Dividend Investing

[Sgt Pepper]

Approaching retirement with the objective of investing to secure a reliable dividend stream is it best to select stocks individually or invest in a Dividend Exchange Traded Fund? Any comments would be gratefully received

[peat]

depends on your skill set really.
The easy way would be the fund.
The hard way (stock selection) may do better - of course it may not, but it may also show more volatility in value due to less diversification.

Why dont you do both with half and see if you can outperform the fund. That'll keep you on your toes.

[percy]

depends on your skill set really.
The easy way would be the fund.
The hard way (stock selection) may do better - of course it may not, but it may also show more volatility in value due to less diversification.

Why dont you do both with half and see if you can outperform the fund. That'll keep you on your toes.
Sage advice.
A friend of mine did this before he retired.
Was pleasantly surprised he out performed the funds.

[alokdhir]

KFL is great investment for retired people . It outperforms market regularly plus give quarterly dividends as PIE income so no need even show in IR3 . Total peace of mind direct credit to bank every 3 months 2% of the NAV . They never missed any dividends ...even last March they paid dividend :t_up:

[mondograss]

Could also look at Milford Diversified Income managed fund. I had some money in that for a while.

[beetills]

No expert for sure but i am nearing retirement in the weeks ahead and i have invested in the USA markets in REITS.Divies every 3 months and some even pay out monthly.
If you are a REIT by law you must pay out 90% of your profit.

[fungus pudding]

No expert for sure but i am nearing retirement in the weeks ahead and i have invested in the USA markets in REITS.Divies every 3 months and some even pay out monthly.
If you are a REIT by law you must pay out 90% of your profit.
Why not nz reits?

[beetills]

I just liked the USA REITS as they were invested in crop farming as well as rental housing.They appealed to me more than commercial buildings.

[RTM]

Approaching retirement with the objective of investing to secure a reliable dividend stream is it best to select stocks individually or invest in a Dividend Exchange Traded Fund? Any comments would be gratefully received

I faced this 10 years ago and decided to invest in stocks. Have accumulated around 40 NZ/OZ stocks over time. Been a great interest. However, there are no free lunches. Takes quite a bit of time and effort to keep on top of. Because of when I started it’s all been relatively easy (so far) as in general most things have been on an upwards trajectory. Not sure how well I would manage in a downtrend, wasn’t fun last year and I was like a possum stuck in the headlights for a bit. Also if I got sick, or couldn’t tend to them (eg because I lost my marbles) I wonder how it would go ? Having said that, in reality I now make only a few transactions a year, rarely selling and occasionally opportunistically adding to existing holdings. I haven’t concentrated solely on dividend stocks, having a bit of fun wth others such as Serko and Synlait. Overall, pleased with the outcome. Start small and add as you get more confident in your decisions.

[iceman]

Interesting discussion. I´m in the same situation nearing my retirement from my current profession. Have definitely been looking more for steady good companies on the NZX that are well managed, reasonably geared and most importantly, have a good chance of increasing dividends in the future.
I like the idea peat & percy mention to split it between a dividend fund and personal selection. I´m definitely keen on having some international exposure to avoid having all assets in NZ$

[ratkin]

If in early Sixties with an optimistic life expectancy, you would still want a few growth companies in the mix.
Going for the highest dividend yield now, might not be the best Ten/Twenty year plan.

[artemis]

What ratkin said. Also shares are usually liquid so if looking for income could add some growth shares that do not attract CGT for non traders. Sell some if extra income is needed. Bit more risky but heck we saw some blue chips fall sharply at times in 2020.

[SPC]

I've been self supporting in recent years entirely from dividend stocks so it's doable and I'm way short of 65. Early days were filled with mistakes like most seasoned investors by I've settled on Fisher's listed funds covering Nz Au and global stocks (diversification over 100 stocks) and some local REITs.
Quarterly (cash) distributions from all of these and pie status simplifies tax compliance. I top up when prices dip and grow the funds continuously.
All NZX listed, so all totally liquidable any day of the week if you want or all of your money back. Works for me, simpler than rentals..

[Sgt Pepper]

How important are dividend reinvestment plans when considering investing for relatively reliable dividend income streams?

[SPC]

Horses for courses. Some prefer to reinvest some or all of each div ocassion in new shares (so no cash for that distribution but new shares usually come at a minor discount) whereas others take the cash. I prefer cash and buy additional shares at times and prices of my choosing.
DRPs can easily be switched on and off by logging on to Computershare when ever you like.

[justakiwi]

I guess you have three options:

1/ reinvest all dividends as a way to add to your holding (usually) at a discounted SP
2/ take all your dividends as cash
3/ Do a mixture of both eg: elect to reinvest a portion of your dividend for each holding, and take the other portion in cash.

DRP is a good way to increase your holding, if that is what you want to do. What you elect to do before retirement may not be what you elect to do after you retire. It also depends on the size of your investment, what other sources of retirement income you will have, and what your chosen standard of living in retirement will be.


How important are dividend reinvestment plans when considering investing for relatively reliable dividend income streams?

[value_investor]

I've got a mix of companies from the nzx in my portfolio. I think if you're going to be dividend investing, you'll need to have the mindset that it will take years of compounding to get to where you want to be, and I'd a say its a minimum of ten.

You'll need to find solid dividend paying companies, that have a runway for future growth and hold them for years. There's a few categories of these on the NZX which are a good place to start:

- Gentailers being your MELs, MCYs, GNEs etc. These have consistently increased dividends over several years (although this might not continue into the future).

- Large property holdings being GMT, KPG, PCT etc. These have been good holders for exposure to the commercial property market. While dividends have been up and down in recent years, if you are holding these long term I think you'll be just fine.

- Retirement Stocks such as OCA, SUM and ARV. These are more emerging for me and where I see a lot of future growth coming from. While dividends aren't impressive as a percentage, I think there are real dividend and capital gains to be made here.

- Large conglomerates such as EBO and IFT are great companies to hold because the dividend is so solid. I think IFT are one of the best allocators of capital I have seen. Unfortunately, these companies don't go on sale very often but good to double or triple down.

- Banking industry is another one to consider, the likes of ANZ, WBC. I'm not a fan of these ones because they are in a very mature place in the market and their ability to grow from here is small. I do like HGH who are probably the only one offering a point of difference.

I avoid holding retail stocks completely but I know people have had success holding HLG. However holding WHS, GXH etc might have some upside in the future because they've been beat down so much. I just wouldn't sleep as well holding them!

I'd consider if you are just in the growth phase and you don't need the cash, to always reinvest if they offer a DRP. If you believe the company has the ability to use your money to make more money then I'd rather they have it than I would.

There is a NZ based ETF with Smartshares DIV. I'm not a fan of this because I don't believe they are in it for the long term and instead offer you the aggregate return of dividend stocks for the current time period. The dividend gain from holding it is therefore not compounded. While I like ETFs for the general market, I don't think a dividend ETF is the best way to go about it.

I like having a core of dividend paying stocks and like to add to it when stocks go on sale. Late last year to now for example, I've been building a position in KPG. You sometimes have to be patient because good dividend paying stocks exist BUT they aren't always worth the value at the price.

[DarkHorse]

International research shows companies with GROWING dividends tend to produce higher returns for lower risk and with less volatility; so ideally I'd be inclined invest in companies with moderate and consistently growing (rather than larger but static) dividends, use those for regular income for regular expenses, donations etc, then just sell some shares every few years for that one off splurge on a new car/world trip etc.

[SBQ]

I just liked the USA REITS as they were invested in crop farming as well as rental housing.They appealed to me more than commercial buildings.

The IRS tax with-holding would be the primary issue for not choosing REITS in the US. Dividends received in NZ or abroad still are taxed at RWT rates - furthermore FIF on the US REIT holdings for any paper capital gain. However would there be NZ REITS that are 'fully imputed' tax credit on the dividend payouts? This would be far more attractive.

I've never fully understood the NZ obsession for chasing dividends. I much always preferred the Buffet view for allocating income during retirement, which is to sell 'a portion' of the share holding when you need ; and not be triggered with a tax situation when the company issues a dividend. Left over after-tax dividends is a waste. If the wife wants a new car this coming year, or if I want to buy the boat, I simply just sell enough shares at that time to pay for these outgoings - and best of all, the capital gains would be tax free for NZ listed shares. However, once the company pays out all it's retained earnings as dividends, then the book value per share drops and fundamentally, the stock price on the open market will also reflect that by having little or no capital gain (ie. TWG.NZ dividend policy but flat share price for the past 20+ years - hell inflation has made it worse).

[fungus pudding]

International research shows companies with GROWING dividends tend to produce higher returns for lower risk and with less volatility; so ideally I'd be inclined invest in companies with moderate and consistently growing (rather than larger but static) dividends, use those for regular income for regular expenses, donations etc, then just sell some shares every few years for that one off splurge on a new car/world trip etc.

I am a fan for just stacking more income with every move. Never buying with the thought of selling - just adding more income. That should eliminate need to sell for a 'one off splurge', and if it doesn't at least the income is there to service a splurge loan. Make 'who am I going to leave all this to?' your biggest concern.
I don't claim to be an expert. In fact I'm quite the opposite. I know nothing at all about the sharemarket, but I have managed to build an income far in excess of my annual requirements without the requirement of 'work'. (Apologies to the sensitive - please forgive that four letter word.)

[NZSilver]

Would be very interested if you could give me more details fungus, what kinds of companies or funds, experience, what you have learnt/would do differently, have you had to sell holdings it just hold. I'm in the process of building a portfolio, one where I don't have to worry/think about to much on a daily or weekly or even monthly basis. current bug portion in ARG, LIC (I own a herd of cows and can buy this one) and SKC, some KPG, NZX top 10 smart share, and USgrowth smart share, CSL on asx long term, ADA & SCL on asx more for small cap interest and these asx only small holdings. Also been in DMX capital for a while.

[kiora]

I am a fan for just stacking more income with every move. Never buying with the thought of selling - just adding more income. That should eliminate need to sell for a 'one off splurge', and if it doesn't at least the income is there to service a splurge loan. Make 'who am I going to leave all this to?' your biggest concern.
I don't claim to be an expert. In fact I'm quite the opposite. I know nothing at all about the sharemarket, but I have managed to build an income far in excess of my annual requirements without the requirement of 'work'. (Apologies to the sensitive - please forgive that four letter word.)

Along the same as my 41 yr investing journey FP. In the last decade I have stacked more into "high return" growth funds and share portfolio that I add to "winners" and cull out the cyclical dead wood . The share portfolio I have reassessed every year or so( early Feb 2020 & Jan this year ) when I have perceived markets are turning. This has left my share portfolio around 65% IFT & 30 % FPH with a small % dabbling in Co's that I am testing the waters on for future growth
This way any inheritance can be easily self managed even by someone with little knowledge on investing

[fungus pudding]

Would be very interested if you could give me more details fungus, what kinds of companies or funds, experience, what you have learnt/would do differently, have you had to sell holdings it just hold. I'm in the process of building a portfolio, one where I don't have to worry/think about to much on a daily or weekly or even monthly basis. current bug portion in ARG, LIC (I own a herd of cows and can buy this one) and SKC, some KPG, NZX top 10 smart share, and USgrowth smart share, CSL on asx long term, ADA & SCL on asx more for small cap interest and these asx only small holdings. Also been in DMX capital for a while.

My only direct share market investment is in various NZ LPTs. I also have a bit in Milford assets. Not sure why.
I have had a lifetime of owning flats, houses and the odd commercial and or industrial building. Generally avoiding selling. Accumulate is the motto. But now for an easier life in the last few years I have had a clear out, retaining one commercial building only which makes all additional income taxed at 33% and soon to be more. So lpts with their PIE tax make sense, especially now as we head to 39% top tax rate for income over 180k - from 1st April.
It's all horses for courses and if were younger I might revert to a more hands on approach.
Most experts preach diversification, and for good reasons. However I have unshakeable faith in commercial and industrial real estate. There are traps there of course, and LPTs provide diversification within that one asset class, as opposed to having a bundle tied up in one or two buildings (while I have great faith in buildings - it doesn't necessarily apply to tenants or their activities.)
Across the LPTs I hold there are well over100 tenants spread over dozens of quality well located buildings. That's sufficient diversification for me. Not a lot to keep me awake. My advice is always - keep building income.

[Beagle]

Approaching retirement with the objective of investing to secure a reliable dividend stream is it best to select stocks individually or invest in a Dividend Exchange Traded Fund? Any comments would be gratefully received

Okay to answer that question, (because there's a range of strategies) I think its best to reverse engineer this and ask what level of weekly income do you want in retirement ?

More than happy to weigh-in on this as I am in much the same position.
Questions that one might like to consider that I have been pondering.

1. What hobbies and interests do you want to pursue in retirement and what might that cost as a lump sum up front (e.g. nice new motorhome or boat) and to run on an annual basis ?
2. What other activities does one want to undertake in their retirement, e.g. annual, (or more frequent ?) holidays outside N.Z. or cruises (obviously once Covid risks have abated)
3. What level of support does one want to continue to provide for charitable or philanthropic purposes.

Once you have answers to the above one then needs to ponder what level of lifestyle generally one wants to have, luxury, comfortable or frugal.
If I recall correctly sorted had some good info on this. Basic super for a married couple ifs $652 per week net after tax https://sorted.org.nz/guides/retirement/this-years-nz-super-rates/

Good page here with heaps of guides - time does not allow me to review today https://sorted.org.nz/guides/retirement/

Suppose you decide you want a comfortable lifestyle and suppose like me your 60 this year and am thinking of retiring before you turn 65 and wondering if you have enough and what is the best way to invest.

If I remember correctly sorted reckon you need around $1,200 - $1,300 per week to live comfortably, (regular trips away, lots of treats, meals out, participating in hobbies e.t.c.). Lets assume a comfortable retirement is something I assume everyone here wants as a minimum. This is about double the rate of N.Z. super for a married couple which is currently $652 per week.

So the question then becomes what is the optimum investment strategy to generate another $650 per week plus whatever extra on top of that for high cost hobbies you want to engage in. $650.00 per week = $33,800 per annum in investment income. If one invested in say the Kingfish fund, Marlin or Barramundi or some combination thereof which pay out 2.0% net each quarter (assuming they are trading at NTA, which sadly they're not at present which makes life a bit more difficult) then one needs to simply invest 33,800 / 0.08 = $422,500 and they will achieve their outcome and if spread over Barramundi and Marlin as well will get a broadly diversified portfolio of Australian and International shares as well.

Australian ETF fund for yield is paying quite a bit more than the NZ ETF fund https://smartshares.co.nz/types-of-funds/australian-shares/asd

I'd rather pick my own shares and yield on the NZX than accept a 3.4% return in the NZ yield ETF. Choose high dividend yield shares like HLG and HGH that can grow dividends over time. Watch a companies track record with dividends. Do they have an unblemished track record over the last 5 years with their dividend payments ?
Hope some of the above helps and other weigh in with some more tips for you.

[NZSilver]

My only direct share market investment is in various NZ LPTs. I also have a bit in Milford assets. Not sure why.
I have had a lifetime of owning flats, houses and the odd commercial and or industrial building. Generally avoiding selling. Accumulate is the motto. But now for an easier life in the last few years I have had a clear out, retaining one commercial building only which makes all additional income taxed at 33% and soon to be more. So lpts with their PIE tax make sense, especially now as we head to 39% top tax rate for income over 180k - from 1st April.
It's all horses for courses and if were younger I might revert to a more hands on approach.
Most experts preach diversification, and for good reasons. However I have unshakeable faith in commercial and industrial real estate. There are traps there of course, and LPTs provide diversification within that one asset class, as opposed to having a bundle tied up in one or two buildings (while I have great faith in buildings - it doesn't necessarily apply to tenants or their activities.)
Across the LPTs I hold there are well over100 tenants spread over dozens of quality well located buildings. That's sufficient diversification for me. Not a lot to keep me awake. My advice is always - keep building income.

Thanks, there's a few pearl's of wisdom in there

[nztx]

Thanks, there's a few pearl's of wisdom in there

Indeed .. indirect property interests with the job professionally managed seems far
more stress free in these crazy times of lunatic political targeting then finger pointing
when their crazy policies fail to fly .. ;)

Even Mr Oar seems to be inflicted with lunatic policies coming off the hill - nothing
an oar being swung very fast back towards him will not fix however .. ;)

Finger pointing at Investors using Interest only funding is bound to solve the bag
of foul tricks I'm sure -- trying to make the portion of the sector possibly most
capable of performing extinct .. can anyone identify which cereal packets the
joke cards with these idiot tendencies have escaped from ? ;)

[Sgt Pepper]

Okay to answer that question, (because there's a range of strategies) I think its best to reverse engineer this and ask what level of weekly income do you want in retirement ?

More than happy to weigh-in on this as I am in much the same position.
Questions that one might like to consider that I have been pondering.

1. What hobbies and interests do you want to pursue in retirement and what might that cost as a lump sum up front (e.g. nice new motorhome or boat) and to run on an annual basis ?
2. What other activities does one want to undertake in their retirement, e.g. annual, (or more frequent ?) holidays outside N.Z. or cruises (obviously once Covid risks have abated)
3. What level of support does one want to continue to provide for charitable or philanthropic purposes.

Once you have answers to the above one then needs to ponder what level of lifestyle generally one wants to have, luxury, comfortable or frugal.
If I recall correctly sorted had some good info on this. Basic super for a married couple ifs $652 per week net after tax https://sorted.org.nz/guides/retirement/this-years-nz-super-rates/

Good page here with heaps of guides - time does not allow me to review today https://sorted.org.nz/guides/retirement/

Suppose you decide you want a comfortable lifestyle and suppose like me your 60 this year and am thinking of retiring before you turn 65 and wondering if you have enough and what is the best way to invest.

If I remember correctly sorted reckon you need around $1,200 - $1,300 per week to live comfortably, (regular trips away, lots of treats, meals out, participating in hobbies e.t.c.). Lets assume a comfortable retirement is something I assume everyone here wants as a minimum. This is about double the rate of N.Z. super for a married couple which is currently $652 per week.

So the question then becomes what is the optimum investment strategy to generate another $650 per week plus whatever extra on top of that for high cost hobbies you want to engage in. $650.00 per week = $33,800 per annum in investment income. If one invested in say the Kingfish fund, Marlin or Barramundi or some combination thereof which pay out 2.0% net each quarter (assuming they are trading at NTA, which sadly they're not at present which makes life a bit more difficult) then one needs to simply invest 33,800 / 0.08 = $422,500 and they will achieve their outcome and if spread over Barramundi and Marlin as well will get a broadly diversified portfolio of Australian and International shares as well.

Australian ETF fund for yield is paying quite a bit more than the NZ ETF fund https://smartshares.co.nz/types-of-funds/australian-shares/asd

I'd rather pick my own shares and yield on the NZX than accept a 3.4% return in the NZ yield ETF. Choose high dividend yield shares like HLG and HGH that can grow dividends over time. Watch a companies track record with dividends. Do they have an unblemished track record over the last 5 years with their dividend payments ?
Hope some of the above helps and other weigh in with some more tips for you.

Thank you so much for taking the time to offer advice on my inquiry. It is sincerely appreciated

[traineeinvestor]

Although this probably won't add to what Beagle and fungus pudding have already posted, I'll add a few comments on my retirement planning process.

1. get the wife on board with me retiring

2. make sure I have something to retire to - there is a strong correlation between people taking early retirement and increased risk of health issues (causation is debatable). Beagle's point about hobbies resonates very strongly with me

3. as Beagle suggested I started by asking myself what income did I need to maintain my desired standard of living in retirement. I kept a record of expenses for a few years before retiring and then made some adjustments for expected changes in spending patterns (e.g. more travel). Given that it becomes increasingly difficult to get a high paying job as one gets older, I arbitrarily added 20% to the projected number - I'd rather work and extra few years in my 40's than be scrambling for a job in my 60's or explaining to Mrs Traineeinvestor why our overseas holiday has been cancelled

4. Given that even low rates of inflation can compound to significantly erode the value of money given enough time, decided that I wanted most of our savings invested in assets which generated income which had at least the potential to at least match inflation - property and shares. Most economic cycles seems to show some form of disruption to dividends and rents, so I have a modest allocation to cash, bonds and precious metals so that I should never be forced to sell shares or property when the market is priced badly

5. the holy grail of equities for a retiree looking to live off the dividends is companies that can grow their dividends over time. One lesson I learned looking back over my portfolio is that the best performing companies are ones that started off with a relatively low yield but kept increasing it year after year (this is a generalisation of course). It's taken me a long time to get out of the mindset that I have to have a decent yield from day one

6. diversification matters. Putting all my money into a concentrated portfolio of (say) ten shares might make for easier management and might give me a better chance of beating the market - but I'd lose sleep if I did that. I've been around long enough to see too many market darlings crash and burn. To use a few examples: all the investment, insurance and property companies from the eighties boom come to mind. ATM is another recent example - it was great for a while ... until it wasn't. I have a mix of real estate, ETF's, individual equites, bonds an a sliver of precious metals. I'm overly diversified and probably should prune some of the smaller investments - and I've been telling myself that for several years now:eek2:

7. pruning loss making investments is one of the hardest things to do. As Kahaneman, Zweig and others have pointed out admitting that I am wrong and taking a loss is not easy but it needs to be done (and I'll be killing at least one investment on Monday which I should have got rid of years ago).

8. do keep reading - both current and historical materials relevant to investing and the economy

9. last point: my focus on income for retirement means that I will miss out on many high performing investments (no crypto for me). It can be difficult reading posts from people who've made spectacular returns from highly speculative investments but I don't care - if I wanted more money I should have kept working for longer.

[iceman]

Thanks traineeinvestor. You have just detailed pretty much exactly what process I have been through in preparation for my "relatively" early retirement. No1 was a very important point and lead to an overseas holiday home becoming part of the equation aimed at both lifestyle and income.
Another thing to point out in response to some of the comments about dividends, we can not forget the very favourable NZ imputation credit systems which make NZ dividend much more attractive for NZ tax payers than for most dividend receivers in other countries.

[Beagle]

Excellent post traineeinvestor. Just wanted to add a little to my earlier post in regard to the desired weekly income in retirement and retiring before you get super.

Suppose one desires the $1,300 net income in retirement that I was previously talking about and you won't get superannuation for a few years time. One way to solve the riddle is to put aside a lump sum of capital into a separate account and pay your own super out of that until the point when you do get superannuation. For the Beagle's that would equate to $181,000 which if invested to generate a 5% net return would pay us the married super rate until we're both getting it.

One then simply has to invest another sum of capital (I used $422,000 above at 8% net invested in the Kingfish group) but if one is assuming a net 4% return they would need double that amount to generate the other $650 per week.

Whether $1,300 per week net is enough for a comfortable retirement wherein one has ample money to engage in interesting hobbies, activities and travel is a question people have to answer for themselves and adjust the assumed capital required and investment return to make the numbers fit.

Sadly I suspect a number of people currently retired and living mainly off term deposit interest + super have had to seriously adjust their expectations when it comes to discretionary spending.

When is the optimum time to retire is another whole big can of worms ? For me I still enjoy helping clients and friends that I have been looking after for decades and my fear is that without a purpose my zest for life will be diminished. Thankfully in my job its fairly easy to simply wind down gradually, let a few ratbag clients go and just work part time looking after people one enjoys being in relationship with.

I suspect I will remain in my fairly comfortable semi retired state for several more years.

[Beagle]

...............

[LaserEyeKiwi]

No expert for sure but i am nearing retirement in the weeks ahead and i have invested in the USA markets in REITS.Divies every 3 months and some even pay out monthly.
If you are a REIT by law you must pay out 90% of your profit.

How are you handling the currency risk? US/NZD currency cross can fluctuate by 30% or more in any year - which would decimate any unhedged portfolio.

[Sgt Pepper]

Excellent post traineeinvestor. Just wanted to add a little to my earlier post in regard to the desired weekly income in retirement and retiring before you get super.

Suppose one desires the $1,300 net income in retirement that I was previously talking about and you won't get superannuation for a few years time. One way to solve the riddle is to put aside a lump sum of capital into a separate account and pay your own super out of that until the point when you do get superannuation. For the Beagle's that would equate to $181,000 which if invested to generate a 5% net return would pay us the married super rate until we're both getting it.

One then simply has to invest another sum of capital (I used $422,000 above at 8% net invested in the Kingfish group) but if one is assuming a net 4% return they would need double that amount to generate the other $650 per week.

Whether $1,300 per week net is enough for a comfortable retirement wherein one has ample money to engage in interesting hobbies, activities and travel is a question people have to answer for themselves and adjust the assumed capital required and investment return to make the numbers fit.

Sadly I suspect a number of people currently retired and living mainly off term deposit interest + super have had to seriously adjust their expectations when it comes to discretionary spending.

When is the optimum time to retire is another whole big can of worms ? For me I still enjoy helping clients and friends that I have been looking after for decades and my fear is that without a purpose my zest for life will be diminished. Thankfully in my job its fairly easy to simply wind down gradually, let a few ratbag clients go and just work part time looking after people one enjoys being in relationship with.

I suspect I will remain in my fairly comfortable semi retired state for several more years.

Very helpful and insightful observations
In my case I am 63 and my intention is to work until I am 67. (retire from work but not life) I am fortunate to have good health. At retirement I should have around $250000 in my staff superannuation scheme( National Provident Fund), I then have the option to take the entire amount in cash, or convert it to a monthly pension for life. The final option is to take 25% as cash and covert 75% to a monthly pension. We still have a relatively small mortgage but will be mortgage free in 2 years. Our home has a current market value of $900000. In addition at retirement i will also have a gratuity payment and annual leave payout which should be around $70000. My tentative plan is to invest my National Super at 65 into shares. The decision as to what to do with the NPF staff superannuation of $250000 will obviously be critically important. I have always found shares very interesting and intellectually stimulating and if I could derive an income from my interest would be of great satisfaction, not just financially.
Any observations or comments from my fellow sharetraders would be gratefully received

[fungus pudding]

Very helpful and insightful observations
In my case I am 63 and my intention is to work until I am 67. (retire from work but not life) I am fortunate to have good health. At retirement I should have around $250000 in my staff superannuation scheme( National Provident Fund), I then have the option to take the entire amount in cash, or convert it to a monthly pension for life. The final option is to take 25% as cash and covert 75% to a monthly pension. We still have a relatively small mortgage but will be mortgage free in 2 years. Our home has a current market value of $900000. In addition at retirement i will also have a gratuity payment and annual leave payout which should be around $70000. My tentative plan is to invest my National Super at 65 into shares. The decision as to what to do with the NPF staff superannuation of $250000 will obviously be critically important. I have always found shares very interesting and intellectually stimulating and if I could derive an income from my interest would be of great satisfaction, not just financially.
Any observations or comments from my fellow sharetraders would be gratefully received

As I understand it, these NPF schemes come to the end of the road when you do. Take all the cash you can, and invest it elsewhere. The pension for life is a complete unknown - easily curtailed by a runaway Kenworth truck.

[fungus pudding]

Very helpful and insightful observations
In my case I am 63 and my intention is to work until I am 67. (retire from work but not life) I am fortunate to have good health. At retirement I should have around $250000 in my staff superannuation scheme( National Provident Fund), I then have the option to take the entire amount in cash, or convert it to a monthly pension for life. The final option is to take 25% as cash and covert 75% to a monthly pension. We still have a relatively small mortgage but will be mortgage free in 2 years. Our home has a current market value of $900000. In addition at retirement i will also have a gratuity payment and annual leave payout which should be around $70000. My tentative plan is to invest my National Super at 65 into shares. The decision as to what to do with the NPF staff superannuation of $250000 will obviously be critically important. I have always found shares very interesting and intellectually stimulating and if I could derive an income from my interest would be of great satisfaction, not just financially.
Any observations or comments from my fellow sharetraders would be gratefully received

As I understand it, these NPF schemes come to the end of the road when you do. Take all the cash you can, and invest it elsewhere. The 'pension for life' is a complete unknown - easily curtailed by a runaway Kenworth truck.

[dibble]

As I understand it, these NPF schemes come to the end of the road when you do. Take all the cash you can, and invest it elsewhere. The 'pension for life' is a complete unknown - easily curtailed by a runaway Kenworth truck.

Couldnt agree more. Always always ALWAYS take the cash, dont give control away to the ticket clippers. If you must let someone else manage it, give it to one of the fund manager's yield funds, e.g. Milford or someone . That way you can withdraw part/all as required and your next of kin get the remnants rather than an insurance company. Whatever NPF pay you per month can be replicated (I would say exceeded given the typical fees) outside their regime and with your control. Also, as hinted at above, these are troubled times for actuarial orgs, I doubt your money is ring fenced so that monthly payment could dissipate if they hit problems.

[Sgt Pepper]

Couldnt agree more. Always always ALWAYS take the cash, dont give control away to the ticket clippers. If you must let someone else manage it, give it to one of the fund manager's yield funds, e.g. Milford or someone . That way you can withdraw part/all as required and your next of kin get the remnants rather than an insurance company. Whatever NPF pay you per month can be replicated (I would say exceeded given the typical fees) outside their regime and with your control. Also, as hinted at above, these are troubled times for actuarial orgs, I doubt your money is ring fenced so that monthly payment could dissipate if they hit problems.

Thanks for that
I guess if I take the lump sum the two things I would need would be confidence and competence to turn it into a sustained, although modest, regular income.
if i elect the pension option it does have the attraction of a unconditional government guarantee. The downside, I guess, of being risk adverse is reduced income. Its just that the lump sum has taken 30 years to accumulate

[percy]

Very helpful and insightful observations
In my case I am 63 and my intention is to work until I am 67. (retire from work but not life) I am fortunate to have good health. At retirement I should have around $250000 in my staff superannuation scheme( National Provident Fund), I then have the option to take the entire amount in cash, or convert it to a monthly pension for life. The final option is to take 25% as cash and covert 75% to a monthly pension. We still have a relatively small mortgage but will be mortgage free in 2 years. Our home has a current market value of $900000. In addition at retirement i will also have a gratuity payment and annual leave payout which should be around $70000. My tentative plan is to invest my National Super at 65 into shares. The decision as to what to do with the NPF staff superannuation of $250000 will obviously be critically important. I have always found shares very interesting and intellectually stimulating and if I could derive an income from my interest would be of great satisfaction, not just financially.
Any observations or comments from my fellow sharetraders would be gratefully received

You have yourself "well positioned."
Two ideas for you to ponder.
1] Work two extra years until you are 69.[I did this,had 3 incomes,work,pension and dividends ]
2] If you live outside of Auckland ,consider when you are about to retire , a cheaper house.This would free up another $250,000 to $300,000.This would add to the $570,000 making you investment capital $820,000 to $870,000.

[percy]

Very helpful and insightful observations
In my case I am 63 and my intention is to work until I am 67. (retire from work but not life) I am fortunate to have good health. At retirement I should have around $250000 in my staff superannuation scheme( National Provident Fund), I then have the option to take the entire amount in cash, or convert it to a monthly pension for life. The final option is to take 25% as cash and covert 75% to a monthly pension. We still have a relatively small mortgage but will be mortgage free in 2 years. Our home has a current market value of $900000. In addition at retirement i will also have a gratuity payment and annual leave payout which should be around $70000. My tentative plan is to invest my National Super at 65 into shares. The decision as to what to do with the NPF staff superannuation of $250000 will obviously be critically important. I have always found shares very interesting and intellectually stimulating and if I could derive an income from my interest would be of great satisfaction, not just financially.
Any observations or comments from my fellow sharetraders would be gratefully received

doubled up.

[Dave]

Thanks for that
I guess if I take the lump sum the two things I would need would be confidence and competence to turn it into a sustained, although modest, regular income.
if i elect the pension option it does have the attraction of a unconditional government guarantee. The downside, I guess, of being risk adverse is reduced income. Its just that the lump sum has taken 30 years to accumulate

If it's guaranteed you'd want to seriously consider that. Also, given you mention the time it's taken to accumulate it, if you put it all in shares and 10% of the capital was gone due to market movements next month, are you able to enjoy yourself as much as you would if you'd taken the guaranteed lower income ?

Given your intention to invest super from age 65 you may want to look at that time at drip feeding all the pension into managed funds using a provider such as Investnow. Fund purchases can be made in $250 lumps. Then maybe look at selling some funds and buying individual shares once there's a reasonable balance. You'd probably want to buy a minimum parcel of $6K in any one share using an online broker for cheap dealing. But there would be little diversification at the start. Or you may decide then that the fund approach is working and just do a periodic withdrawal when you want some money.

I'm retired (due to redundancy) at 58 but should have sufficient savings for my lifestyle. I keep cash for a few years and then use a direct portfolio of NZ shares and bonds, and some bond funds which probably won't perform well for a couple of years. As term deposits mature I drip feed the proceeds into Investnow funds which gives some offshore and broader exposure.

I started with the share portfolio and then started a balanced fund intending to simplify things by just using that (which would probably do just as well). But I kept adding other funds and still have the shares.

You may want to see if you can find a financial advisor who you can pay for a consultation (as a fixed fee one off thing - not the ones who charge a percentage of your funds invested with them).

If you don't have private health insurance make sure you factor in any needs, as well as housing repairs etc.

[dibble]

if i elect the pension option it does have the attraction of a unconditional government guarantee.

Govt guarantee is indeed a positive (maybe double check wording on unconditional) but your volume of posts on a shareinfo website suggests you're interested in trying harder than the easiest option.

NPF ought be able to give you an estimate of the annuity. Also ask how it is inflation adjusted.
And ask yourself if you had 250k in cash would you give it to an insurance provider to hand it back to you in drips. Compare their estimate to your own calculation to see if it represents value. For example if you have 24 years left (approx from StatsNZ for a 63yo male??, bit more for female) and netted 1% at the bank you could spend about $13,900 a year over 20 years from 67, extremely low risk, to use all 250k by 87. Of course bank deposits dont account for inflation and if you live longer NFP keeps paying but you can tweak your formula if you think you'll live to 90 or want eg 50k left at 87.

If you then do it yourself with a few lower risk shares and average 3% net (not so hard, see all suggestions above altho the income will fluctuate) your annuity is about $16,800. Focus on industries that are at least inflation resilient then growth is a bonus.

Never simple to make a risk based decision but ensure you have all the variables and assumptions to hand.

Diversification: small point, whatever your view on this, if nothing else, it at least spreads the dividend payments out a bit.