How much capital do I need to retire comfortably on ?

[dobby41]

Remembered that this was the thread to have a crack at boomers. Turn away now if you are 60 or older.

I say nothing but found this article regarding Australia interesting and the linked articles at the bottom of the page follow a similar theme. Not sure if NZ is in the same boat but suspect it is.

https://www.abc.net.au/news/2023-11-...ents/103126250

Interestingly it isn't only the young who are having to cut back - many boomers are broke and suffering too.
My son (30) is following in my property development footsteps, working 2 jobs and renovating himself etc and he will be as wealthy as me way before I was (age-wise). This is without any financial help from me - just knowledge and he is willing to give it his all.

Maybe it was easier 'then' but I didn't notice (though I am at the end of the boomers), isn't super hard now if you gain knowledge and get stuck in.

[Bjauck]

Just sharing an interesting article. Appreciate that you took the time to respond.

I don't know if it is just me with the hang up, the articles in Australia seemed to identify people by generation. Just an observation, interesting that in Aussie their national super is means and asset tested and they have a capital gains tax so asset owners can contribute to society and they have a much more progressive income tax system.

Based on the rhetoric leading up to the elections here in NZ I would assume Aussie would be an absolute basket case with all that additional tax burden. Can't understand why our young people are going there. I imagine with all the burden imposed on the wealthy in Australia all the rich people would have left by now.

I miss Beagle, he could always start an interesting thread.

And sticking to the thread a $70,000 income off $1,000,000 in capital is nearly doable with a 7% yield, so sad to hear interest rates and yields could be heading back down soon. A 5% yield takes my capital requirements back up to $1,400,000 amazing what a few percentage points can do for you.

Would $70k still be enough to live on? perhaps my aspirations need to grow.

Imagine a 10% yield. A great pity that capital can be printed up at no cost so easily by central bankers, so that cash savings have little or no value when compared to inflation.

Many of these forecast capital requirements assume accommodation is taken care of via home ownership. So $70k pa before tax may be enough, ignoring accommodation costs.

When comparing the Australian tax system, don’t forget that their savings/pension scheme/s allow for contributions from gross income. So their government does not tax many of the contributions into the schemes as happens in NZ. Many Australian high income earners have large pension pots as a result of these tax incentives.

[Aaron]

Interestingly it isn't only the young who are having to cut back - many boomers are broke and suffering too.
My son (30) is following in my property development footsteps, working 2 jobs and renovating himself etc and he will be as wealthy as me way before I was (age-wise). This is without any financial help from me - just knowledge and he is willing to give it his all.

Maybe it was easier 'then' but I didn't notice (though I am at the end of the boomers), isn't super hard now if you gain knowledge and get stuck in.

Fair enough, rather than complaining and wanting change, work with the system available. Invest in residential housing with huge leverage and wait for central banks to inflate away the debt. Tax free capital gains.

I guess we need lower interest rates and to bring in more immigrants to optimise this economic system? Doesn't really appeal to me for some reason.

[Aaron]

Many Australian high income earners have large pension pots as a result of these tax incentives.

I am pretty ignorant of Australian policies to be honest, just quote the stuff that appears to confirm my views. I understand those high income earners with large pension pots don't put a hand out for welfare when they retire in Australia.

[Aaron]

Interestingly it isn't only the young who are having to cut back - many boomers are broke and suffering too.

And dobby my beef isn't with people who are trying to live on national super alone. That looks like it can be a struggle and I guess that is why we delay gratification and invest the surplus.

I just think trickle down economics is a joke and I don't think people should get welfare if they don't need it.

[Bjauck]

I am pretty ignorant of Australian policies to be honest, just quote the stuff that appears to confirm my views. I understand those high income earners with large pension pots don't put a hand out for welfare when they retire in Australia.

The pension is a safety net in Australia, as a government benefit from general taxation should be. Encouraging pension fund accumulation through tax breaks has the benefit of providing domestic funds for local investment. NZ’s small stock market (for our population) can partly be explained by our inadequate provision for pension schemes and our reliance on real estate for wealth accumulation.

In NZ I think the government architects of KiwiSaver were reluctant to provide meaningful tax breaks for larger contributions as they considered it a type of middle-class unneeded welfare. Yet bizarrely they left a general Capital Gains Tax off the table. That is an even greater tax break for the wealthy, and ironically often the already retired.

[GTM 3442]

For a lot of people, it's more capital than they have access to.

Many people approach retirement with little or no capital. Many others approach retirement with no debt-free housing. Sadly, New Zealand's retirement model is based on debt-free home ownership at retirement.

This is already causing problems as the working poor morph into the retired poor. Changes in population structure will only emphasize this.

The model is broken, but politically it's a live-rail issue which nobody - irrespective of party - has any intention of touching.

[dobby41]

And dobby my beef isn't with people who are trying to live on national super alone. That looks like it can be a struggle and I guess that is why we delay gratification and invest the surplus.

I just think trickle down economics is a joke and I don't think people should get welfare if they don't need it.

I agree on trickle-down economics.
It seems that Govts are scared to change either welfare (including Super) or the tax settings to any great (or necessary) level.
They tend to stay away from the hard stuff.

[fungus pudding]

For a lot of people, it's more capital than they have access to.

Many people approach retirement with little or no capital. Many others approach retirement with no debt-free housing. Sadly, New Zealand's retirement model is based on debt-free home ownership at retirement.

This is already causing problems as the working poor morph into the retired poor. Changes in population structure will only emphasize this.

The model is broken, but politically it's a live-rail issue which nobody - irrespective of party - has any intention of touching.

The question should be 'how much income do I need to retire on'? Invest for income, otherwise buy a kid's money box and throw your money in it.

[Bjauck]

The question should be 'how much income do I need to retire on'? Invest for income, otherwise buy a kid's money box and throw your money in it.

Without a general CGT In NZ, Wouldn’t it best to invest for the total return in retirement? During your working life invest for the long term in assets that return as much as possible in untaxed capital gains, whilst your income from employment or self-employment is assessed up to a high marginal rate. Then if you need extra funds in retirement this appreciated asset can be disposed of gradually (if shares.)

Likewise, Investor real estate held for a long time could be disposed of without incurring CGT and invested in bonds or assets producing higher income, if your income from Self/employment has dropped to a lower marginal tax rate. So the investing for taxable income should be after retirement.