By Claire Dale*
A large number of New Zealanders are facing a perfect storm at retirement, with minimal savings and no house, raising the risk that thousands will enter old age in poverty.
According to the latest retirement expenditure guidelines from Massey University, a two-person retiree household living an urban “choices” lifestyle, which includes some luxuries, would need to have saved $809,000. In the provinces, a couple would need to have saved $511,000.
New Zealanders have traditionally relied on owning a home to support themselves during their retirement years. But many of the New Zealanders now aged between 50 and 65 – a cohort of almost half a million people – will go into retirement as renters after skyrocketing house prices over the last three decades put home ownership out of reach.
At the same time, this generation were already working adults when the Labour government introduced KiwiSaver in 2007, and are less likely to have a significant savings cushion.
Last year, Treasury raised concerns that this mixed group of baby boomers and generation X will not be able to financially manage retirement on their own.
Declining home ownership
Home ownership in New Zealand has fallen to the lowest rate in 70 years, with just 65% of people living in houses they own, down from the peak of 74% in the 1990s.
According to the 2018 Census, around one in four people between 50 and 65 don’t own the home they live in.
Research by Kay Saville-Smith from the Centre for Research Evaluation and Social Assessment suggests that by 2053 almost half of over-65s would be renting. That would mean 640,000 over-65s renting, including 326,000 renters aged over 85.
This issue of declining home ownership disproportionately affects those who have remained on low incomes throughout their working life. This, in turn, has stark consequences for Māori and Pacific people in New Zealand.
Between 1986 and 2013 the proportion of Māori and Pacific peoples living in owner occupied housing fell at a faster rate than the overall population (down 20% and 34.8%, respectively).
Skyrocketing rents
Also, in the last five years nationwide rents have risen 28% across all property types and regions.
For increasing numbers of people, housing – whether through ownership or renting – has become unaffordable.
The rapidly increasing rental costs have also reduced the ability of people to save for their own home.
KiwiSaver came too late
In 2007, the government of the day set up KiwiSaver as a voluntary savings scheme to help New Zealanders save for their retirement and to lift New Zealand’s low national savings rate.
But New Zealanders aged 50 to 64 were already adults and mid-career when KiwiSaver was launched. In our low-wage economy, they are likely to have contributed only 3% of wages, in addition to the employer’s 3%.
While some will have used their KiwiSaver account plus the government subsidy to put a deposit on a home purchase, few will have saved a significant nest egg for retirement. The 2021 Financial Markets Authority KiwiSaver Report showed average balances of only $26,410.
Squeaking by on superannuation
There is some support for retirees. When a person reaches the qualifying age of 65 years, they receive New Zealand Superannuation, currently $437 per week after tax for a single person.
But superannuation is predicated on owning your home rather than renting. Home ownership means effectively living rent free, with only rates and maintenance as regular necessary expenses in addition to food, power and phone.
Those people renting are currently confronted by a median weekly rental for a small house or apartment of $390 per week. While they may also be able to access the accommodation supplement and temporary additional support to assist with costs, a new threat has emerged in the form of inflation.
Consumer price index inflation peaked at close to 6.35% in early 2022, its highest level in three decades.
As well as steady increases in the price of electricity, petrol prices increased by 10% over the past year, and annual food prices rose 6.85% in February year-on-year. Fruit and vegetables are the largest contributors to the price rise. Car use can be contained with less recreational outings, but electricity, fruit and vegetables are needed for health.
None of this is going unnoticed. Treasury has raised the alarm about the increase of old age poverty. Many in the 50-65 age group share those concerns, and are approaching retirement with rational trepidation.
* Claire Dale, is a Research Fellow at the University of Auckland. This article is republished from The Conversation under a Creative Commons license. Read the original article.
146 Comments
TTP - not sure what values your parents taught you, but compassion for those experiencing hardship is a virtue, not a vice.
These are people between the age group of 50-65, not millennials who still have time to get their finances in order through action.
For the people in this article, its quite likely they are in this situation because of real hardship (i.e. divorce, bankruptcy, death of an income earning partner or other bad life changing event).
Some compassion as opposed to gloating about how wonderful you are from time to time would be a beneficial change.
And I thought you were renting? So are you one of these people Tim in the 50-65 age group who doesn't own their own home - so you are a DGM and are in the process of offending yourself?
So are you lying now, or were you lying back when you said:
https://www.interest.co.nz/property/88569/average-prices-realestateconz…
by tothepoint - d… | 1st Jul 17, 11:07am
.....
Finally, I have never stated that I can't afford a home. That's complete rubbish. I happen to own my own home..
I don't think TTP Tim Mordaunt the owner of Property Brokers has ever felt good towards renters.
Advocacy group Renters United says it has been approached by landlords horrified at Property Brokers stance.
https://www.rnz.co.nz/news/national/412965/property-brokers-tell-landlo…
Oh well, Developers, Investors and even FHB are ditching this company in the droves. I guess renters will now avoid Property Jokers as well.
Merrydaze.. success is subjective. I don’t think anyone bemoans the business man that employs people and supports families through that. Or the entrepreneur that helps put NZ on the map in tech. Success should never be measured by how many houses someone has hoarded. It’s nothing to brag about, literally anyone with no education and 2 brain cells could do it. Why is it a sign of success? Real question.
"literally anyone with no education and 2 brain cells could do it", .....so have you?
This ignorant attitude is a common misconception. I have quite left leaning views and represent working middle class regularly but can see points of views from both sides, I also understand and respect the rights of business people and entrepreneurs. You appear to have biased views and only see one side of the discussion. It is amazing how opinionated some people can be not knowing what they don't know. I have no issue whatsoever helping under privileged or lower socio economic people in very difficult times, I just find it hypocritical to criticise those paying the bill. Not saying they are saints but you cant have it both ways, most people who can take care of themselves have done so going without for many many years until finances come to fruition, it is not a simple thing and those people are not as 'lucky' as people like you presume. For the record I came from the 'Bronx' solo mother as poor as they come. I've broken the systemic mould of society of where I am 'supposed' to be at, and now consider myself financially successful. My children have the same work ethic and savings mentality, I have no doubt they will be referred to as privileged and lucky in due course
I didn't realise having compassion for people doing it tough was a bad thing, nor were aspirations for social and financial stability.
Hypothetically, in your mind, will I make society less rotten if I come on here and say 'house price to the moon, interest rates back to zero and lets bring back mortgage deductability for rentals?' Is that what you want to hear? Because anything else are the worlds of a doom goblin (lol).
Well if it is the gentlemen you say it is, he has made a positive contribution to society. More than most i might suggest.
"He was a member of the Manawatu branding committee and is a Trustee of Arohanui Hospice. Property Brokers have been major contributors to the Jets basketball, Turbo’s rugby, Centrepoint Theatre and the Cancer Society’s Relay for Life, as well as countless school and community groups. In 2003 he was awarded the New Zealand Order of Merit for services to the community"
Te Kooki - All that you just bleated was actually a self serving advertising campaign that any narcissistic sales company would do. If any of that was even true to start with of course. Its just a sales trick.
Anyway. How is your band practice going with Tim for the Open Homes ? I see the Tim Dogg has given you a bit more room to express yourself. Tim is not one for letting go of control, so feel lucky me Homie. Not a bad track. I hope my grammar is good enough for you today. Oh, can you please ask the Tim Dogg if that is a Perm or is that hair real.
Not news but the tax for this will have to come from somewhere. GST is already high and income is already high for those actually working. Any increase in either of them will see more leave for Aussie, and a big increase in tax avoidance. So TTP...whats the on last golden goose not getting taxed..oh yes its property.
All this does is underline that a land tax in inevitable at some point.
Much of the wealth has been transferred off wages and savings and handed to asset owners. So...yes, presumably - at least if parliament is not completely infested with narcissistic asset owners - the recipients of that wealth transfer may need to start contributing more of a share to society. (This will include me paying any LVT.)
FHBs who bought near the peak are likely to face an even worse situation than renters if they end up in negative equity and are forced to sell. Deposit gone, KiwiSaver gone, house gone, and a residual mortgage to pay off. I wouldn't be counting on NZ Super, either.
Keep your deposit and KiwiSaver, rent until you're 65, then retire in the Phillipines?
Recent funerals I have been too ages 18,72,73 and 48. I have worked hard to be mortgage free by 65, but even I will be struggling to have 800k without not enjoying some of my life while young. Some balance and perspective needs to be had throwing fiqures like this out. The things I enjoy at 70 won't be the same as what I do know I suspect.
Hence the dire need to regulate interest rates above the rate of inflation - so that we can reduce asset prices and increase the return of savers so that we have something to use for future investment.
At the moment we are crippling society for the benefit of a few ultra wealthy with share and property portfolios.
We have deeply negative real interest rates which is highly stimulatory.....it supports run away asset prices and unaffordable consumer goods. Until that changes, its going to be very damaging to parts of society....its financial repression.
For the people mentioned in this article....the current monetary/fiscal policy settings are only going to make life worse for them, not better.
Ultimately it will probably fall on the tax payer to support them, while wealthy landlord types continue to enrich themselves while having structured their affairs to pay little or no tax. One group gets all the benefits, another all the hardship. The system is clearly broken and needs significant intervention/reinvention to create a financially and socially stable environment.
I_O,
I see the problem from a different angle. Kiwis are adamantly opposed to ANY form of capital taxation. The burden falls entirely on taxing income. This is both selfish and short-sighted.
I spent a considerable part of my time giving clients advice on both CGT and Inheritance Tax planning, both of which were long-established taxes. People grumbled, but largely accepted that they should form part of the mix. Of course really wealthy people employed accountants and solicitors to help them avoid paying, but i witnessed many of these loopholes being closed by the courts.
There is no perfect system of taxation, but I am certain that one like ours is grossly unfair to many taxpayers. We should have a nil rate income tax up to a certain figure, with the tax given up being replaced by some form of capital tax.
Good points and yes I agree. You can add tax legislation to fiscal and monetary policy settings that have resulted in the circumstances we find ourselves in.
Tax policy is hard to change due to voters....monetary policy appears to be almost immune to the democratic process so perhaps we could start there by raising rates and resetting asset prices to a fair playing field?
I_O,
It wouldn't hurt me as i have no debt and enough income, but I don't think a rapid fall in property values is good policy. I think it should be more gradual. Thus, a debt/income cap of say 5 times joint income could be imposed, to be brought in over a period of years. Then, if that proved to still be insufficient, the cap could be tightened.
That should of course be accompanied by some form of capital tax together with sensible immigration policy. The problem has taken many years to reach this state and I would like to see the air being gradually released from the balloon rather than abruptly burst.
I would support some form of inheritance tax. Thus, if were to die worth say $4m, then I see no reason why my family should simply pocket the lot. A tax rate of say 20% after the first $1m would give the government $600,000, leaving $3.40m for my family. I am well aware that there are issues with family companies for example and yes, tax lawyers would love it, but it would help redress the current imbalance in the system.
Again good points and agree. On the 'I don't think a rapid fall in property values is good policy'....well why then has the reverse been true/tolerated/by many encouraged?
You don't have to worry about the rapid fall if you don't allow the rapid ascent in the first place. But successive governments and central banks have facilitated the rapid rise....crazy stuff.
I agree. I know a number of retirees that have had to take reverse mortgages or downsize into awful little units because they were no longer able to supplement their pension with reasonable interest income from term deposits. It appears that Mr. Orr didn't take this into effect when he kept the cheap money flowing in the economy.
Beyond this scenario another looming problem, and a big one at that. Aged healthcare. Elderly who for whatever reason cannot fend for themselves end up in care in rest homes, hospices eventually. Presently the government takes a contribution from existing assets up to around $200k to pay for that. But when those additional assets run out, or if there aren’t any in the first place of course, then the government, meaning taxpayers, meet that cost of care, lock stock & barrel. The thrust and argument of this article indicates that this is going to be a highly compounding cost and nothing can be done about it. Wouldn’t be surprised to see the $200k retention being significantly reduced before this government has had its day.
Younger New Zealanders loaded to their eye-balls with mortgage debt, will need to be taxed more to pay for the healthcare of these people....or we just across the board agree to have a reduce standard of living and that includes healthcare services provided to the elderly (although I'd imagine that would go down like a cup of cold sick).
The solutions is going to end up being massive great Kiwisaver credits to a generation who are going to end up underwater on housing through no fault of their own. It's the only way to ensure the social contract of continuing to underwrite today's retirees. Unless the argument is 'save for your own retirement, pay for today's pensioners on a non-means-tested basis, but Kiwisaver will mean you don't qualify for a pension in your own retirement' because in that case the far easier outcome for forward-thinking young Kiwis is 'just leave'.
What bugs me is that the standard of healthcare is declining across the board, while we spend more and more on end of life care. In some cases keeping people alive when ethically maybe they shouldn't be. Lack of speed in cancer diagnoses and drug funding, lack of postpartum care past 6 weeks ect ect ect... Just another way that my generation is being screwed for the elderly.
Having had a father who went into a home before dying in the last few years, they actually take assets to pay for care down till you only have 240k, if I recall. So if you have a $1000,000 house you will lose $760k before you reach to 240k limit.
Resthome care is at least $2000 per week, so you can expect to lose 100k per year in assets, oh, and they look through gifting/trusts set up to avoid paying.
Well, there were those who were using trusts to avoid paying their own way until that loophole was closed. As I understand it, there may still be some open loopholes? At that point, I guess it's a character issue and folk are just bludgers who expect to live off other people's money?
What ever happened to the compulsory superannuation scheme of the 70's? Oh that's right, it was abolished when National was voted in after they campaigned heavily on the "communist nature" of the scheme (dancing cossacks etc).
Very hard to have sympathy to be honest, particularly with how much is being saddled onto younger tax payers through non-means tested super at $12b a year. And it's still not enough???!?! Yet we cannot find less than $1b to abolish the need for student loans.
Kirk’s labour government was undone, and particularly after he died, by a rampant Muldoon in opposition. Kirk, introduced ACC, had the spine to stop a Springbok tour, introduced a property speculation tax, sent a frigate to protest the French Nuclear tests, and compulsory superannuation. In hindsight quite a lot of constructive effort. In those days a lot of large companies and institutions, and of course the public service ran superannuation schemes. As well there was the National Provident fund and a copious selection of Life Assurance endowment policies on offer. So it’s not like people weren’t saving for their future. Muldoon’s universal super scheme not only undid Kirk’s compulsory super but it also unfortunately lessened the need for people to think about saving, ie the govt going to take care of us. To my mind Kirk’s government had some good accomplishments and if the compulsory super had been allowed to continue, NZ & NZrs would be far better off by a long way.
No one in that age group was old enough to vote at that time. That group is the tail end of the baby boomers and 7-8 years of gen X. 50-64 and everyone younger than that got shafted by Muldoon.
There's no shortage of people that I've met that realised they don't have enough saved for retirement once they reached 65 and are still working.
Still working may be part of the equation. Family members I know have worked into their 70s because they don't want to not work. Then there are all the blokes who seem to cark it as soon as they stop working...
It may be that we need to employ more of our people and with better conditions, rather than having dependence on cheap, exploitable imported labour in some industries.
I know folk cite the trades - e.g. builders - for people who cannot work past a certain age. But we used to have skilled older builders as Town Clerks to oversee building quality and avoid leaky buildings crises...
In regards to "sky rocketing rents", I am not sure of that is the case given the decrease in immigration due to Covid. As the full effect of the deductibility changes does not occur until 2025, I would think the effect would take a few years to come about. It surely will have a negative effect on the market than otherwise. I already see many landlords listing their Auckland units and they are sticking on the market. Look at the "no bid" proportions at the auction rooms. The other concern here is that with all this regular change, I would not bet on the deductibility on new rentals staying in place. It could be removed as quick as it was for existing properties. When you make a decision to invest in a rental or a business or similar and you have risk that radical change can occur without much warning that completely and adversely effects that investment, it does not give you much confidence to invest moving forwards.
You got to remember that for property investors the activity is a business only when it is financially beneficial to be classified as such. So for mortgage lending, no its not a business because they want the private/residential rate, but for tax purposes, absolutely it is, because we want to deduct expenses...
Point taken. Just going back to pre rogernomics when the RBNZ had bank lending “corseted” there were tiers imposed, categorising interest rates for all lending. An active government of late, could have distinguished household borrowing from other property borrowers by way of a declaration to this effect. In fact this is how the then trading banks first really got into mortgage lending, by the creation of their own Savings Banks and resultant savings bank loans, about 1969 from memory.
I think it will result in housing being less attractive as an investment. So it will be worth less, resulting in no rent changes.
If you are making interest payments deductible on housing, it should be deductible to all, not just people who decide houses are a business and leaverage the wazoo out of this investment, whilst leaving the family home unencumbered with debt.
A number of countries including the United states allow mortgage interest tax deductions on the family home
https://en.m.wikipedia.org/wiki/Home_mortgage_interest_deduction
"In the United States, there are additional tax incentives for home ownership. For example, taxpayers are allowed an exclusion of up to $250,000 ($500,000 for a married couple filing jointly) of capital gains on the sale of real property if the owner used it as primary residence for two of the five years before the date of sale."
Average house price in USA is $375k
All the woe about deduct this and that. Its part of the problem.
Just bring in a universal land tax, paid quarterly, in advance. If you miss, then there is a quick legal process to seize, and sell at auction and you get the difference. If you have no income, sell and buy a smaller house vs land banking etc. If your debt ponzi mountain makes no money, then it will be quickly unraveled. Yes housing would revert to mean and all the speculators will loose out big time as a one off correction sweeps the land. News flash - they are by far the minority and operating a parasitic business model.
The vast majority had choices in life with what to do with their money every week --- save a deposit and buy a house -- chose to rent and rely on government and private landlords for accommodation the number 1 need
choices in going out -- sky city - alcohol partying holidays -- or saving for retirement creating a nest egg
Its not a this is right or this is wrong choice - sure many renters enjoyed their lives to the max and maybe had better experiences up to now --- but in retirement -- those who played the long game are going to have a better quality going forward than the live for today spend up and lets not worry about old age !
hence vast majority -- there are always exceptions to the rule -- but the general premise is always some people thought about how they wanted to live in later life and acted accordingly -- others purely lived for today -- we are constantly trying to excuse peoples choices - -blaming everyone else but ourselves and accepting of poor performance outcomes and behaviours - as long as that continues -- we will continue to have to bail out large sections of society -- well i hope they enjoyed their partying , holidays, lack of savings - because they will have plenty of free time to refelct on those choices
Like landlords who have taken on too much debt and need to be bailed out by the tax payer through QE so that debt bubble doesn't explode?
I'm sure they purchased the rental with the intention of providing for their retirement (all that good planning ahead you talk about above), but that rental is essentially farming the wealth of another person, and because the investment is bad, it now requires continuous market intervention via fiscal and monetary policy to prevent the entire economy from collapsing?
I don't recall any landlords asking for QE to bail them out. Mortgage interest deductibility was a cost incurred in proving accommodation so a legitimate property business expense. Remember also that private landlords provide the vast majority of the NZ rental availability.
"I don't recall any landlords asking for QE to bail them out"
Oh well I guess there will be no complaints if mortgages rates keep rising as NZ enters into a recession the next 12-24 months while interest deductability is stepped out of circulation over the next few years.
I'm sure they won't be crying out for lower interest rates again (via QE to save the debt ponzi!)
QE was never introduced in NZ to bail out landlords. The thinking was to redirect funds from Gov bonds to business expansion, reinvestment and general increased spending in the community.
The artificially low OCR which followed then helped drive further investment in residential property. Turned out to be a win for a minority, a weeping scab for a majority.
My lecturer at teacher's college in 1975 called it deferred gratification.
Oh that's right I got paid to go to college. I saved my entire 3 years pay and used the money to buy a section($8500).
I am grateful I have a choices nest egg to supplement my superannuation.
I think the way the retirement expenditure guidelines have been reported on here is misleading (as is often the case with these guidelines). The article above reports the "choices" amounts as what you "need to have saved" to live a choices lifestyle. But the choices guidelines in the report are based on the average expenditure of the the fourth quintile of the HES for retired households. So the '$809000' is not what you 'need' to save to live a choices lifestyle, it's what you 'need' to save to live like the current cohort of those in the fourth quintile of the richest generation in history. TLDR: the retirement guidelines don't tell you what you need to have. They tell you that lots of current retirees are really wealthy.
A good comparison is to look at the actual expenditures, take out the housing costs, and see what's left over. For example, the 'choices' budget for one person is $1116.23, and the housing costs (including power) are $187.64, leaving $928.59 for everything else. I can't imagine why anyone would think they need $928 after housing and power costs to have a decent standard of living in the provinces. I earn a six figure salary, I live in the provinces, and after my housing costs I spend less than half that a week on everything else (and that includes Netflix, going to the pub every week or so, trips to the dentist, a takeaway at least once a week etc). Sure I'm not going on cruises, but I'm not subsisting on beans and rice.
I've been living on a budget = NZSuper since I retired 6 years ago. No, it doesn't pay for holidays, vehicles or expensive hobbies and vices but it's been ok for a basic reasonable lifestyle with a few beers/wine because my home is mortgage free.
While that's the budget I also have significant savings investments so don't feel any pressure & can make choices which not everyone can.
If you don't mind commenting: How much extra over and above Super do you think you need annually to support your retirement?
My parents (early 80s) Iive comfortably and spend $1000/month on Southern Cross. They no longer travel internationally. Estimated annual spend above Super is $25-30k.
I'm budgeting 35k/yr. Then plan for a wealth tax....You won't get change from $1m invested conservatively.
There's a longer story however the short version is probably around $15k pa which reflects the average history for myself (double that to include my wife however she was working part-time by choice until recently). So, $30k pa extra for a couple sounds about right for a pretty good lifestyle - roughly doubling NZ Super.
This includes a trip to Oz every year to see family plus a trip to Asia every 2nd year to see my wifes family (we usually combined these trips & travelled Jetstar / Air Asia). I used to have a small boat until a year ago & have an old 4wd wagon (I am able to do most of my own maintenance & repairs on these & the house). I have cheaper discretionary hobbies such as fishing. We eat out a couple of times a month with friends (using the Entertainment book discounts).
Your parents $1000/month SthX sounds like it could be reviewed. I used to have all my SthX Hospital Care plan for myself & my wife paid by my employer however when I retired this was going to cost over $5k pa so we went with the max $4k excess, assuming we'd use it for biggies & self insure the rest. This reduced it by half.
I would add that the wise choice of partner & their money habits is going to make the biggest difference to financial security throughout anyones life. I've been very lucky there (with wife #2).
Hi Claire
There are myriad causes of this problem, but some economists have pointed out for years that the unusual design of the government's retirement income policies are a direct contributor to this situation. New Zealand has the most unusual retirement income system in the OECD, due to deliberate decisions made in the 1970s and 1980s that ignored standard economic tax theory. The first was to design the whole system as a welfare-based system (everyone gets the same pension independent of contribution) rather than have mandatory contributory elements. (New Zealand is the only country in the OECD to do this, with the marginal exception of Ireland where the pension depends on the number of years you contribute, not the amount of the contribution.) The second is the tax regime for retirement savings, which in New Zealand but not most other countries strongly favours investment in housing. The combination means middle class people need to save privately for their retirement more than in other countries; and when they do they have big incentives to invest in housing. The international literature on the effects of this are very clear: almost all economic models predict that this combination generates high land prices, and makes housing less affordable.
What is less easy to understand is why most NZ analysts of the retirement system ignore the effects of the tax system on house prices. It is possible to be cynical and suggest that since older generations directly benefit from the design of the system (as it creates a transfer from younger to older generations) they have an incentive to defend the system in the current form. This seems too cynical - but it is strange that the major organisations that could be expected to develop "general equilibrium" economic models (models that take into account the ripple effects of taxes that result in price changes) have yet to do this, despite these models being relatively common overseas. Perhaps it is because New Zealand policy developers simply like being different, irrespective of the costs that this imposes on people.
Andrew
Agree. I think changes must occur with our superannuation scheme in New Zealand. A lot of other countries have schemes that are self funded, so hopefully the younger generation will have a bit of a nest egg when they are due to retire. In New Zealand, a lot of savers have had to dip into their Kiwisaver balances to use as home deposits. We need to increase our qualifying age to 67 (but announcing it well in advance to give people time to plan). I strongly believe that no-one entering New Zealand permanently should be eligible for superannuation unless they have lived here (and paid taxes) for a minimum of 20 years.
I'm one of "those people". Wow I'm part of 25%. That's way more than I would have thought.
We did own property but made the unforgivable mistake of believing property was over priced. We live in a service tenancy so didn't need it and didn't want to be landlords and never had any intention of living in that area long-term again. So sold it making bugger all gain.
As it stands we are unlikely to ever own again though at least prices are heading in our direction. Reality is with ten years of working life left I could never earn enough to own again, 20 years wouldn't be enough. Only one of us works, the other has a arthritic hip that isn't bad enough nor old enough for replacement.
It's all highly depressing and certainly not planned. Infact oddly enough all my planned things turned to dirt while the things I never planned particularly family turned out fantastic.
Luckily there's five kids and all either own houses or businesses and all have kids. Happily there's a lot more to life than money, but damn it makes things a bit easier.
you know redcows I don't think there is a man or women past, who died on their death bed saying they wish they had a bigger house or flasher car, but I bet a hell of a lot would of wanted loved ones around and to care for them in those last stages of life. At the end of the day you will have them around you in your greatest time of need and leave this place with a smile on your face. (hopefully that's a long time away)
If an arthritic hip is worth mentioning then it's probably impacting quality of life. I'd encourage replacement earlier rather than later. My hip started crapping out at 55, replaced at 57, cycled across town for the 6 week post-op checkup, now 63 and have to remind myself it's in there. Running, tennis, snow and waterskiing, all just as good as ever. Literally life changing, feels like science fiction.
According to the 2018 Census, around one in four people between 50 and 65 don’t own the home they live in.
While I don't doubt there are many thousands of people in that age group who are renting, I wonder at the methodology behind that conclusion (note: I haven't dug into it). If my home is owned by a family trust I can state that I do not own the home in which I live.
Similarly, I could be renting the house in which I live, while simultaneously maintaining a portfolio of investment properties. I'm sure there's more than one dodgy real estate agent doing this kind of thing.
Something something statistics.
Wow I didn't realise the Super had gone up that much to $437 a week, hell I would be rolling in it getting that. You also don't need anything like those figures in savings when you retire, that's a joke, especially with rising interest rates. Sure at 1% TD's but when you get back to 5% thats like earning a wage without getting out of bed in the morning. The secret is simply owning your own home with no mortgage, cannot overstate this enough. If you get to 65 and do not have a house and want to retire, your screwed.
What is your estimate Carlos? You've retired?
Its not the day to day expenses that blow the budget. Its the $60k TAVI heart valve not covered by Sx. Its the retaining wall which lasted 30 years but needs replacing ($7k), the tooth bridge (3k), then the trusty outdoor gas-water cylinder needs replacing. People ignore/forget depreciation and medical expenses which become increasing common and expensive.
Packed up full time work years ago now. You have to be realistic, if you have paid off the mortgage your probably not going to retire with $800k in "Savings" these days. Look at the numbers and the percentage hitting 65 that don't even own the house. You will be in the top 5% retiring with that sort of cash and lets not forget that is a couple so a marriage split in your 50's will leave you with a house and no cash at all.
Yeah nah, its time that someone on interest ran an article on the updated individual "Net Wealth" for 2022 it will shock you. I still have the NZ Herald article in a draw somewhere from years ago, I couldn't believe how low the threshold was in dollar terms to put you in the top 5%.
Edit: I just pulled the newspaper clipping its actually the North Shore Times dated November 19th 2015 if anyone's interested. I can break it down for you in percentage and dollar terms but the key point is "The bottom 50% of adults own practically nothing. The top 50% have over 90% of the wealth"
To get into the top 10% back in 2015 you needed just $535K.
Exactly right al123. So basically since 2015 you house has doubled in price so now your sitting in a $1.2mil house with no mortgage with that 800k in the bank and as a couple that puts your individual net wealth at $1mill. So in this scenario you would be in the top 10% of the population. This is hardly "Normal" if you stop and think about it.
Meh!
The usual pattern I see with articles of this nature are that they are penned by people who make thier living from managing your investments (ie they're trying to scare people into saving more with them).
My late in life mum saves $10K per year from her superannuation. Mortgage free, no car, few posessions of any real value, unable to live a fancier lifestyle even if she wanted to. Her real life 'no frills, but no hardship' lifestlye costs less than $12K/yr.
I'm on the modest Supported Living suppliment while I support her, and I still get by OK without dipping into my savings, and if I exclude my forest investment annual expenses I'd finish each year on this benefit with about $5K more than I had at the start of the year.
A modest lifestyle is no hardship, and a comfortable lifestyle is there for all pensioners who are debt free, regardless of whatever savings they may or may not have.
I'm single and childless. Once mum pops her clogs I'll retire (I'm in my 50s). Reflecting on what $ are truely needed, and the diminishing ability to use those $ in old age has led me to believe I've overshot my savings/investing, and that I could have retired earlier.
I'd encourage anyone else who's debt free, kid free to consider quitting early. Each year lost at work is a year of health and fitness you've lost from your eventual retirement.
Why retire only once your body is broken?
Pinetrez
Agree with you as my comment below support.
I was fortunate to retire a few years early before 65. Still able to self-drive around Europe on two four-month trips, do the five-day round Ruapehu and other multi-day tramps, do a number of multi-day cycle trails . . . .
Covid has limited my international travel the past couple of years so really glad I retired early. It is not just Covid, risk of ill-health in one partner or the other increases considerably as one ages (that hip joint, or knee or cancer) which seriously limit one's options including travel plans.
I agonise over this daily. When to walk away from a good income and enter the next stage in life.
Martin Hawes penned a good piece (IIRC) "25 MORE GOOD YEARS." The thrust was that he realised he had about 25 years left of good healthy living where he was able to pursue his interests. The lights went on when he was in his early 50'S.
In my work environment this is a clear motivator. I use a picture of me tackling some hills on the bike as a younger faster man with a bold headline "You are only getting older and slower. What are you doing?" I envy people who have been able to take the step to early retirement.
Here is a tip, its all in your head. Many people can retire early you need to get your head around the fact you have more money going out than what is coming in. Basically you start spending your money in a controlled fashion, no point kicking the bucket with $800K in the bank is there. I'm ramping down the cash until I hit 65 and that's IF I hit 65.
Given you're agonising over it daily I'd say there's a good chance you've passed the financial threshold, and the problem is all in your head.
(Edit haha whoops just read Carlos' comment saying the same thing)
I don't hear of many people who say "bugger, I quit too early, need more $". But plenty who realise, after making the leap, that's it's not as big and scary as they feared and they probably could have quit sooner. The biggest issue I see is not financial but boredom in people without the creativity to figure out how to amuse themselves, some have even gone back to work to fill their days, how sad.
I think the book title is "Twenty Good Summers". I first heard of it just before I quit at 55, which was very encouraging :-)
I'm about seven years into retirement and its the best (in terms of freedom in doing things) and less stressful time of my life.
All this discussion about retirement being about money negates the most important things.
In order the important things are:
1. Your health and fitness - if you are overweight and unfit increasingly your life is going to get considerably more limiting as you get older. No mater how wealthy you are, it counts for little if you aren't fit and healthy . . . and you don't start at 65.
2. A good relationship - I know a three or four who are on their own which presents problems: firstly, chronic loneliness (which no amount of wealth will compensate for), secondly not able to share expenses (very obvious when it comes to costs of accommodation) and lack of support when ill.
3. Genuine interests which make life enjoyable and what you are keen to to do when you wake up each day - not simply looking to do things to fill in time
4. Mates - do not underestimate this. I learnt from my father who was focused on work and his career - especially for males a necessity to develop strong friendships outside of work well before retirement (women tend to be better at this)
and a distant fifth
5. Money - yes, a mortgage free home is a good basis (just drive around some of the council social housing to see some pitiful sights) with some additional income for luxuries and some savings to fund medical care expenses (just to throw it out there - our health system advantages millennials over past it boomers). I know some people who own their own home, have little savings but still enjoy life.
I think you are underestimating the extent to which being able to achieve and maintain the first four depend on money. Of course all of those thing *can* be done on a budget, but it is significantly easier to get and maintain good health if you have money (for good food, health insurance, dentists etc). Money stress is also a major cause of relationship breakdowns. Most interests take at least some money to participate in, and even maintaining friendships often takes some money (if you're never able to visit your friends who live further than walking distance away, shout your round at the pub, or go out for a coffee it's significantly harder to maintain friendships).
But I think most of these things are reasonably achieveable on the pension if you own you're own home. If you're renting - especially in the private market - and you have no other income above the pension you're f***ked.
Also, I cannot for the life of me think why you might believe that the healthcare system advantages millennials over boomers. Care to elaborate?
al123
" I cannot for the life of me think why you might believe that the healthcare system advantages millennials over boomers. Care to elaborate?"
You clearly do not understand either "elective surgery" or "priority scores".
Firstly elective surgery, while non-life threatening, can include quite serious issues such as a need for hip or knee surgery, cataract surgery, some cardio surgery etc which place serious limitations on the quality of one's life and ability to do things.
Hospital Boards prioritise elective surgery assigning each individual a surgery "priority score" - this is based on a range of factors including ethnicity (Maori and Pacifika are currently given a higher priority), age, life expectancy and work status.
My comment regarding millennials and boomers is based on the reality that a millennial with the exact same disability as a retired boomer (e.g. the exact same extent of limitations due to a knee problem) will be given a higher priority score based on their age, life expectancy and employment status.
A 35 year-old will be prioritised over a 80 year-old for a heart sent operation; a thirty year-old millennial with the exact same limiting knee or hip condition as a seventy year old boomer will be given priority over that seventy year old.
So yes, the health care system will advantage a boomer over a millennial.
It is worth noting that as one ages, not only is one likely to have greater need for medical care, there is also greater need for self-funding surgery - or the increasing cost of health insurance premiums - which is a significant issue not often considered when discussing retirement.
al123
"I think you are underestimating the extent to which being able to achieve and maintain the first four depend on money".
Keeping fit such as playing touch (rugby) or netball, going for a run or walk, or going for a tramp didn't and to my knowledge still don't cost, there are plenty of genuine interests (such as diving for paua or fishing or pig hunting) that aren't expensive, and - unless your mates are only those who bludge of you - are no cost.
I see many in lower socio-economic areas participating and enjoying such things.
. . ., and my wife is not a gold digger - why is yours that you need money? :)
Not sure what world you live in. :)
I guess I live in the world where rugby kit and balls aren't free, a lot of people don't live within walking distance of places to play rugby and this require transport (also not free for most people), tramping gear costs money as does the transport to get to a tramp, ditto fishing, and there's a large amount of space between one partner being a 'gold digger' and money (or lack thereof) being a cause of relationship stress. Also note that you haven't touched on the most expensive things required to maintain good healthcare, for example - like dentistry or even health insurance (as you yourself have mentioned below as a cost that many people fail to take into account).
I agree that there are a lot of things more important than money. But I don't understand why people feel the need to insist that money doesn't at least help get and maintain those things, when that is clearly not true. As you yourself have made clear, someone who is able to pay for health insurance is much more likely to get timely healthcare for something that's having a significant impact on their standard of living if they can afford health insurance.
Why do you feel the need to be so antagonistic, by the way? I was mostly agreeing with you on that post - that most of those important things can be achieved on the pension if you own your own home. You then basically called me stupid for asking you a question, and implied that I 'need money' because I must have a 'gold-digging' wife. What do you get out of making these kinds of comments? Do you not find it interesting enough to discuss financial issues with people who have different viewpoints than you and you need to spice things up by trying to get a rise out of people?
You clearly do not understand either "elective surgery" or "priority scores".
Please don't talk to me as though I am stupid. I understand both of those things. I simply asked you to explain why you thought that the healthcare system advantages millennials over boomers. The facts you cited about elective surgery and priority scores do not mean it's an open and shut case that 'millennials are advantaged over boomers.' For example, you could look at how much gets spent on boomers as opposed to millennials - the average 70 year old costs the health system 7x more the average 40 year old. But again, this doesn't prove that the health system 'advantages' boomers over millennials.
What is true is that age (rather than generation) affects priority. But it makes as much sense to say that that means the healthcare system advantages millennials over boomers as it does to say that the welfare system advantages boomers over millennials, because most boomers can now get a non-means tested government handout even if they are healthy and working, and millennials cannot.
al123
Well don’t ask such stupid questions then. :)
Contrary to your assumption as I have elaborated as you requested, millennials are prioritised over retired as I said in my original post.
Not that you want to know; last year I had a hernia operation at a cost of $11k while a younger person I know with an equal hernia issue was done at no cost. :)
The fact that you think it's a stupid question shows that your thinking on this issue is overly simplistic :-).
Last year I got nothing from the welfare system, but an older colleague doing exactly the same job as me just got handed over 20k a year, no strings attached.
JC the uncle has simply evaluated everyone's personality and based on that would rather give is money to the RSPCA. Perhaps instead of being gutted they should take a look in the mirror, it cannot be good. I know someone I wouldn't give money to, his attitude to life and work sux.
Personal responsibility will of course be the problem for particular individuals. But this is an article about general trends. I think the reason personal responsibility talk gets a bad response when we are talking about general trends rather than particular individuals is that it tends to function as a distraction from systemic problems like the massively increased cost of housing and, intentionally or not, reads like blaming people who, for the most part, are doing their best to exercise personal responsibility in the face of forces outside their control that are making it increasingly difficult for them to adequately prepare for their retirement.
What I think is important about a comfortable retirement.
al123 "Why do you feel the need to be so antagonistic" - the answer is that in my post above I argued that people put too much importance on money which your challenged. It is probably that I get annoyed that our Retirement Commissioner - and many people commenting on retirement often with a vested interest - focus solely on money and neglect what I consider to be far more important factor such as one's health.
As posted, I am seven years retired. I have a close group of about eight who meet weekly for a couple of hours each Friday for a enjoyable beer (note "a" beer about $7.00 for a Steiney) and great banter.
It is quite an ecliptic group with some with with little income other than national superannuation; but yes, all own their own home albeit from pretty basic to reasonably good properties. I earnt the most during my working life and I am the most financially comfortable of the group, however while I own a comfortable home I don't have the best home.
The seven years retired and our group has given me plenty of opportunity to think about retirement and conclude what I consider the four more important factors rather than money in retirement. There is one of the group who although financially comfortable is without a partner and very lonely and unhappy. Another, who never earnt more than $50,000 pa during his working life as the sole income, has bought a cheapish caravan and just completed a great three months trip down south.
Money is definitely not the most important factor.
I agree, owning one's own home is important to having a comfortable retirement under current superannuation allowances. As said in my post, one only needs to drive around and look at the council's social housing to see retired people unhappily living in "ghetto" like conditions.
Housing affordability for FHB does concern me. I have posted a number of times some figures I saw a few years ago; homeownership rates for 25 to 35 year-olds has fallen from 65% in 1988 to 35% in 2018. This has been a continuing trend and yes, accelerated especially over the past two or three years and there are long term underlying factors other than a need for short term falls.
Housing should be seen not only as providing for one's family but also for retirement and that fall in homeownership rates is of significant concern.
My only comments to young regarding long term and retirement is that making sound social and financial decisions is more important than what you earn - and while important more so than regular savings. One can get upset, but getting pregnant at 16, or not getting qualifications (either academic or trade) and being on basic wage for life are not the best decisions in ensuring a comfortable life and retirement. OK, I consider my self pretty comfortable and current issues such as inflation and the price of petrol don't concern me at all which I put down to having a balanced life and making sound decisions in life.
I have consistently advocated for FHB to buy their own home. Short-term increases or declines in the market are irrelevant in the long-term; provided one can service the mortgage, a home provides social and financial security and as this article points out a basis for a comfortable retirement in the longer-term. Yes, many (but certainly not all) boomers have benefited from homeownership and there is no reason to suggest that it won't apply for the future. Despite what some have posted, I strongly advocate using KiwiSaver for homeownership as one is contributing to their retirement and one's earning late is likely to be higher.
Unfortunately over the past four or five years, I have seen both too much scaremongering on this site and in some instances some poor decision making.
"Why do you feel the need to be so antagonistic" - the answer is that in my post above I argued that people put too much importance on money which your challenged.
OK. But there's just no need to respond to posts that challenge your views - pretty mildly in this case - with personal insults about someone's wife.
I get annoyed with a lot of people who comment on retirement too, because they tend to advocate such ludicrous amounts that it just stresses people out about the impossibility of saving so much. As I said above, so many people ignore the fact that the Retirement Expenditure Guidelines aren't 'recommended' savings guidelines, instead they provide information about actual levels of expenditure by New Zealanders who have already retired. My perspective (and that of many other people I know in my age group) is that we know that Boomers (the majority of current retirees) have been comparatively wealthier than us at every life stage so far, and we expect that to also be true in retirement. What the top 40-20% of probably the wealthiest generation in history are able to spend on luxuries in retirement has very little bearing on what me or my friends are going to need to live a decent life once retired.
al123
Lighten up Will Smith.
My comment included that having a partner in retirement was one of four things more important than money; in your response you said money was a necessity for all four things which included having a partner.
You need to think about what you said . . .
My response was in a light handed manner indicated by attaching a smiley face. Will, given the opportunity your response would have be a slap again to what was a simple innocuous comment.
OK Will, ??? :)
For christ's sake, p8.
in your response you said money was a necessity for all four things which included having a partner.
I did not say that money was a necessity for having a partner. Attaching a smiley face to an insult does not automatically make it an innocuous comment. Stop being a dickhead.
Advice I give my 3 teenage sons is placing paving stones ahead of you so the pathway is set. Live your life in the here and now but have goals and know where you are heading. The basic paving stones are education/training, qualifications, job satisfaction and a regular savings plan, in their case savings plan is Sharesies and Kiwisaver. So long as you put these paving stones in place you can relax have fun and enjoy lifes experiences. When you are ready the paving stones have already been put in place, accumulating in importance and value along the way, sure you might wander off the beaten track every now and then but you can always find your way back, It is far easier to start at the beginning, always MUCH harder playing catch up, and you never know you just might have a bit of luck on the way to sweeten the deal.
There are exceptions, however, most of us end up where our choices take us, pointing this out does not make one unempathetic. Getting to the end and pointing the finger, blaming others ignores the choices that have been made. Helping others less fortunate is rewarding and satisfying just drop the blame game and accept responsibility. People are more likely to give when they are not being constantly vilified.
I do agree with you. Is not about blaming fortunate/smart people. (but I'll give you 1 like :) )
I had so much in my life, and I know I worked so hard for it. I know I paid several times for what I had.
But still, I will remembered because I was nice, not because I had a nice car, or a nice house.
I will remembered for how I dealt with people.
Being good with others is just another form of selfishness, in a sense.... but still, a better one
I wonder why is so difficult to get my nickname right :D
Anyways, I can give only what I have.
You are most probably (like for sure) already using things that I helped making.
I was paid for them, but nevertheless those are the things that make me feel good.
As said, I remember what I did, what I gave, not what I got (even if I don't despise it, I admit that if I made it for free I would feel even better).
You get in this world with nothing and leave this world with nothing.
If Kiwisaver is going to be instead of the pension that everyone else up to that point got on a means-tested basis, then younger Kiwis will be better served living and retiring elsewhere. NZ is just a giant grift operation on young people, making them pay for everything for themselves while everyone who is older gets to fill their boots while looking concerned about how sustainable it is.
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