HELPING KIWIS TO FLY

Useful hints, ideas and suggestions to help you get off the ground.
2022
  • Did my retirement plan survive Covid?
  • Will I have enough money to retire?
  • Do you trust your kids?
  • Did my retirement plan survive Covid?
    September 2022

    • The recent “NZ Seniors: The Retirement Living Report 2022” found that: Only 50% of Kiwi pre-retirees felt on track to retire at the age they prefer, and 28% of pre retirees reported that the events of 2020-2021 have impacted their retirement plans or have now left them unsure – most typically expecting to delay full retirement (23%)
    • The report also indicated: 40% of pre retirees do not feel particularly prepared or prepared at all financially for retirement, with only 8% (less than 1 in 10) feeling very prepared

    • Many small business owners were previously planning to sell their business and hit the golf course to reap the rewards of all their years of hard work. The money they hoped to realise through the sale of their business was a key part of their retirement strategy.

    • Now they are looking at more years of having to work, or a business that is unsaleable in today’s market.

    • Businesses have taken on more debt, experienced delays in supply and payment collections, and are still experiencing staffing issues and rising costs. All factors that impact the valuation of a business, future cashflows, and risk profiles. All factors that impact your ability to retire when planned.

    • In addition, the level of uncertainty of economic conditions, the cost of living crisis, out-of-control inflation, and reduced access to funding being experienced, has significantly reduced the number of potential business buyers in the market.

    • Having a good detailed retirement plan can help you evaluate alternative strategies to get your retirement back under control.

    • Also consider engaging a Business Mentor to help you package your business for sale. Seeking help now on how to restructure your balance sheet, or what changes you could make that will have the most impact on your future business valuation, could help shorten the time until you can retire.

    • Go to our Download page, and start planning today for the retirement you deserve. It is free, informative, and easy to complete. Don’t let your business hold you back.

  • Will I have enough money to retire?
    July 2022
    • This month (July 2022), Stats NZ published their wellbeing statistics and associated report. It doesn’t make for good reading.

    • Wellbeing statistics give a picture of social wellbeing in the New Zealand population. They're based on people's assessments of their own lives such as how satisfied they are, along with objective information such as their labour force status, age, income bands etc.
    • Data is based on Stats 2021 General Social Survey. The data collection began on 1 April 2021, a year after the first COVID-19 lockdown, but finished early on 17 August 2021 due to the first community outbreak of the Delta variant. So while it represents some of the issues experienced during Covid, the survey was conducted prior to the Governments acknowledgement that we now have a ‘cost of living crisis’, inflation is now running at almost 7%, and significant increases in mortgage interest rates have occurred or have been signalled to occur.

    • One of the questions was participants “Adequacy of income to meet everyday needs”. Participants were requested to select one of four answers: Not enough money, Only just enough money, Enough money, or More than enough money.

    • Over 33% of those in the 65 – 74 age bracket indicated they had not enough money (11%), or only just enough money (22.4%). This group is already retired, but are struggling financially.

    • What is more concerning is the younger age bracket, the 55 – 64 year olds. Almost 30% indicated they had either not enough money (9%), or only just enough money (20%). This is the period in their life when they should be saving for retirement, and they don’t even have adequate income to meet their everyday needs.

    • Furthermore, looking at income adequacy in household income bands, 35% of households with annual income in the $70,001 – $100,000 indicated they either don’t have enough money or have only just enough money, with 33% in the $100,001 – $150,000 indicating the same concerns. Obviously as income reduces, the level of concern gets higher with 46% in the $30,001 – $70,000 band, and 53% in the less than $30,000 band indicating concerns with their level of income. So even people in the higher income brackets are experiencing financial pressure.

    • If people are not able to address these concerns, then they are not looking forward towards any quality of lifestyle in retirement.

    • Making a plan now, setting some financial goals and priorities, and monitoring your progress towards these goals will help improve your quality of life in retirement. Retirement planning is not difficult and with our free 250+ page guide and excel spreadsheet you can create your own retirement plan.

    • Obtain your free copy today from our Downloads page and take control of your retirement - before it is too late.
  • Do you trust your kids?
    May 2022
    • New research from Consumer NZ has found the ‘Bank of Mum and Dad’ plays a sizeable role when it comes to helping young home buyers on the property ladder.
    • What Consumer failed to say is that many retirees get into financial trouble during their retirement because of money they lent to family – usually their children, or their children’s partners. Money that never gets repaid!

    • Common problems with providing loans to family are listed below. All valid, but all can be easily mitigated if you follow the guidelines provided in our free retirement planning guide.

    • 1. Open-ended loans
    • Loans to family members tend to be open-ended. The parties don’t reach an agreement for a timeline for repayments and don’t include interest on the loan. Lenders don’t know when their money will be returned, and borrowers don’t know when they need to have repaid the loans.

    • 2. Difficult to get your money back
    • As Shakespeare wrote, “For loan oft loses both itself and friend.”
    • It can be difficult to request repayment of a loan from a family member. More than likely, the lender cares about the borrower and doesn’t want the borrower to feel awkward.
    • Family get-togethers can become very awkward. The borrower, in particular, may feel uncomfortable being around the person who loaned the money. It can also be uncomfortable to be around other family members who know about the loans. Many retirees become stressed in these circumstances. This stress can lead to health issues.

    • 3. The family may ask for more
    • Once money has been lent to a family member, this person may return when he or she needs more money. In addition, other family members may also ask you for a loan. Can you afford more than one loan?

    • 4. Helping or enabling?
    • When you lend money to family members, you may be giving them an easy way out of their financial problems, instead of helping them work through their issues. Lending money to a family member costs the lender money. But often, the lender doesn’t charge interest as the loan is given to a loved one.

    • 5. Confusion between the parties
    • Family loans can impact the lending able to be accessed from a bank, so some people say they are gifts to avoid this. Once you start calling it a gift to avoid IRD or Bank obligations – then it is a gift and there is no reason for it to be repaid. Often the formality of ‘is it a gift or a loan?’ is not adequately recorded between the parties.

    • 6. Additional Taxes
    • If you lend money to your kids to purchase a house, and you become a ‘co-owner’, then you may be liable for capital gains tax if the property is sold within the bright-line period (currently 10 years) as it is not your primary residence. If you are receiving interest on the loan, you are required to pay tax on that interest as part of your income. Have you factored these taxes into your retirement planning?

    • 7. Risk of default
    • Do you understand the risk to yourself (and your retirement) if the family default on a loan you guarantee? A common mistake is to offer to guarantee family loans, or to provide your own house as security. If you act as a guarantee on a family loan, you risk your assets being repossessed if they default on their loan.

    • The best gift you can give your family is financial literacy – not a financial handout.
    • If you do want to help your children or grandchildren during your retirement, don’t give them free handouts. Any monetary assistance given must be by way of a well documented loan, secured over an asset. If you want to loan them money, agree when they will repay you, check that they can repay you, agree what interest rate will be charged (and what penalty interest will be charged), and what security they will provide. Also check with your accountant and lawyer any additional taxes you may be liable for and ensure you can afford them in retirement.

    • And before you provide any loan to family (or friends), ensure you can still live the lifestyle you want and deserve in your retirement. Check the impacts on your retirement if your kids default on the loan.

    • We have done the hard work for you and created a free planning guide and spreadsheet to model the financial impacts lending to family can have on your retirement. You can obtain your copy from our Downloads page.
Copyright © 2020-2025. Created by PMG Services. Terms of Use