M
aybe
you have
KiwiSaver,
term
deposits and/or some
rental properties.
Perhaps you plan to
release equity from
your home to fund
retirement. Will these
strategies provide
enough money for a
retirement that could
last 30 years?
A CHANGING WORLD
“There is commonly a gap
between what Kiwis need
to save for retirement and
the money provided by New
Zealand Superannuation,”
says Mark Brown, head of
fixed income at Harbour Asset
Management. “For many, NZ
Super is simply not enough for
anything more than a budget
retirement.”
At the same time we’re living
longer – to 87 on average –
which means we need to save
more and stretch those savings
further.
If you’re aged 35-55, there
is still time to adopt healthy
savings strategies. Even if
you’re retired, your nest egg
can be made to go further.FALSE LOGIC
Many Kiwis make wrong
assumptions when planning
their retirement. Downsizing
the family home, for example,
doesn’t always work. “Research
from the Financial Services
Council shows that people
who downsized their homes
only released sufficient equity
on average to last three years,”
says Brown.Term deposits and
residential property
investment are the other big
favourites for retirement
savings and have their pros
and cons. These investments
may feel as Kiwi as paua and
pavlova, but limiting yourself
to them could mean falling
behind in the savings stakes,
says Brown.
On the property front,Kiwis have been blinded by
the stellar 75% growth in
residential property prices over
the past decade. “You just need
to look over the Tasman at
falls in Australian house prices
to see you can’t always bank
on price rises,” says Brown.
Auckland’s capital growth has
flatlined since 2016.
That’s not all. Rental yields
are at near-historic lows,Is retirement looming? Have you saved enough to retire comfortably?
SPONSORED CONTENT
Making retirement savings last
“For many, NZ Super is simply
not enough for anything morethan a budget retirement.”
Mark Brownaccording to Core Logic. A
yield of 3.3% may not even
cover mortgage payments,
maintenance, insurance and
other costs, let alone generate
sufficient income to retire on.NOT ENOUGH TO LIVE ON
As a nation, we also love the
stable return of term deposits.
Yet, replacing a modest car
could eat up the entire year’s
returns at current interest
rates on $500,000 invested in a
term deposit, says Brown. The
Reserve Bank of New Zealand
has indicated that already-low
interest rates may head further
down, too.
Putting everything in term
deposits also assumes you
need to access all your money
at once, which most people
don’t. Even bond yields are
down, so they may not be the
answer.LESS RISK, MORE CASH:
FUNDING THE GAP
If there’s a shortfall in your
savings, says Brown, you must
either earn and save more
while working or get a better
return on your savings.
In order to get that better
return and ensure your savings
last long enough, you may need
a broader mix of investments.
“Investments such as
Harbour’s Income Fund spread
your capital across a wide
range of growth and defensive
assets, including shares, listed
property and fixed interest.
Combined, they work harder
but still have defensive
investments to preserve your
capital.” While investment
performance may go up and
down, the Fund pays out a
regular income, currently at 5%
a year, after tax.