Planning for retirement has never been easy, but it seems to be getting harder, and the amount of money needed for retirement is rising every day. It’s not all about smashed avocados.
But, McQueen told Ponsonby News, no one has left their run too late. She often starts with teenagers. Her value, she believes, is in being an unconnected person (parents and school guidance councillors don’t cut it). Most kids want to succeed, but often don’t know how, and they don’t and wont listen to family members.
“No child leaving school wants to fail,” says Hannah McQueen.
In addition to working with adults for 12 month blocks, McQueen works with teenagers for 12 weeks, at the end of which savings patterns should be established, career paths forged, and investment strategies honed.
Young people have to be better than previous generations to get ahead. McQueen quoted graduates with a $60-80K student loan debt, having just completed a degree in a field they do not want to pursue as a career. It’s a huge noose around their neck, and can constrain their future home buying till 40 or later, McQueen told us. “Equipping your children for financial success early on, is an investment in your own retirement planning.”
We also talked to Rutherford Reid director, Henry Ford, who is a financial planner. He told us everyone needs a good day-to-day system for cash control. “Set out your weekly and monthly commitments,” says Henry, “and put some aside for a rainy day.”
Ford also recommends joining Kiwisaver, emphasising the employer and Government contribution. McQueen reminds clients that Kiwisaver investments are locked in.
Ford warns about property investment. It’s getting harder to get more than 3% on investment properties, he told us. No more than you can get from a bank.
He also told us that Australian shares had shed more than 10% in the last two months, which was a warning against short-term speculation. We were also asked to warn our readers against short -term investment, and to be wary about the Government’s new bright -line tests. These tests may incur tax if properties are sold.
Ford’s advice was to pay off debt as quickly as possible.
McQueen echoed that call. “Pay off your mortgage in 10 to 12 years,” she advised. Then you can plan to continue saving the amount you were paying on the mortgage, building up a cash reserve which you could use to buy a rental property or invest in the share market.
Of course, in these ever changing financial times, it is virtually impossible to work out how many dollars you will need in retirement. It depends where you live. It depends whether you still have any dependents. (Many couples are having children later in life, and they may not be off their hands by the time they reach 60.) I know 80-year -old men who have 10-year-olds at home.
The aim is to have as much flexibility as possible as retirement looms. Few, I was advised, can live comfortably on superannuation alone.
Both in New Zealand and Australia there has been a big trend to downsize. It may be about selling your Auckland or Sydney home and going rural or provincial. That is impossible for those whose work is in the big city, and can’t survive eating grass in the countryside. However, if someone works in, say IT, and can work from home, it may not matter where that home is.
Others may choose to live more cheaply, eschewing a consumer ethos of buy, buy, buy. They will give up trying to keep up with the Joneses and opt to live a simpler life.
Two frightening statistics for young people are: In 1968, that is 50 years ago, the average New Zealand salary was $2500 dollars. The average house cost $10,000, four times the salary. The average house in New Zealand, but not Auckland, now costs at least 10 times the average salary.
Here is one more frightening statistic. In 1980 a teacher near the top of the primary salary scale received a salary of $17,000 while a member of parliament received $18,000. Now that same teacher receives about $60,000, while the MP receives $160,000. Inequality is rampant in New Zealand, and is very unhelpful when people are trying to plan for their retirement.
Our advice would be to seek professional guidance to give you the best possible options for saving for retirement, remembering that if you want to retire a little early at 60, you probably have another 30 years of good living time ahead. So you must have a financial plan for those 30 years. (JOHN ELLIOTT)