How much capital do I need to retire comfortably on ?

[Cool Bear]

To Aaron, Bb and Roger,

The following paper by Prof Ross Guest is an interesting comparison of the NZ Super vs the OZ age pension. NOTE the terms used are a bit confusing at first. OZ Super is equivalent to our NZ Kiwisaver whereas OZ Age Pension is equivalent to our NZ Super.

Major difference is that OZ Age Pension (equivalent to NZ Super) is means tested which is what Aaron would like to see for our NZ Super

In OZ, they can withdraw their Super (read Kiwisaver) at 60. One unfortunate consequence of means testing is that many will try to spend most of it by 65 so that they are eligible for the full Age Pension! The other interesting fact is that their poverty rate for over 64 is much higher than ours 34.9 per cent compared to our 7%.

http://www.cffc.org.nz/assets/Docume...me-Systems.pdf

My stand is that our Super should never be means tested - most of us kiwis are far from being fiscally responsible individuals at the moment. Means testing will encourage more to just live for today and spend spend spend and not to worry about tomorrow as we will then get the full super! It will penalise most of us here in ST who are trying to build up a nest egg.

[Aaron]

My stand is that our Super should never be means tested - most of us kiwis are far from being fiscally responsible individuals at the moment. Means testing will encourage more to just live for today and spend spend spend and not to worry about tomorrow as we will then get the full super! It will penalise most of us here in ST who are trying to build up a nest egg.

I agree that most of us kiwis are far from being fiscally responsible individuals.

I don't agree that national super should not be means tested and to get around some issues, I would suggest that after Kiwisaver becomes compulsory you also restrict withdrawals on retirement to an annuity. I don't like managed funds or annuities( I am in kiwisaver for the govt handouts(shame on me but thank you nz)) but if you had means and/or asset testing for National Super an around the world trip, new car and renovated house would see most kiwisaver savings gone in a couple of years after retirement. It would never work unless you force people to take an annuity. Making Kiwisaver compulsory is another way of making life harder for future generations (but possibly a politically acceptable one) while maintaining the current generous system.

I would note the disparity in benefit between old and young in the article I attached above.
A single person seeking work aged over 25 years of age will receive Jobseeker Support of $210.13 after tax.In 2015, a single person aged over 65 and living alone will receive $374.53 per week ($19,475.56 per annum). A difference of $164.40 per week. A jobseeker aged 20-24 years will receive $175.10 after tax - less than half of their retired counterparts. It is unclear why a single retired person needs $165 per week more than a single younger person seeking work.
I am not against old people or the need to look after them in retirement but they older generation were paid to go to University if they were able or wanted to go, something they haven't offered the young people of today. We should be investing in our young people as they are the future of NZ.

[Beagle]

I agree that most of us kiwis are far from being fiscally responsible individuals.

I don't agree that national super should not be means tested and to get around some issues, I would suggest that after Kiwisaver becomes compulsory you also restrict withdrawals on retirement to an annuity. I don't like managed funds or annuities( I am in kiwisaver for the govt handouts(shame on me but thank you nz)) but if you had means and/or asset testing for National Super an around the world trip, new car and renovated house would see most kiwisaver savings gone in a couple of years after retirement. It would never work unless you force people to take an annuity. Making Kiwisaver compulsory is another way of making life harder for future generations (but possibly a politically acceptable one) while maintaining the current generous system.

I would note the disparity in benefit between old and young in the article I attached above.
A single person seeking work aged over 25 years of age will receive Jobseeker Support of $210.13 after tax.In 2015, a single person aged over 65 and living alone will receive $374.53 per week ($19,475.56 per annum). A difference of $164.40 per week. A jobseeker aged 20-24 years will receive $175.10 after tax - less than half of their retired counterparts. It is unclear why a single retired person needs $165 per week more than a single younger person seeking work.
I am not against old people or the need to look after them in retirement but they older generation were paid to go to University if they were able or wanted to go, something they haven't offered the young people of today. We should be investing in our young people as they are the future of NZ.

The difference between a benefit for a young person in their early twenties and the superannuation of that of a retired person in their late sixties is that one is a temporary welfare benefit paid to encourage people who into full time work, many of whom have been doing nothing but suck off the taxpayers teat since they were in nappies through the education and family support welfare system and have never contributed a cent to society whereas the latter is an entitlement often earned through contributions to the taxation system for circa 50 years...pretty simple difference really, surely anyone can understand this fundmental difference for goodness sake.

As for being paid to go to University if you wanted to go, what a bloody JOKE...you couldn't be more wrong. If you were smart enough to earn the right to get there and that was a big IF, (B bursary standard 7th form absolute minimum) you were paid a tiny allowance that didn't even cover the cost of textbooks. There was no ability to take tens / a hundred thousand of dollars of interest free student loans with repayment terms spread infinitum often for twenty years or more. Many people worked part time or did 60 hour weeks all holidays like I did on my Uncle's farm for $1 hour to get by and scrape through a bare bones existence. Even then I could only attend Uni with the support of my parents free rent and food support. I vividly remember breaking down and crying when the brake pads on my 100 cc motorbike gave their last breath of life...I had no way in the world to afford the $8 replacement pads.
No generous student allowance of $150 per week, albeit repayable on the never never payment terms or $150 weekly accommodation payment. (I wish there was as I would have gone on and done a masters degree). Uni is far more available and affordable for all these days with or without parental support.

Oh and before you bleat like a lamb lost from its mother and say you have to pay back the student loan consider this, when I was a young fella the top personal tax rate was 66%...you think professionals didn't have to pay back their education costs in another manner doh !!

Every new generation thinks they're hard done by...I'm over it mate and suggest you do the same.

[Bjauck]

The difference between a benefit for a young person in their early twenties and the superannuation of that of a retired person in their late sixties is that one is a temporary welfare benefit paid to encourage people who into full time work, many of whom have been doing nothing but suck off the taxpayers teat since they were in nappies through the education and family support welfare system and have never contributed a cent to society whereas the latter is an entitlement often earned through contributions to the taxation system for circa 50 years...pretty simple difference really, surely anyone can understand this fundmental difference for goodness sake....

I must admit I think that no government payments/benefits can be treated as entitlements. They are all dependant on the policies of the government of the day and the strength of the various lobby and interest groups that influence that government. NZ super is not a specific contributory scheme and is paid from general taxation. When the NZ old age pension was originally introduced, it was subject to a means test. As the disparity of wealth and income in NZ has regressed to Victorian or Edwardian era levels, maybe it is time to reintroduce the means test (provided settlors' wealth tied up in discretionary family trusts is also taken into account). Government payments targeted for need are a much more effective use of taxpayers' money.

[Aaron]

Dear Roger
Not sure how old you think I am, I suspect you have a few years on me but my university education was free(taxpayer funded). I think a small level of fees for university students is a good idea as it will help them focus on what is important. I remember my days at Uni as a lot of fun (maybe too much drinking and not enough study) admittedly I never worried about money or the future back then(poor decision in hindsight). I am concerned that the level of fees required to get a degree is getting to the point where only those kids who have the backing of well off parents can do it, creating a class society. I like the idea that every kid born in NZ has the same chance at a good education. They do what they like with their lives after that but at least they can't say they weren't given a chance. If they do well they can contribute through taxes if they don't then hopefully they aren't just bludgers. Anyway this is off track for the nat super debate.

In the words of Doctor Lisa Marriot. Who you can assume is a lot smarter than me, I have a degree but had to work hard for it as I am of only average intelligence at best.
The fiction
Many believe that New Zealand Superannuation is an entitlement.
Indeed, the universal nature of the pension is one of its many strengths.
Our health system is largely universal, but health care is provided according to need - to those who are sick.
So, why do we automatically pay a pension to those who have no need for the funds?
For argument's sake, New Zealand Superannuation could be tapered back for people with incomes over $50,000 and eliminated by the time this income is $100,000.

In conclusion I enjoy the anonymity of a website debate but hope that we could still share a beer at an Auckland Share Trader meeting one day without letting our difference of opinion get in the way.

[Bjauck]

I think that a one-size-fits-all super payment may have been more appropriate in a more egalitarian NZ. However the poorer retired folk will increasingly need more government assistance. For example in Auckland, fewer people are able to afford the deposits to buy ever more expensive housing. Ownership of residential housing is increasingly becoming less widespread. Those who do not own their own homes when they retire will need help to avoid poverty when they rely on government super.

Many of those who are able to build up a sizeable nest egg of a portfolio of shares (or more likely in NZ, a portfolio of rental property), may have been able to do so as a result of liberal family trust rules and tax reforms from the 1980's onwards - a shift to GST from income tax and as a result of greater inherited wealth as a result of the abolition of death duties. They may have the luxury to now consider government superannuation as pocket money in their retirement.

[JBmurc]

IMHIO Kiwisaver will become "compulsory" and in time the nation super will be nothing more than a small credit per week compared to living costs this will happen because of more kiwi's in retirement and more on a benefit (I don't see the future being more labour intensive than present more robots / machines etc.. all banking will be online or ATM ... factories , retail , retail ..etc

I know of many wealth baby boomers that have actually tired to stop their super payments ...as in their eyes its just stupid they have passive incomes upwards million + per year ... they see it better to go to those that need it ,,, wonder how many retired kiwis think the same...

[Bjauck]

Morgan's credibility has really gone down the toilet with his eccentric campaigns against cat's and other eccentricities.....

Even from the point of view of NZ's economy, Stephen Franks agrees with him...http://www.nbr.co.nz/opinion/gareth-...-kill-all-cats
I think one of Gareth Morgan's points was that society's wealth includes its environment too and that Aotearoa NZ's unique fauna has always been at risk from introduced predators, including the domestic moggy cat. NZ's unique fauna is one of our attractions to overseas tourists too.

My parents' cat on their lifestyle property on the city fringe often kills piwakwaka, riroriro, tauhou and even kotare (despite those dangerous looking beaks)! Though it does kill quite a few rats. So on balance, that particular cat probably contributes more to the native fauna population!

[Bjauck]

When you buy from someone else a parcel of shares, you own part of a productive business. If shares were a preferred investment and a greater proportion of NZers wealth were in shares (with a corresponding higher price and lower yield) then more corporate money for productive expansion could be raised via rights issues for expansion domestically and overseas. Similarly well capitalised and valued NZ companies may be more likely to be the ones buying and setting up business overseas, as opposed to being the take over targets.

It would be great if the ever higher amounts of money going into the Auckland property market was going into new houses...but most of it is just going into boosting the price of land.

[dingoNZ]

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Well that's bloody depressing, whats the underlying causes(s) or ours being significantly lower? Poor savers? Lower wages? A populous who are somewhat scared of equity markets?