Retirement and Financial Planning

Retirement

Even if it seems a long way off, it pays to plan for your retirement as early as possible.  Many retired New Zealanders get their income from two main sources – NZ Super, and their own savings. However it is estimated that around 40% of New Zealanders over the age of 65 rely on NZ Super alone. The following are the current rates of NZ Super:

Category Weekly rate
Gross Net
Single, living alone $450.10 $390.20
Single, sharing accommodation $413.60 $360.18
Married or in a civil union or de facto relationship, both qualify Total $681.60 $600.30
Each $340.80 $300.15
Married or in a civil union or de facto relationship, non-qualified partner included on or after 1 October 1991 Total $645.56 $570.56
Each $322.78 $285.28
Married, non-qualified partner included before 1 October 1991 Total $681.60 $600.30
Each $340.80 $300.15
Qualified partner in rest home with non-qualified partner in the community $299.01 $265.54

 *Based on Tax Code “M”. Rates are as at 1 April 2017


How much you’ll need to save will depend on your own circumstances, but the sooner you start, the more you will have.

How much will you need?

Everyone’s retirement needs are different. To work out how much you will need, think about how long you will have in retirement, what sort of lifestyle you will want, and where you will live. 

How many years will you have in retirement?

People are living longer these days. On average, 65-year-old men can now expect to live until they're 86, and 65-year-old women until they're 88 and in the future, we'll probably live even longer. (Figures based on the latest Statistics New Zealand cohort life tables and national population projections.)

Where will your money come from?

Look at the current rates of NZ Super. Could you live on that amount?

Most likely, there will be a gap between the income NZ Super provides, and the income you want in retirement. So you will need to have other sources of your own such as your savings. These may come from income and lump sums from retirement savings schemes like KiwiSaver, other pensions and workplace savings, investments, and cash deposits.

You may prefer and be able to keep working, either full-time or part time (as long as you have the skills and capacity). Around a third of Kiwis continue some form of paid work past age 65.

Other sources of income could include investment income from the sale or rental of property, the sale of a business or an inheritance.

Managing Debt

How do you balancing savings with reducing debt. What debt should you get rid of first. How can you structure your mortgage to pay of your debt quicker. These are all things you need to consider as part of planning for the future.

KiwiSaver

How does this fit in with your retirement planning. Are you on track or can you contribute more. Is the investment you are in the best one for you.

A little planning now can potentially save a lot of financial heartache later in life.

 

Financial Planning

What Is Financial Planning?
Financial planning is the process of meeting your life goals through the proper management of your finances. Life goals can include buying a home, saving for your child’s education or planning for retirement.  The financial planning process involves the following steps:  

  • Gathering relevant financial information
  • Setting life goals
  • Examining your current financial status
  • Coming up with a financial strategy or plan for how you can meet your goals
  • Implementing the financial plan
  • Monitoring the success of the financial plan, adjusting it if necessary 

Using these steps, you can determine where you are now and what you may need in the future in order to reach your goals.

What Are the Benefits of Financial Planning?
Financial planning provides direction and meaning to your financial decisions. It allows you to understand how each financial decision you make affects other areas of your finances. For example, buying a particular investment product might help you pay off your mortgage faster, or it might delay your retirement significantly.

By viewing each financial decision as part of a whole, you can consider its short and long-term effects on your life goals. You can also adapt more easily to life changes and feel more secure that your goals are on track.

Can You Do Your Own Financial Planning?
Some personal finance software packages, magazines or self-help books can help you do your own financial planning. However, you may decide to seek help from a professional financial planner if:

  • You need expertise you don’t possess in certain areas of your finances. For example, a planner can help you evaluate the level of risk in your investment portfolio or adjust your retirement plan due to changing family circumstances.
  • You want to get a professional opinion about the financial plan you developed for yourself.
  • You don’t feel you have the time to spare to do your own financial planning.
  • You have an immediate need or unexpected life event such as a birth, inheritance or major illness.
  • You feel that a professional adviser could help you improve on how you are currently managing your finances.
  • You know that you need to improve your current financial situation but don’t know where to start.

When working with First Capital you remain the focus of the financial planning process. As such, the results you get from working with us are as much your responsibility as they are those of the planner. To achieve the best results from your financial planning engagement, you will need to be prepared to avoid some of the common mistakes by considering the following advice:

  • Set measurable financial goals – Set specific targets of what you want to achieve and when you want to achieve results. For example, instead of saying you want to be "comfortable" when you retire or that you want your children to attend "good" schools, you need to quantify what "comfortable" and "good" mean so that you’ll know when you’ve reached your goals.
  • Understand the effect of each financial decision – Each financial decision you make can affect several other areas of your life. For example, an investment decision may have tax consequences that are harmful to your estate plans. Or a decision about your child’s education may affect when and how you meet your retirement goals. Remember that all of your financial decisions are interrelated.
  • Re-evaluate your financial situation periodically – Financial planning is a dynamic process. Your financial goals may change over the years due to changes in your lifestyle or circumstances, such as an inheritance, marriage, birth, house purchase or change of job status. Revisit and revise your financial plan as time goes by to reflect these changes so that you stay on track with your long-term goals.
  • Start planning as soon as you can – Don’t delay your financial planning. People who save or invest small amounts of money early, and often, tend to do better than those who wait until later in life. Similarly, by developing good financial planning habits such as saving, budgeting, investing and regularly reviewing your finances early in life, you will be better prepared to meet life changes and handle emergencies. 
  • Be realistic in your expectations – Financial planning is a common sense approach to managing your finances to reach your life goals. It cannot change your situation overnight; it is a lifelong process. Remember that events beyond your control such as inflation or changes in the stock market or interest rates will affect your financial planning results.
  • Realize that you are in charge – If you’re working with a financial planner, be sure you understand the financial planning process and what the planner should be doing. Provide the planner with all of the relevant information on your financial situation. Ask questions about the recommendations offered to you and play an active role in decision-making.