Answers to your questions
There wasn’t time during the webinar to answer all the questions that came in. Here is Mary’s response to those questions.
Setting a savings target
How do you factor in inflation when deciding on a savings target?
You can’t accurately because we don’t know future inflation. But while you’re saving, if you’re in a balanced or higher-risk fund, your returns should be more than inflation. In retirement, many retired people say they spend less as they get older and go out less, so I assume that takes care of inflation adjustment.
How realistic is the $100 per week income for every $100,000 savings?
It’s realistic. If you want more on this, see page 204 of my book Rich Enough? [Or read the article here - Ed.]
What is the website for the US site to tell how long we'll live?
We are working for the next 15 years and want to know what are good decisions to prepare for retirement. What should we be doing now?
Basically saving hard.
What about KiwiSaver versus UniSaver?
UniSaver is better as your employer will contribute more and the fees are below average KiwiSaver fees.
Can you put lump sums (e.g. from inheritance) into UniSaver and/or KiwiSaver?
You can into KiwiSaver but not into UniSaver although you could drip feed extra into UniSaver over time.
Can you continue paying into UniSaver if you no long work at a university?
Generally, no, although you can top up your locked-in account in order to receive the government contribution.
If I’m able to pay more into my UniSaver/KiwiSaver, is this a good idea?
Put in enough to get the maximums from your employer and the government. Beyond that, it can be good to save elsewhere (perhaps in a similar non-KiwiSaver fund) as you have access to that money whenever you need it. (But if you would squander the money, by all means tie it up in UniSaver or KiwiSaver!)
If you want to boost KiwiSaver with investments, how do you know which investors to trust?
All KiwiSaver providers are monitored by supervisors, which are separate companies, and both providers and supervisors are regulated by the FMA. There is no government guarantee, but it would be very surprising to see a provider stealing money etc.
At 64, is it okay to be in a high growth (UniSaver and Simplicity) or should I be more conservative? When is a good time to move from Growth to Conservative or Cash funds in KiwiSaver?
It’s not about age, but when you will spend the money. See the handout.
How should one approach the balance between local and foreign equities? (I see that UniSaver is quite well diversified.)
It’s good to invest in funds that hold international investments to spread your risk.
Do you recommend getting an investment adviser once you leave UniSaver?
Maybe, although it’s not that hard to run your own money! See the Which Adviser page on maryholm.com.
I'm in my late 30s. Should I just focus on paying off my mortgage or save for retirement as well (via long-term shares etc.)?
Be in UniSaver (or KiwiSaver) enough to get the full employer and government contributions. Beyond that, it’s good to use excess money to pay off a mortgage faster.
At 65, if you still have a mortgage, is it better to use your KiwiSaver to pay off the mortgage or better to keep the investment and earn returns.
Generally, I think it’s better to get rid of the mortgage. To beat that, you need an investment that earns more than your mortgage interest rate, after fees and tax. That means a risky investment. If you love risk, that’s fine.
What if you cannot afford a house?
Keep saving hard. Either house prices will fall enough and you can buy after a while or you will have large retirement savings to cover rent in your retirement.
New Zealand Superannuation
Does working after 65 affect how much pension one gets?
No, although NZ Super is taxed, and the more your other income is, the more your Super will be taxed.
Are there any rules around having to work a certain amount in the years before 65 to ensure you get NZ Super?
No. NZ Super goes to all New Zealanders regardless of how much they have worked.
If you take in boarders or international students, presumably the income has to be declared and is taxable. What impact might it have on the tax rate on your NZ Super?
For info on tax, see tinyurl.com/BoardersTaxNZ. Any income you earn after 65 affects tax on your NZ Super but you will still be considerably better off.
Given reverse mortgages are becoming more common these days, why should people worry about savings?
Reverse mortgages aren’t actually all that common. Anyway, you probably won’t be able to borrow enough to fund a comfortable retirement. You want savings too.
You can only reverse mortgage a property that is already actually paid for I assume?
Heartland, the current main lender of reverse mortgages, says: “To be eligible, you need to be over the age of 60, own your own home outright, or have a standard mortgage that can be paid off by the reverse mortgage.” For more, see their website.
What happens if, at time of your death, your house is not worth as much as what is owing? Does your estate then owe that money?
New Zealand lenders of reverse mortgages usually give you a guarantee that you won’t owe more than the proceeds of selling the house. Check for that.
Is it a good idea to invest in art?
I would never count on the value of a particular piece of art growing. Buy and enjoy it, and if its value grows (and you can bear to sell it), that’s a bonus!
What about investing in Bitcoin?
It’s pretty high risk – okay with play money that you don’t mind losing.
What about gold?
A bit of gold – maybe 5% of your investments – is fine, but it is very volatile, and there are no returns except gains, whereas with other investments, you also get interest, dividends or rent.
Roughly from what age onwards would you say to drop the life insurance? That was something I had never considered, as I always thought, once started, one should continue with it forever not to miss out on the initial investment for the many years.
Don’t think of the money you have already spent on insurance. That bought you peace of mind at the time. Now – at whatever age you are – would your dependants have enough money, without insurance, if you died? When you can say yes to that, drop the life insurance.
Should your house be in a trust so that, if you need rest-home care, you can qualify for the government subsidy?
I wouldn’t advise it. The government is getting better and better at “looking through” trusts to what is really going on!
Check out these articles by Mary Holm. Most of the articles are excerpts from Mary's book Rich Enough? A laid-back guide for every Kiwi.