheirvalue. Anoteofwarning.Expensivedoesn’talways meanqualityorsomethingthatwilllast.That canbethecasewithfashion.Withelectrical itemsexpensiveoftenmeanslotsofextra features,ratherthanbetterquality.More featuresmeanmorethingstobreakdown. Andyoumaynotneedthosefeatures.

What’smore,certainbrandssuchas Samsung,Dyson,Thermomix,andsoon, chargeahugepremiumontheirbrand.Other brandsmightdothejobjustaswellandlast justaslong,butcostless.Withphones,for example,sometimesmid-rangephonesare stillgreatquality,butatafractionof theprice.

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Legacygifting -Murrayand Lorna’sStory

AfterheretiredMurrayspentmanyyears asavolunteerdriverandlovedspending histimegivingback,Murrayistruly passionateaboutcaringforothers.

HisCancerSocietyjourneybegan inthelate90swhenhisfirstwife wasdiagnosedwithcancer.Over thenextfiveyears,theCancer Societywasakeypartof LornaandMurray’s lives,providing supportand carewhen theyneeded itmost. Devastatingly, Lornapassed awayfrom cancerin 2005.Murray remembers: “Whenshe passedaway,she wantedtohavea Willmadeupandshe gaveagenerousdonation toCancerSociety...going throughcancercanbeaverydifficult timeandit’ssuchagoodservice[Cancer Society]give,andsoIsaidifitwasgood enoughforhertodoit,I’lldoitaswell! Andmyson,he’salsogotCancerSociety inhisWill.”

Lornareceivedalotofsupport, especiallyduringherlastfewmonths. Murraystillhadtoworkandtravelto supporthisfamily,keephisbusiness runningandpaythebills,Murrayand

Lornaneededtheextrahelp.“Wecouldn’t dowithoutthem–it’sjustsuchan importantorganisation...nobodywantsto seesomeonesufferingthroughtheir cancer.”

Nowlivinginthe beautifulsuburbof Karaka,78-year-old Murrayhasn’tlost hisenthusiasm forhelpingother familiesfacing cancerandwants togivebackto everyonethat supportedthem. “Iwouldsay especiallyifyou’ve beenaffectedbycancer inyourfamily,thatyou shouldseriouslyconsider givingadonationinyourWill...it goestoaverygoodcause,andtheyshould berewardedforthecareandgoodwork theydo.”

GivingagiftinyourwilltotheCancer Societyisoneofthebestwaysyoucan continuetosupportNewZealanders facingcancerinthefuture.Ifyouwould liketoknowmoreaboutgivinginthis specialway,pleasecallAshleighon 099307172oremail legacy@akcansoc.org.nz

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Smartspending forseniors

Givingupworktoretirecanprovea financialstretch.Thecostoflivingcrisis isn’tmakingitanyeasier.

Manyretireesbecomeexpertsat makingtheirmoneystretchfurther. Therearemanytrickstotrim spendingwithoutdowngradinglifestyle. Shoparoundforutilitiesandother essentials.Useswitchingsitessuchas Powerswitchtocompareyourenergyplans, Internetandotherssuchasmobilephone deals.Butbeware.Doingthemathsis notoriouslydifficult.Retailersfudgetheir offersandhidetheplanyou’reontomake atruecomparisondifficult.“Ifyourretailer doesnotappearinthetopfourresultsthat’s areallygoodindicatorthatyou’repaying toomuch,”saysPowerswitchmanagerPaul Fuge.Bewareaswelloffreebiesandsign-up bonuses.Oftenyou’repayingforthat“free” vacuumcleanerorTVonoffer.It’smuch thesamewith“free”ordiscountedmobile phones.Makesureyoudiarythedatewhen yourpower,Internet,orotherdealfinishesto

shoparoundagain.

Wastelessfood.NewZealanderswasteas muchas1/3rdofthefoodtheybuy.With moretimeinretirementthereisnoexcuse nottomealplan.Itcansaveahugeamount ofmoney.Planyourmealsaroundleftovers andingredientsthatneedeatingup.

Buyless.Most“essentials’‘peoplebuyare wantsnotneeds.Tryhavingamonthwith nospendingandanalysethesavings.Even considerchallengingyourselftoeatonly what’sinyourfridge,freezer,andpantry foraweekortwo.Thereisalotoflearning tobehadfromthis.TryPAK’n’SAVE’sSavey Meal-Botforsomemealideasbasedonthe ingredientsyouhavealready.Don’tjustdo thisforfood.Extendthebuylessmentality toeverythingonyourwantslist.Focuson experiences,notthings.

Saveatthefuelpump.Petrolcostsmore perlitrethanfullcreammilk.Withinflation

biting,savingfuelisbecomingimperative. Averygoodwaytosavemoneyonpetrolis toleavethecarinthegarage.TheGoldCard anditsfreepublictransportisagodsend, andelectricbicyclesareincreasinglypopular withretirees.Whenyouhavetotakethecar out,considerdoingmultipleerrandsatonce. Otherwaystosavemoneyonfuelinclude, buyinghybridorelectricnexttimeyou upgradethecar,keepingitmaintained,only usingtheairconditioningwhennecessary, andshoppingaroundforcheaperfuel.

ConsidersigningupforGaspy,orZEnergy’s Sharetankapp.

Growyourown.Growingfruit,vegetables, herbsandotherediblescansavealotof money.Ifthemainaimistosavemoney,then concentrateongrowingfruitandvegetables thatareprolificproducers.Eatingbetter forlessfolksavemoneybygrowingmore obscurecropsthatcostasmallfortunein thesupermarket.Thingslikebasil,berries, asparagus,chillies,fancylettucesandsoon. TraceyMaddox,plantdoctoratKingsPlant Barn,Stonefields,hasasmallgardenso concentratesongrowingdwarffruittreesand high-producingplantssuchastomatoes.Her two-year-olddwarfmandarintreeproduced 23kgoffruitinoneseason.Maddox’stop threemoneysaversforthegardenare1:

citrus(includinglemon,lime,orangeand grapefruit);2.brassicas(that’scauliflower, broccoli,kale,andcabbage);and3:leafy greens(lettuce,spinachandsilverbeet).

Useyourfreezer:Youdon’tneedalarge freezertosavemoney.Freezeleftoversso theydon’tgotowaste.AstheLoveFood HateWastecampaignpointsoutthat“sellbydates”shouldbeviewedas“freeze-by dates”.Youcanalsofreezepartpacketsof allsortsofthingsfromtortillastopesto. Icecubecontainersaregreatforfreezing anythingthatcomesoutofjarsandcans andwouldotherwisegooff.Tomatopaste andcoconutcreamaregreatexamples.You canevenfreezeentirelemonsinseason,and microwavewhenyou’rereadytouse.

Cutoutunnecessarysubscriptions.Check yourbankandcreditcardstatementsfor recurringsubscriptions.It’seasytoforget aboutthem,andthosesmallpaymentsadd uptobigmoneyquickly.Doyouactuallyuse yourNetflix,NeonorAppleTVsubscriptions, orthatsoftwarethatonceseemedagood idea?

Finally,thisisaboutremovingunnecessary spending,notfeelinglikeyou’relivingina monastery.Enjoywhatyou’veworkedfor. Justdon’twasteit.

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Theinsandoutsofhelping yourchildrenfinancially

It’shumannatureforparentstohelptheir adultchildrenfinancially.Butthathelp comesinmanydifferentforms.

Oneofthebestthingsaparentcandoto helptheirchildfinanciallyistoteach themyoungaboutfinancialadulting. Cuttingthefinancialumbilicalcord Thereisevenaschoolofthoughtthatthe financialumbilicalcordneedstobecutonce childrenturn18or21.Thisargumentgoesthat unlessyoungadultslearnearlytostandon theirowntwofeet,theymayspendtheirlives askingforahandout.

Boomerangkids,whokeepcominghome, canbearealproblem.Manyafamilyhasatale ofadultchildrentakingfinancialadvantageof parentsastheyage.

Theargumentis,iftheyworkparttime,pay fortheirownuniandmanagestudentloan repayments,youngadultswillbewellontheir waytofinancialindependence.

Payingforuni,buyingthemacarand savingthemfromeverydayexpensesmaybe

hinderingtheirfutureratherthanhelpingit. Asurprisingnumberofunder30sdo managetobuytheirfirsthomeseveryyear withoutparentsstumpingupdeposits.

Thebankofmumanddad

None-the-less,thebankofmumanddadis aliveandwellinNewZealand.Forparentswho wanttohelpfinanciallytogettheirchildren intotheirfirsthome,therearewaystodothis.

Parentswhocanafforditoftenhelptheir childrenwithafirsthomedeposit.Theymay giftorloanadeposittotheiradultchildren. Bewarethatbanksneedtoseeatleast5% genuinesavingsbytheperson/coupleactually buyingthehome.Otherwaystohelpinclude: •Goingguarantor.Nomoneychangeshands iftheparentsguaranteethemortgage, althoughthiscomeswithrisk.

•Borrowingthedepositagainstyourown homeandlendingorgiftingittothechildren

isanotheroption.Thatwayyou’renot puttingtheirownhomeonthelineifthe childrenfallintoarrears.Thedownside, however,isthatthechildrenmaynotsee repaymentstomumanddadbeingas importantastheirotherbills.

•Co-buywiththechild.Aparentbuysa portionofthehomeandownsthatuntilthe childbuystheoldergenerationout.Beware thatparentsmaybesubjecttothebrightline taxiftheydothis.

Themajorityofparent-supportedpurchases gowell.Theparents’assistancegivestheir adultchildrenalegupintohomeownership, theyoungergenerationbecomesindependent andgetsonwithpayingdownthemortgage. Butitcanbeaminefield.

Seeklegaladvice

It’sessentialforparentstotakelegal,financial, andtaxadvicebeforebecomingthebankof mumanddad.

Familiescanfalloutpermanentlyasaresult ofthesetypesofarrangements.Somechildren feelentitledtothemoney,andsiblingscan becomejealous.

What’smore,someparentsfindthemselves plungedintopovertyinretirementthanksto guaranteesandotherarrangementsiftheir

childrenarelessthanhonourable.

Thebig“but”isifyou’relendingmoney toachildwhohasn’tlearnedtosave,they’re probablynotsuitabletobecomehomeowners anyway.Chancesare,iftheyhaven’tsaveda bean,thatthey’llmakepoorfinancialchoices inthefuture.Astemptingasitmaybe,it’s neveragoodideatorescueadultchildrenfrom themselves.

Morethanjustmoney

Someparentsarenotinapositiontohelp theiradultchildrenfinancially.Living inintergenerationalhomes,canhelp, withgrandparentsabletobabysittheir grandchildren,anddobeforeandafterschool care.That’sahugefinancialbenefitforthe entirefamily.

Finally,oneworrythatmostpeopledon’t thinkaboutwhenparentingisthespectreof financialelderabuselaterinlife.Adultchildren whoexpectassistancecantreatparentsas anATM,orevenmoveinandtakeovertheir homes.FinancialelderabuseisrifeinNew Zealand.Raisingfinanciallyindependent childrencanlessentheriskoffallingvictim tothisbehaviourwhenyoubecomemore vulnerable.

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Moneymattersandcomfortcounts:the valueofreusableunderwearforleaks

Spendingmoreupfrontcan sometimessavemoneyinlife.That canbethecasewiththeniggly problemoflightbladderleakage.

Modernleakproofunderwearisa practicalsolutionforthisage-oldproblem, whichaffectsoneinthreewomeninNew Zealandandoneinfivemen,including manymanagingtheafter-effectsof prostatecancertreatment.Beingreusable, itcansaveyoumoneyovertime,compared toforevershellingoutforsingle-usepads, liners,shieldsandguards.

Whenincontinencestartstobecome aproblem,manyKiwiwomen(andeven somemen)turntosingle-useperiod productsbecausethey’reusuallycheaper thanspecialistincontinenceproducts,and there’slessstigmaassociatedwithbuying them.Butwhatmanypeopledon’trealise isthatpadsandlinersdesignedforblood

arenotlikelytoprovidereliableprotection forurine,whichislessviscousandtendsto bereleasedinlargerspurts.

Switchingtomodernreusableleakproof Just’nCasewomen’sbriefsandConfitex forMenmaletrunkscanbelifechanging. TheseuniqueKiwi-designedunderwear lookandfeeljustlikeordinaryfabric underwear,buthavetheaddedbenefit ofConfitex’spatentedabsorbentand leakprooftextilerightwhereit’sneeded.

They’rediscreet,comfortable,and farbetterfortheplanetthansingle-use absorbenthygieneproducts,whichmake upabout10percentoftheearth’slandfill.

Theupfrontcostofbuyingafewpairsof specialistabsorbentunderwearishigher thanyourweeklyoutlayonsingle-use liners,padsorshields,butbecauseyoucan washandwearthemoverandoveragain you’llbesavingmoneyovertime.

Andyoualsoneedtofactorinthatyou won’thavetobuyordinaryunderwearany more.Confitexunderwearcostaboutthe sameashigh-qualitydesignerunderwear, andlastjustaslong.Theyhavebeen independentlylabtestedandverifiedto withstandatleast52washanddrycycles withoutdeteriorationinperformance.

Andunlikemanybrandsofwashable absorbentunderwear,Confitexproducts canbesafelytumble-driedwithout affectingtheirleakproofing,whichmeans youdon’tneedtobuyasmanypairs toalwayshaveaclean,drypairinyour drawerfortomorrow.

“Manyofourlong-termcustomerstell usthatourunderwearhasbeengreatvalue formoney,”saysConfitexfounderand designdirectorFrantisekRiha-Scott.“It’s ordinaryunderwearwithextraordinary protection.”

TheConfitexstoryisKiwiingenuityat itsbest.Thecompany’srootsstretchback to2013,whenFrantisekandafriendcame upwiththeingeniousideaofcreating high-performanceabsorbentsports underweartoavoidtoiletbreaksduring

enduranceskiraces.Thepairquickly realisedthatabsorbentunderwearhad afarwiderapplicationthandownhillski racing.Itwouldbelife-changingforwomen andmenwithlight-to-mediumurinary incontinence,offeringthemacomfortable andconvenientwaytoreducethenumber ofsingle-useabsorbenthygieneproducts theysenttolandfill.

Drawingonhisdesigntrainingand extensiveresearchintomicroscopictextile technology,Frantisekcreatedamultilayeredtextiledesignedtoquicklywick moistureawayfromtheskin,absorbing liquidwithoutleaking,evenunder bodyweightpressure.Therestis Confitexhistory.

ConfitexforMenandJust’nCaseby Confitexunderwearcomesinavariety ofsizes,styles,absorbenciesand colours.Itisavailableonlyonlinefrom theofficialwebsiteconfitex.co.nz,with discreetdeliverytoyourdoor.Confitex recommendsthatnewcustomersbuyone pairfirsttotrialinthecomfortofhome andcheckthatthesizeandabsorbencyare rightforyou.

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Investinginleakproofunderwearcan beasmartfinancialmove.

ReviewyourKiwiSaver andunlockitspotential

KiwiSavergrowsbestwithregularsavings andnottoomuchtinkering.Evenso, everybodyshouldreviewtheirretirement savingseverycoupleofyears.Sleepwalking withinvestmentisneveragoodidea.

Lifechanges,theworldchanges,and everyoneisslowlyinchingtowards retirement.

Beware,however,ofmakingrash decisions.Caseinpointwastheshort-lived Covid“crash”of2020,whenKiwiSaver balancesplunged,peoplepanicked,and manylockedinthoselossesbyswitchingto moreconservativefundsatthebottomofthe market.

JustbecauseyourKiwiSaverbalanceis belowwhatitmighthavebeenafewmonths earlier,doesn’tmeanit’sabadinvestment. Mostpeoplewhoheldtheirnerveinthat crashhavemoreintheirfundsnowthan thosewhopanicked.

If,however,afundisfallingcomparedto equivalentfunds,oryourreactiontofalling valuesisoffthescale,thenyoumightbein thewrongfundforyou.

Herearefivereasonstoreviewyour KiwiSaver:

1.Theworldchanges.Fewpeoplepredicted howKiwiSaverbalanceswouldsoarafter theinitialCovidlockdownin2020,orhow theyfellin2022.Gyrationsinpricescan beagoodwake-upcalloverhowmuch riskanindividualcantolerate.Anyone whofreakedoutin2020whenKiwiSaver balanceswentintofreefall,orintheslower steadydeclinein2022,shouldseekadvice.

2.Yourpersonalcircumstanceschange.Life changes.Whenyoureachyour50syoumay findyourchildrenflyingthenest,divorce looming,orevenunexpectedredundancy. It’snotalwayseasytofindworkinyour 50s.

Aswecyclethroughthosedifferentlife transitions,ourKiwiSaverneedsmay

change.Maybeyourmoneyhasbeenin agrowthfund‘forever’.Mostfinancial advisersrecommendthatmoneyyoumay needtowithdrawinthenextfiveyears (oreven10)shouldbeinlessvolatile investmentsthanagrowthfund. Peoplewhoavoidmakingdecisions shouldconsiderswitchingtoa“life stages”KiwiSaverfund,whichtransitions themoneyfromgrowthtobalancedto conservativeasthememberages.AMP, Generate,Lifestages,andotherKiwiSaver providersofferthistypeoffund.

3.Ruleschange.Theruleshaven’tchanged muchforKiwiSaver,althoughthe$1000 freekickstartwasremovedin2015,and therehavebeentaxchangesalongtheway. Keepaneyeoutforchangesthatmight affectyou.

4.Fundsandproviderschange.Every yearnewprovidersandfundsenter theKiwiSaverarena.Moreandmore investorsarechoosingsustainable optionsforKiwiSaver,whicharebecoming increasinglysophisticated.Anothernewish offeringthatisdifferentfrommanyis KernelWealth’sKiwiSaverplan,which launchedin2022.Itallowsmembers tobuildtheirownKiwiSavermixof investmentsfromarangeofdifferent funds.CraigsKiwiSaveroffersabuild-your-

ownoptionaswell.OthernewKiwiSaver entrantsincludefundsupermarket InvestNow,andethicalfundprovider PathfinderAssetManagement.Always checkoutthelesserknownproviders thatdon’tspendafortuneonmarketing. ThelikesofMAS,Mercer,KouraWealth, FisherFunds,Milford,Juno,Summerand SmartSharesallprovideKiwiSaveroptions thatsuitsomepeople.

5.Yourabilitytocontributechanges.Most peoplewhojoinKiwiSavermakeminimum contributionsof3percent,whichifthey’re employedismatchedbytheemployer. Astimegoesontheremaybereasonsto increasethatcontributionpercentage. Withretirementlooming,somepeopleget awake-upcall.Takingabreakfromsaving forretirementcanbefinanciallyharmful. Inadditiontochoosingconservative, balanced,growthorother“assetallocation”, anyreviewofKiwiSaverneedstoconsider yourfinancialvalues,risktolerance,medium andlong-termgoalsfortheinvestment,and otherinvestmentsowned.

SomeKiwiSaverprovidersofferfinancial advice,orindependentfinancialadviserscan alsohelpindividualsmaketherightchoice forthem.

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Inflationversustermdeposits: therisksoffixedreturns

Thecostoflivingcrisisisgettingplentyof airtime.It’snotjustgroceriesandheatingthat arehittinghomeforsavers.

Persistenthighinflationisalso decimatingretirementsavingskeptin termdepositsandotherfixedinterest investments.

Withinflationrunningat6%overthe pastyearandfewsignsthatthecostof livingcrisiswon’tbeslainanytimesoon, inflationiserodingtermdeposits.Retirees withmoneyintermdepositsandotherfixed interestinvestmentsearninglessthanthe rateofinflationarefallingbehindfinancially.

It’sunlikelyanytimesoonthatinflation willreturntothe1-3%bandthattheReserve BankofNewZealandworkstokeepitat. Evenifinflationdropsto3%by2025,as someeconomistspredict,theinflationary tidewillsteadilyerodefixedretirement savings.

Oneofthebigissues,saysAMPNZ managingdirectorJeffRuscoe,ispeople

whohaven’ttakenfinancialadviceare withdrawingtheirKiwiSaverandinvestingit intermdeposits.Shouldthosepeoplelive25 or30years,it’sunlikelythosetermdeposits willlastthedistance.

Onthesurface,termdepositsare“safe” andtheinterestratestheypayhaverisen considerably.Butthatisillusory.

Termdepositsrarelykeeppacewiththe rateofinflation.Thatmeansthepurchasing powerisdiminishing.Inhighinflationtimes, that’sabigrisktoretirees’nesteggs.

Whenitcomestotheeffectofinflationon termdeposits,it’sworthlookingathistory. Theworldexperiencedadecadeofhigh inflationfrom1970to1980andpeoplewho reliedontermdepositsandfixedratebonds atthattimesawtheirsavingseroded.

Manywereearning2.5%to4%intereston savingsinthebank,whileinflationaveraged

11.5%forthedecade.Thatmeantalot lessintheretirementpotwhentheyfinally clockedoutofworkforthelasttime.Orif they’dalreadyretired,abigchunkoftheir capitalwaserodedbyinflationlongbefore theydied.

Wearen’tlikelytohit11.5%inflationin theforeseeablefuture.ButRuscoesaysafter 15years,ateven2.5%inflation,thespending powerofmoneyintermdepositswillhave fallenby31%.

“Soifyouare50today,andyouwantto continuetolivealifestylelikeyoudonow, you’regoingtoneed31%moremoneyby thetimeyougettoretirementtolivethat lifestyle,”hesays.

Financialadviserspointoutthatthetrick isthatmostpeoplearen’tgoingtospend theirretirementsavingsinthefirstfive yearsoftheirretirement,anddon’tneedto withdraweverythingtoputintermdeposits assomedo.

Insteadtheyshouldkeepaportion oftheirretirementsavingsingrowth investments.Thatmightmeankeepingsome ofthemoneyinKiwiSaveruntilit’sneeded, orothergrowthinvestmentssuchasfunds.

“Tryingtomakesurethatyourreturnsare keepingupwithinflationissuperimportant,” saysRuscoe.

“Byinvestingintermdeposits[retirees] fixtheirincome,anditdoesn’tgoupwith inflation.Soyou’realwaysgoingbackwards inthatspace.”

Share-basedfundsmayappearrisky, howeverovertimetheytendtooutpace inflation.

Ruscoesaysadiversifiedportfoliowitha portioningrowthfundsallowsthecapitalto keepgrowing,insteadofbeingeatenupby inflation.

Leavetheplanningtotheexperts,says Ruscoe.“Ibelievepeopleneedtogetaway fromtheDIYapproachandgetsomeproper helptomatchtheirinvestmentplantotheir spendingplan.”

Hecitestheexampleofaroadtrip.“If youwereheadingoffonaroadtripinto acountry,youdidn’tknow,youwouldsit downandmapoutaplan.

“That’sthesamewithretirement planning.Youknow,ifyoudon’tmakethat plan,youwilljustarrive,andyoumightnot arriveattherighttimeandplace.”

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