By Amanda Morrall
1) Weight and wealth
"They" say you should never ask a woman (at least those of a certain age) how old she is. And weight? Don't even go there unless you enjoy being slapped or relegated to the social equivalent of Siberia for a few days. Actually, I've been there (the real Siberia) and it's not so bad. Well not at least for a cold conditioned Canuck.
Okay, so it's sensitive stuff. I'll admit it. You don't have to announce it to world but you may want to quietly hop on the scales next time you see one and then consider this: the lower your BMI (that's body mass index) the higher your net wealth.
That at least was the finding of a research paper by Jay L. Zagorsky from the Centre for Human Research the details of which are reported in this blog from dqydj.net.
The sweet spot for a white woman such as myself is a BMI of around 18 with net worth peaking around $140K. For males, the top net worth zone corresponded with a BMI of around 24.
I don't know if I buy it. It's just more food for thought to go with your finances folks.
Body mass index is defined as an individual's body mass divided by the square of his or her height.
How to calculate your net worth here.
2) Sudden death
Personal finance touches on a lot of sensitive areas, i.e. death, retirement savings, debt, wants vs needs. As such, I tend to make a lot of people nervous when I talk about my job or the stories I've been working on. I once suggested that couples, even those in good marriages, sit down and have a "what if" chat just to see how their finances would play out if they separated, or divorced. I still remember the look of horror on the TV presenter's face. I still maintain it's a good idea regardless of whether you're in a stable or a rocky relationship.
This Globe and Mail article makes a similar suggestion with respect to stress testing your finances to see how well they'd stand up in the event of a sudden death. It's not morbid, just practical particularly for those couples where one person manages all the money and the other doesn't even know what the banking passwords are.
3) Funeral insurance
Last week, a reader sent me an email asking how quickly they could get their hands on their KiwiSaver money should they shuffle off this mortal coil unexpectedly. I pointed them in the direction of our extensive Q&A section on KiwiSaver where I explored that issue previously. I've cut and paste my answer below. In the ensuing emails, I discovered their reason for asking was because someone was trying to sell them funeral insurance; the cost of which was going to be $28 a month for approximately $10,000 in cover. They reasoned that it would take 25 years for them to save $10,000 (at a rate of $28 per month) so thought maybe it wasn't such a bad idea.
Having a cashed up emergency fund to cover this eventuality is one alternative but there are many other ways to restructure your finances to cover this cost if you get creative.
Just how much does it cost to die anyway? I looked at that subject here in another issue of Take Five.
The short answer to your question is, don't bank on your KiwiSaver money to cover your funeral costs. While I understand the process of withdrawing your funds can happen fairly quickly if you have all your ducks in row, it's unrealistic to expect that to happen in time for your funeral, which is usually a few days after death.
I consulted with one provider to get a rough idea of time but they couldn't give a definitive answer as it depends on your circumstances.
If you have more than NZ$15,000 in your KiwiSaver account, the money will be subject to probate as it will form part of your estate. If you don't have a will, you'll need a letter of administration. Dying intestate presents all manner of issues which can be time consuming and costly to resolve so hopefully you've got that one sorted.
If you have less than NZ$15,000 in your KiwiSaver account, then probate is one less obstacle to getting at the money. If you want to be organised about this (and it sounds as if you do), pay your provider a visit and review what's expected of you. It sounds like you can do a bit of prep work here and have everything ready to go in advance, to minimise the amount of work involved for your grieving spouse. In addition to the standard application form (which has to be notorised), your wife or another party acting on your behalf, will have to supply a copy of your death certificate.
If your wife is already losing sleep over this one, it is probably a good idea to review with your provider your circumstances and discuss what will be required of you, so there's no surprises and unnecessary hold ups in the event of your death. Pricing out a funeral that you can afford is also a good idea, if you haven't already looked into that one.
Not exactly uplifting phone calls to make I know but it may bring some peace of mind just knowing what's involved. I remember having to make a few of these calls on behalf of my late grandmother and it wasn't easy.
For what it's worth, here's what the withdrawal form (in the event of death) looks like for Fisher Funds, just so you can get a sense of what kind of information you'll be asked to supply.
Just as an aside, maybe it would be worth looking into withdrawing your funds (while you're still alive) so you have that money ready to go in advance. Serious illness is one of the conditions for early withdrawal of your funds. Not sure what your health status is, but it's possible you could qualify for this one. See Inland Revenue's KiwiSaver website for their content on "serious illness.''
It says on the website you can withdraw the total funds in your account, including the current value of:
- your contributions
- your employer's contributions
- the $1,000 kick-start
- any member tax credits.
Maybe this option would suit you better? Check with your provider to see what's involved.
Live fully while you can.
4) How much do you need in retirement?
I sound like a broken record but this is a biggie that keeps coming up, again and again. Here's three simple steps described beautifully by a blogger by the name of dividendninja.com to help you figure it out. Sorted.org.nz also has some great tools and calculators.
5) Active vs passive
No, it's not beat up on fund managers day here at interest.co.nz. We're just trying to raise awareness about how much you pay in fees on managed funds. Here, Emma Wall from the Telegraph looks at the active versus passive debate on investing and the relative costs of each style.
To read other Take Fives by Amanda Morrall click here. You can also follow Amanda on Twitter @amandamorrall
13 Comments
Importance of planning
A man established a successful business which he left to his two sons as 50/50 share holders and directors. They both worked there for many years, although the younger didn't really like that line of work. The elder started an affair the started the disintegration of his marriage.
Before any divorce settlement could be negotiated the elder unexpectedly died in his mid fifties.
His death left the younger in sole charge of the widows largest investment. The brothers made no plans of any kind for any end to the business. No life, key man or other insurances. No shareholders agreements. No agreed share valuation methods. Not even a simple memorandum of understanding.
The younger proceeded to lock out his brothers widow and ran the business for his own benefit.
Although she now owns the family home it was badly damaged in the earthquakes and will be demolished. Having given up her career for her children and husband she now has to get low paid work to cover the daily cost of running the household (two children still at home) while on paper she has a large investment portfolio.
If you make no plans, things may not turn out anything like you expect.
Of course if you have no kids these kinds of things never happen. And that leads on to the added bonus of not really needing any funeral insurance because when I die there won't be any kids around to mourn my passing and I won't care what happens to my body once I'm gone - you can dump it in a mass grave or make it into pet food - either works for me... because I won't be here!
Result!
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