IN YOUR FUTURE
financial wellbeing. The reality of being
in your forties means your risk of illness
and required career breaks increase
dramatically.
Future-proofing your finances
Generation Kiwisaver
Planning for retirement - Ross Frater, Authorised Financial Adviser, Core Advice
Over my 17 years in the financial industry,
I’ve seen a rapid rise in instances where
long-term relationships or marriages
dissolve and the woman’s asset base has
consequently halved. For this to happen at
a vulnerable age such as your forties and
fifties can be financially devastating, as you
may not necessarily be in the fortunate
position to make up that lost value. A recent report, commissioned by the
Financial Services Council, to discover what
retirement means and will look like for New
Zealanders, made some interesting findings.
In these circumstances, your greatest
asset is your earning capacity, so it’s
important for you to invest in your career
development and maintain your career
path. For that reason, your income is worth
protecting fiercely – even if your partner
earns enough to cover all your expenses.
It’s not the most romantic thing to do, but
this is the most essential. Go into every
new relationship with your financial future
intact, whatever the outcome. It discovered that younger New Zealanders
are increasingly reliant on KiwiSaver as their
main source of income when planning for
retirement and want more support with
their financial planning. For younger New
Zealanders, only 54% of respondents aged
18-34 expected to have their own home and
only 30% expected to have New Zealand
Superannuation at retirement. Millennials
will be Generation KiwiSaver. This is a
significant change from the findings of their
earlier research, which found that owning
a mortgage-free home was the extent of
retirement planning for many.
Find your financial support
The best advice I received was to surround
myself with the right people – and this is
particularly true when it comes to your
finances. Don’t be afraid to enlist strong
support to help achieve your financial
vision. Is building wealth important to you?
Meet with a few financial advisers until
you find one you’re comfortable with and
who understands your vision. Is buying
investment property your key action for the
year? Find a mortgage broker you want to
give your business to. It’s all about building
your financial ‘A-team’, one that empowers
you to achieve your financial goals.
The report focused on those aged 18-34 and
their attitudes towards retirement planning.
It examined what they expected in their
retirement, how this would be funded, and
their confidence towards future planning.
Despite having a lower asset base,
Generation KiwiSaver has a higher
expectation on the income needed to retire
than the primary working age group – 2%
higher at $754 a week. This means there is
likely to be a $205 weekly shortfall between
expected retirement income and actual
retirement income for under 35s. Perhaps
unsurprisingly, the report found that young
people are more worried than not over their
prospective lives when they stop work –
even though they still have plenty of time to
plan and prepare for it. 18–24 year olds are
less concerned than average, but concerns
increase for those aged 25–34.
Given this, the research has a clear message
about the need for continued strengthening
of KiwiSaver and improvement in financial
advice. An overwhelming number of under
35s want the law changed so that minimum
contributions are lifted gradually. There is
also a strong desire for greater visibility of
how KiwiSaver funds are performing.
The research shows that millennials more
than any other age group support financial
advice being provided in new ways such as
via robo-advice, and want a personalised
financial plan. The industry challenge is to
help younger New Zealanders diversify away
from a pure KiwiSaver approach and into
other wealth-building products.
The findings of the ‘Generation KiwiSaver’
research are a wake-up call for all. Getting
KiwiSaver settings right will be vital for the
future of young New Zealanders, and they
will need better financial advice delivered in
different ways.
The first step is often the hardest – but
you don’t have to do this alone. Contact an
Authorised Financial Adviser to discuss your
goals, review your current situation and plan
for your future. You are welcome to contact
one of the team for an initial discussion –
[email protected] or phone 5789029.
You can also read the full report at
www.financialadvice.nz.