Saving for retirement

ByRuby Harfield

People are living longer and, ideally, spendingatleast 25 years inretirement so it’s importanttomake sure they have enough money.

StatisticsNew Zealandstates that,on average,80percentof65-year-oldmencan nowexpecttolive until they are 90 and 65-year-old women until they are 94.

MintAsset Management head of sales and marketing, David Boyle, said people over 50 who have not started savingfor retirement needtostart now.

“Don’twait another day. It sounds flippant I know,however in my view it is nevertoo late tostartpreparing.”

When itcomestohow much people need tohavefor retirement it is differentfor each person, Boyle said.

“There arenoeasy answerstothese next chapters in ourlives, but the sooner you start theeasier it is.

“Everyone will havea differentroadto takeandfor many theroadismuch longer now than it has ever been before.

“We areliving longer and that’s greatbut it does createa host of challenges that other generations before us didn’t have to contend with.”

People needtoconsider where they want tolive, holidays, supporting widerfamily members, interestsand life expectancy.

Massey University hasrecently updated its guidelines on how much someone might need duringretirement.

A couple whowanteda comfortable lifestyle ina citywould need about $809,000 to get to the age of 90.

A goodway to work outhow to save for retirement istodevelop three investment buckets, Boyle said.

“The first is your threetofive yearbucket. Ideally, these funds would be used to top up yourretirement income. So they needtobe pretty safe, accessible and able to provide regularpayments to yourbank account.”

Banktermdepositsora Diversified IncomeFundcould be optionstoinvestigate, Boylesaid.

“The second bucket is forfive to ten years. Ideally, this is money that you will usetofill up the first bucket butyou will be ableto takea little more risk because of the time you havebeforeneedingtodrawdown the capital.

“So perhapsa diversified fund that has a higher weighting to growthstockslikeshares and propertycould be a good place to start.”

The third bucketis something more long termfor at least10to20 years.

“Here youcan take further risk (for a greater longtermreward) to help maintain the buying power of yourmoney when you really need it.

“Thiscould include some property you might alreadyhave or developing a growth portfoliothat meetsyour personal circumstances.

“There areso many quality investment options in theregulated market and this is where a little advice wouldgoa longway.”

Boylerecommends beingwaryof investments offering guaranteed double-digit returns.

“Many are property syndications and have a range of risks you needtobe mindful of.

“If it soundstoo goodtobe true it probably is.”

Havinga chat with an adviser ortalkingto companies that offer investment solutions is a greatplace to start working out whatyou needtodo.

A growing number of NewZealandersare nearingretirement but not near their savings goals– especially as people are taking on more debt to getinto home ownership, Boyle said.

“Isuspectmore Kiwiswill havea mortgage when theyreachthe age of 65 so this does createa real challenge when preparingfor a life afterpaid income and work.”

Ona positive noteproperties have grown significantly in value over thepastfive years soreleasing some of that capitalcould be a goodstart, he said.

“The first thing istodecide if youcan, or wantto, work longer.

“The greatbenefit of working longer is that youare notspending your savings, which means allgoing well, you will have more moneytospend later for longer.”

Working longer will help peopleget rid of debt and save enough moneytobuild up a small nest egg.

Once people turn 65 theystartreceiving the NewZealand Superannuation socould,if still working, invest thesepayments or use it toretire debt,Boyle said.

“If workingpastthe age of 65 is not possible then things do becomea little more challenging.

“Downsize your house and invest the difference.

“If the difference is notthat greatyou could sell your house and move to a smaller town or city that is cheaper.”

Sorted, which offers free financial advice, recommends using savingsand investments ontop of pensionstomake retirement more comfortableandenjoyable.

Being mortgage-free byretirement is a great goal to aimfor,itstates.

“Thereason many people currently in retirement are abletomanage financiallyis because they no longer have the burden of mortgagerepayments.”

The organisation hasa retirement calculator to work out how muchyou will needtosavebased on what youcurrently spend – thiscan be foundat www.sorted.org.nz.

Thecalculator includes figuresbased ona basic lifestyle or one with some more luxuries.

DavidBoyleisMintAssetManagement’sheadofsalesandmarketing. Photos/Supplied

David Boyle’sretirement saving tips: • Work outa budget. • Review your KiwiSaver. • Geta plancompleted by afinancial adviser.

Take our advice.