Where would we be without men?

When my father was age 90, he was going to the local pub for Sunday lunch. When I asked who he was going with, he replied, “20 widows and me” (with a cheeky grin). I said, “What, no men?” And he said, “No, they have all gone.”

This is of course no surprise to anybody; we all know that women live longer than men. Let us assume that a husband age 68 retires. His wife is 65 so they now both get National super of $27,000 a year. They have a debt free home and have saved $300,000 for retirement thus they are looking relatively comfortable. Assuming a 4% after tax return and 3% inflation, how long will this money last? 

If they are sure they will only live 10 years, they can spend $31,000 a year.If they are sure they will only live another15 years, they can spend $23,000 a year. If they are prudent and assume they will live for 20 years, they can spend $19,000 a year. If one of them lives for 30 more years, they can only spend $15,500 a year.

Now we all know who is likely to live longer – the woman – so it is clear that all women need to be well-informed about retirement and all its financial aspects. There are many, many issues that you need to be aware of;

• Will the retirement age be raised from 65 to…?
• Should you perhaps work a little longer or keep working part-time?
• Why you need more investment returns than the bank will pay you
• How you can get better investment returns without taking excessive risks
• Women seem to outlive men by 7 to 10 years
• A woman living alone gets $18,000 a year govt. super
• A woman living alone will have most of the expenses that a couple would have
• If you are going to outlive your man, you need to understand money today

This can seem a pretty depressing subject, but it need not be. In fact, you can have a pretty good retirement in NZ if you plan ahead, and there are many things you can do out and about at low cost.

The key to having a good retirement (and you can)
Knowledge is power – and that is very much the case when it comes to retirement. It does not matter if you are 25 or 75, women of all ages can and will benefit from planning and learning about retirement and finances. You don't need to be a rocket scientist either;

• get started on a savings plan today
• KiwiSaver is good, but for most of us that will not be enough
• any saving is better than no saving
• learn the basics or more about investments
• get professional advice from an independent adviser or suitably qualified mentor
• make a plan and stick to it
• review your plan at least annually with your adviser
• be prepared to be flexible
• never, never ever give up – Winston Churchill

Property – your home
Keep an eye on property prices, because at some point you may downsize your house to release some more cash - the fallback position.
Since you do not know how long you are going to live, “keep your powder dry” and do not use up your fallback position until later on – say age 77 to 80.
House prices are a very interesting issue and I would not be so brave as to forecast where they will go. However, the government recently tweaked the rules and asked the Reserve Bank to ensure house prices do not rise too quickly.
Excessive house prices for young families were recently referred to in the media as “a form of child abuse” and the government is working on cheaper first homes as I write.
House prices are very high compared to wages in NZ. Taking all these factors into account, one would be unwise to count on significant capital gains, year in, year out.
So ladies, you can have a good retirement, but to get it right, you need to take action and seek the knowledge. If you do, you will gain a lot of satisfaction and peace of mind. Good luck.
Alan Clarke
 
www.investandretire.co.nz
 
Alan is an independent authorised financial adviser (AFA) and his disclosure statement is available on request and free of charge.