Will you be ready to retire?

Colin Thomson, Head of Investments at MAS, has some sage advice for NZVA members thinking ahead to their retirement.

PLANNING FOR RETIREMENT

What are you going to do with your retirement? Travel? Take up some new hobbies? Maybe even continue to do a little work in a less structured way? Retirement means different things to different people, but whatever you have in mind, you need to plan for it.

Retirement planning is even more important in the wake of the COVID-19 pandemic, which has had major impacts on international financial markets. Investors who kept their investments ticking over have generally emerged in more financially secure positions than those who panicked at the prospect of plummeting returns and sold out of fundamentally sound investments.

But of course retirement can seem a long way off – even when you’re in the middle of your career – and planning for it can be pushed down the to-do list by more immediate priorities.

The good news is that you don’t have to do everything yourself. Getting in touch with a qualified financial advisor is a great place to start, and the personalised guidance they provide can help you get the sort of retirement you want.

In general, though, there are four basic questions you need to think about. 1. What kind of retirement do you want? Are you imagining six-month travels through Europe every other year? Or will you be spending your retirement a little closer to home? Are you going to downsize the family home, or splash out on a new car? Different retirements have very different price tags, and one of your first jobs is to work out how much you’ll need to save. Use tools such as the online calculators at www.sorted.org.nz to help you determine the retirement you want, how much it’ll cost, and the savings plan you’re going to need. Then be sure to speak to your advisor so they can help you meet those goals.

2. What can you afford to save now? You’re going to have to pay for your retirement somehow, and New Zealand Superannuation will unlikely provide enough by itself. While it’s important to put away some of your pay each month to build up your retirement fund, you also want to be able to enjoy life in the here and now. So how do you strike the balance between saving and spending? A basic budget is essential to help you get a sense of what you need to put away for a comfortable retirement. The younger you are, the more you can take advantage of the wonders of compound interest. If you’re able to boost your monthly contributions to your retirement fund now, it’ll be well worth it in the long run.

3. What’s your risk profile? How long do you have until you hit retirement age? If you still have 20–30 years to go, you have plenty of time to ride the ups and downs of the sharemarket – like those

we’ve just experienced thanks to the pandemic – and still come out on top. If you’re nearing retirement, you’ll want to make sure your money is more secure in lower-risk funds to ensure no nasty surprises.

To make sure you’re in the right fund, check out Sorted’s Fund Finder (www.fundfinder.sorted. org.nz) or the MAS risk profiler (www.mas.co.nz/risk-profiler).

4. Are you a responsible investor? Responsible investment is a hot topic right now, and savers are becoming much more interested in where their money is being invested. KiwiSaver and other investment funds vary dramatically when it comes to their investment ethics. While recent controversies have led to many divesting armaments and tobacco, many funds still invest in fossil fuels that contribute to climate change.

Consider your own values and, if you care about how your money is invested, think about choosing a responsible investment fund.

SEEK PERSONALISED, QUALIFIED ADVICE

These are some of the basic questions you need to think about when it comes to saving for your retirement. But nothing beats specialist advice from a financial advisor. They can take your specific circumstances into account and help design a personalised savings and investment plan that will give you the retirement you want.

Finding the right advisor is also important when times get tough. Having a clear plan prevents kneejerk responses to market downturns and keeps you focused on your long-term savings goals.

Be sure to find a qualified financial advisor who’s working in your best interests. They’ll be an advisor such as those at MAS who aren’t incentivised to sell by receiving commissions or remuneration if they meet sales targets.

So if you’ve been putting off your retirement planning, book an appointment with an advisor today. The sooner you get a plan in place, the better off you’ll be in the future.

This article is of a general nature and is not a substitute for professional and individually tailored financial, business or legal advice. © Medical Assurance Society New Zealand Limited 2020.

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