INFLATION HURTING RETIREES ON FIXED INCOMES

IN June 2022 the Massey University Fin-Ed Centre released its Annual Update to the New Zealand Retirement Expenditure Guidelines. The Centre aims to empower New Zealanders to make more financially savvy decisions – giving people the tools they need for the life-long process of managing their finances.

The New Zealand Retirement Expenditure Guidelines – as at 30 June 2022 – are prepared from Statistics New Zealand’s triennial 2018/19 Household Economic Survey for the year ended 30 June 2019.

The June Update noted that current high inflation particularly concerns Kiwis in or near retirement, eroding purchasing power and reducing the value of their investments.

The Update commented that interest rate increases resulting from attempts by the Reserve Bank of New Zealand, and other central banks globally to combat inflation, may negatively impact the value of fixed income investments held in KiwiSaver and other managed funds. This means, KiwiSaver members are seeing their KiwiSaver account balances drop.

Retirees are likely to have a greater proportion of fixed income investments in their portfolios, due to the lower volatility of this asset class, which is preferred for those at this life stage.

The Update notes the main contributors to continued cost increases for retirees for the twelve months ended 30 June 2022 were transport (with inflation of 14.5%), housing and household utilities (rising 9.1%), and food (up 6.5%).

Inflation is at levels last seen in the early 1990s. Long-term bond rates of 4% suggest investment values will continue to be eroded for some time, which may encourage diligent investors to make their nest egg work harder.

Significant demand from baby boomers is driving the thriving senior living sector, which offers a long-proven record of generating attractive income for Kiwi investors.

John Jackson, Executive Director of the Senior Trust Retirement Village Income Generator, has been involved in the investment sector for more than two decades. He believes the growing surge in demand for quality modern retirement villages reflects the concerns of many senior New Zealanders about social isolation, security, and a desire for a good life in their golden years.

Senior Trust focuses on this segment of the industry, supporting and funding experienced, capable operators who deliver quality retirement villages at the premium end of the market.

Building wealth and wellbeing, to help Kiwis live more comfortable lives.

Senior Trust Income Generator – specialist funder of premium retirement assets that deliver attractive, steady returns – while helping create quality places to live.

0800 609 600. 