Retirees With Bigger KiwiSaver Balances

SPEAKER_01 0:10

A lot more New Zealanders are retiring with more Kiwi Saber in their funds and balances and more money to spend. Hello, David. Morning. How are you? Lost my channel there. Right. More New Zealanders are retiring. They've got more money in their Kiwi Saber balances. What are they doing with that money?

SPEAKER_00 0:28

Yeah, so I think it's an interesting stat, right? So we notice that there's more and more people now are retiring with more money. So the average retirement dollars figure is now $95,000 for somebody at 65. So people are starting to take it a little bit more serious than they did than Kiwi Saber first came in. People were retiring on $10,000, $15,000 in their Kiwi Saber, they'd just go and use it for a car or do something holiday with it. Now it's there's a lot more to it. And I think it's something that everybody should start thinking about, no matter how old they are, is how do I get myself to my retirement? Make sure that you look after yourself. Don't rely on other people to look after you with your with your money you've got left over. And what am I going to do with it in retirement? And you look like it's all age groups really, but start thinking about it and going, well, okay, what do we need to do?

Leaving KiwiSaver Invested After 65

SPEAKER_01 1:18

Mm-hmm. Interesting, right? Because when I used to work in a bank, um I used to see a lot of people, and the moment they turned 65, they'll be running into the bank and getting all their KiwiSaver out. Absolutely. Because they saw it as a big risk, keeping it in KiwiSaver. But now I believe more and more people are leaving it in KiwiSaver.

SPEAKER_00 1:36

Correct. And using it as a retirement vehicle, yes. And one thing I'd add to that is that how do we use it in retirement, right? How are we going to use our KiwiSaver? And and one of the big things for KiwiSaver, well not just for any KiwiSaver, but for retirement money, is being looked at with government at the moment about what we call not the drawdown, but it's the deaccumulation effect of money when you hit 65. And you should still be growth assets in there, not just go straight into a tomb deposit or a or a fixed interest fund just because you've turned 65. I'm hoping when I turn 65 that I'll still be living at 85. So then I need to make sure my money is is going with inflation as well, right? And it has some growth assets. So there's lots of different ways to do that.

Building A Retirement Bucket Plan

SPEAKER_00 2:23

One of the main ways is to do what we call the bucket approach. Now the key behind the bucket approach is to understand your income and how much you need from your KiwiSaver to help you live on top of all the other income that you've got. The key is to understand and plan ahead and have a goal. Right? They're the two real key things. So by using the buckets approach, you've recognized how much you're going to need in the shorter term. So say you've got $250,000. $50,000 of that might be into your fixed interest or very short-term account because you know you need $2,000 a month for the next two years. Or six a year, let's say a year. Right? So you might not put that much in. But that's your safe bucket that you know is going to pay your income. Then you have your medium term bucket, which is your normally some somewhere from three to maybe five or six years, where you go, right, that's going to be medium term. So invested in a balanced type investment, maybe with a little bit more lean to a fixed income because it's a three-year thing as well. And that will feed that original bucket when that bucket starts to go. Then you have a high growth or growth bucket, which is for your longer term stuff. So like I say, I want to be in retirement for 20 years. I will then have a probably a fair portion of my money into that growth side, and that growth bucket will feed the medium bucket, and that will feed the income bucket. But planning ahead is the key, and going, right, this is how much I can live off, and this is how much I need from my KiwiSaver. You keep in your KiwiSaver, you set up your withdrawals, you set up your investments to reflect that. Really good to talk to an advisor just to get that right, and then it will just get rebalanced every year, or whenever the advisor decides, or if the provider might have a tool to help you with it as well. So that's kind of the the f the idea, and then you can review that. You might go, look, I'm I'm doing okay, I probably don't need as much as what I'm paying myself, so make sure you're paying yourself, and then you go, right, I might play around with that next year because I'm doing okay, I'm saving a little bit of money. Well, markets have been great, and therefore I could take a little bit more, or the markets have dropped a little bit, therefore I might have to review how much. But if you think if you plan over your 20-year period of retirement, you shouldn't need to play around with it too much.

SPEAKER_01 4:44

I love that. I know your bucket approach was super popular at the seminar we did earlier this year for our retirees. Yeah. And I know they loved it, and they were like, oh my god, you could do it this way. We didn't realize. So I think if people want to know more, they should definitely reach out to me and then I'll pass them on to you. Absolutely, yeah. Because it's just an incredible approach to have that long vision, long-term vision, because we are living longer. Yeah, we're not just dying at the retirement most of the time. We tend to live up to the 85, 90, and beyond.

SPEAKER_00 5:16

Yeah. That's comfort. Yeah. Right. It's just give you some comfort to know, actually, you know what, I'm going to be okay.

unknown 5:22

Yeah.

SPEAKER_00 5:22

And I can know that I'm going to get this over a period of time.

KiwiSaver Withdrawals And NZ Tax

SPEAKER_01 5:25

Now, a question to you, and I know we talked about whether we should do it as a separate episode or not, but now that we're here, do people get taxed on withdrawals?

SPEAKER_00 5:34

Yeah, so in New Zealand, we so the way Kibi Saver is taxed is taxed within the fund and it's taxed on income and generated in the generated within the fund and it's taxed at your own tax rate. So we mentioned PIR in a previous episode. So we're taxed on income. So if you withdraw it for first home, if you withdraw your money for uh illness, if you withdraw it for retirement, you're not taxed on that lump sum amount. Because you just keep it's just your money, it's there. There's no extra tax because it's already all been taxed. In other countries, sometimes there's a tax when you reach a certain age, sometimes it's tax when you withdraw the money. Over here, we don't have any inheritance tax, we don't have any other taxes where it'll be taken off the lump sum of their money.

SPEAKER_01 6:20

And let's not encourage the government to listen to this.

SPEAKER_00 6:24

No, I think we've got a really nice point of difference in New Zealand that that isn't the case. And it's been the case for a lot of years where they generally hopefully we know that coming up in the next couple of weeks, but hopefully they don't play around with that too much.

SPEAKER_01 6:37

Yeah, no, I love that. Yeah. So for those that are worried that, oh, I should get it all out of Kiwi Saber because I will be getting taxed and this and that, look, you'll be getting taxed regardless on the return of that investment, unless you just keep it in your everyday account. Yeah, correct. And but that that way your money depreciates. It doesn't grow with the economy. So that 100k today is going to be worthless come 10 years later.

SPEAKER_00 7:00

Yeah.

SPEAKER_01 7:00

So you might as well leave it an account where it grows. Whether you leave it in terms of deposit savings account or managed funds, you will still be taxed the prescribed investor rate. Correct. P I R. Yep. So for our retirees, normally it's about 10.5% if they're not working, right? Yep. And then for people that are working on a high income.

SPEAKER_00 7:18

Yep. 17 and a half. 17 and a half. 28. 28. But it's capped at 28%. So you don't have to pay more tax than that. So if you are in that 33% tax bracket somehow somewhere on the line, then a unit trust or what we call a pie fund is the way to invest. Not all turn deposits are pie funds, so they will they might you might get taxed at 33%. Some other investments out there, you still be taxed at 33%. So again, as a it's a benefit if you are a 33% taxpayer, you'll have some savings.

SPEAKER_01 7:46

Yeah, so definitely super important to check. But I love this. Thank you so much. And I hope that gives food for thought for people that are looking to retire.

SPEAKER_00 7:55

Yeah, hopefully. And and it just again, it just gives you something to think

KiwiSaver After Death And Wills

SPEAKER_00 7:59

about. You did mention earlier on, before we started, about what happens when somebody passes away.

SPEAKER_01 8:05

Yes, that's another thing as well, right? I didn't want to ask that morbid question, but thank you for bringing. So what happens to Kiwi Saber?

SPEAKER_00 8:12

So Kiwi Saber is just an investment. So if you pass away, it goes falls into your estate. So if you something happens to you prior to being 65, it just gets wound up in your estate and paid out to your beneficiaries of your estate or kept in the estate if that's what's happening. So it's not treated any differently to any other investment or any other account that you might have. What I would suggest, which is really important, is to make sure that your will is up to date. That's really important in the financial services world.

SPEAKER_01 8:40

So if you don't have a will, then it becomes a little bit hairier.

SPEAKER_00 8:44

Yeah, it ends up becoming what we call a test date, which means the courts will decide. Now, sometimes it might be black and white. My son has I've got one son, he will end up with my money. But you know, they open up for like whatever's left is.

SPEAKER_01 8:57

I think six to twelve months that any other people can actually come forward and say, hey.

SPEAKER_00 9:03

And it takes longer. If you don't have a will, it does take longer.

SPEAKER_01 9:06

So your son may be surprised.

SPEAKER_00 9:07

Yes. I might put somebody else in the will, you never know. But but what generally happens is that yeah, if you if you die without a will, it takes longer, you have to go through the courts for then to decide what happened to the thing. Okay. So again, there could be an instance where it goes somebody you probably might not want it to go to.

SPEAKER_01 9:24

Okay. So make sure you have it well. Correct. Okay. Interesting, right? Because uh some of the Kiwi Saber providers I've seen, like, they can also help you with something. Yep.

SPEAKER_00 9:34

Yep. So we uh I can't talk for other providers, but we we provide an accidental death cover which is free to our members and it can be paid up to $100,000, which is quite significant and can help the family if it's an accident, then we will always have a look at uh what's happened and then we will always suggest that there could be a possibility they could claim on that. But it's no extra cost for that for the for the client. We do that for free.

SPEAKER_01 9:57

Okay.

SPEAKER_00 9:58

Wow, that's awesome. Yeah, it's very cool. So yeah, look always if that's important, then make sure your provider m does that as well.

SPEAKER_01 10:06

Awesome.

Final Thoughts And Quick Disclaimer

SPEAKER_01 10:06

Thank you so much, Dave.

SPEAKER_00 10:07

No problem.

SPEAKER_01 10:08

This episode is not sponsored by Booster. Just making it clear.