Doing the sums for retirement brings on the uh-oh moment

by Bill Ralston / 23 January, 2018

Photo/Getty Images

Lying in the hot sun, watching the surf roll in on the beach out front as another set of summer holidays came to an end, I reached for a cold beer but, instead, picked up the computer and looked at a newspaper site. That was a bad mistake. My eyes fell on a business story headlined “A wake-up call – the harsh reality of retirement in NZ”.

I had always assumed my retirement would be something like I was doing at that moment, involving lying in the sun, drinking beer and reading books. Not according to this opinion piece. It talked of a recent Financial Services Council report that said many retirees were squandering all their savings in the first 10 years, then spending the rest of their time on the planet living solely off Government superannuation.

Currently, that Super is about $450 a week before tax if you’re on your own and $680 for a couple. I used my phone to check the bank account and discovered we had frittered away $600 in the previous three days. Uh-oh. I checked our last KiwiSaver balances. Paltry. We also have a small investment fund. Very small, I discovered.

There is always that cornerstone of lucky prime investment for those even luckier Kiwis who own their own home. Yes, when I peruse the property pages, the value of the Auckland house looks impressive, but we have also bought a small shack in sunny Hawke’s Bay. The theory was that we should hold onto the Auckland place until we were sure we wanted to live permanently in the Bay, so we rented it out to friends. Sensible, except the mortgage payments on two properties are astronomical and not really covered by the Auckland rent. Uh-oh, again.

The answer is relatively simple. Sometime in the next 12 months we should sell the Auckland house, fix up the shack, retire all debt and batten down the hatches as we head towards retirement. I picked up a pen and worked out at 5% interest what the residue of cash left would pay us in addition to the pension. It looked suspiciously small, especially after tax.

I spooled down the page and discovered hundreds of comments from folk who seemed to be in a much worse position than we are. A quick summary of the comments revealed it was all the fault of National, Labour, Sir Robert Muldoon, Winston Peters, greedy Australian banks, pampered baby boomers, hopeless millennials and our parents. None of which is particularly helpful if you are facing a future of living your old age in a tent and eating pet food.

Reducing costs is one way to survive the Jellymeat Years. The expense of maintaining your children is (hopefully) gone, you no longer have the outlay of commuting to work, theoretically you have all the big possessions you’re likely to need before you die, you have sold your home to eliminate mortgage debt and you’ve retreated somewhere cheaper to live. If enough of us big-city pensioners did that, we’d free up a lot of cheaper housing for the next generation.

My advice to people of my age is do it quickly. Nothing ever stays the same. Unbelievably, house prices may actually fall. Some future government, in an act of utter bastardry, may introduce means testing on superannuation or raise the age of entitlement, which could remove hundreds of dollars a week from your pocket, sending you back to the supermarket pet-food aisle. Now, what did I do with that beer before I was so cruelly distracted?

This article was first published in the January 13, 2018 issue of the New Zealand Listener.

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