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Investment for life's last decade
Well I guess there's a lot of people out there investing for their retirement and thinking about the overseas holidays they want to take between 65 and 75, or the joint replacements they might want to pay for between 75 and 85... but what happens when you've already been retired for two decades and might still have another decade or more to go?
I'm guessing most people will be crossing their fingers and hoping they still have a bit of extra pocket money to avoid the worst of the nursing homes and to bribe the kids to turn up for regular visits in the hope of receiving an inheritance... however, assuming you make it this far, what is a good strategy to maintain your investments?
I'm assuming that someone in this category will likely want three things:
- a regular monthly top up to their bank account
- low risk of loss (or deterioration in total funds beyond that which would occur with drawing down a bank savings account)
- minimum paperwork (including tax) and/or ease for a trusted family member to manage on behalf
Is there a simple way to do this without incurring corrosive levels of fees? From what I have seen, a decade is plenty of time for a poor advisor to lose a lot of client money and would usually cover at least one decent market melt down to provide them with an excuse! Inflation may also need to be considered over 10 years.
I am interested in any anecdotes posters can provide on solutions those around them may have chosen and problems or successes they have seen with investment for the 85+ age group.
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Are you wanting answers taht live of income only, or will capital be drawn down as well.
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Originally Posted by Harvey Specter
Are you wanting answers taht live of income only, or will capital be drawn down as well.
I guess that is going to depend a lot on how much capital a retiree has left - presumably at 85-95, all but the wealthiest are likely to be tapping capital to some degree? But I guess that can vary, which is why it is sometimes more useful to get real life anecdotes to highlight successes and problems rather than theoretical solutions.
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Member
I'm looking forward to the replies on this. I am in the process of selling my last investment property, ( its worth twice as much as it cost 10 years ago, but only brings in 25% more rent), and have no idea where to put the proceeds. We rent and have done so for years. Just taken on a homestayer, brings in 250 pw, not taxed.
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Considered an annuity?
Some time ago in an essay on retirement planning I wrote...
It is common in overseas retirement plans for lump sums to be used to purchase a life-long income via an annuity. These products completely remove the longevity risk and although they restrict access to capital they provide for a continuous on-going income which can even be inflation adjusted. The difficulty around these products is that they aren’t highly available in this country and that they are penalised due to current tax legislation
Something to cost out as one of the many options perhaps.
I'm just throwin this out there as one of the alternatives... cos the obvious seems too obvious to state.
For clarity, nothing I say is advice....
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I was discussing annuity's with an accountant yesterday specifically ones from USA. He indicated these did well but the gains where wiped out by the strengthening NZ/US$.
So annuity may be an option if you can remove exchange rate risk or now when exchange rate could go the other way ?
Originally Posted by peat
Considered an annuity?
Some time ago in an essay on retirement planning I wrote...
It is common in overseas retirement plans for lump sums to be used to purchase a life-long income via an annuity. These products completely remove the longevity risk and although they restrict access to capital they provide for a continuous on-going income which can even be inflation adjusted. The difficulty around these products is that they aren’t highly available in this country and that they are penalised due to current tax legislation
Something to cost out as one of the many options perhaps.
I'm just throwin this out there as one of the alternatives... cos the obvious seems too obvious to state.
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Originally Posted by kiora
I was discussing annuity's with an accountant yesterday specifically ones from USA. He indicated these did well but the gains where wiped out by the strengthening NZ/US$.
So annuity may be an option if you can remove exchange rate risk or now when exchange rate could go the other way ?
You would always have to hedge the exchange rate to be certain to achieve goals and this adds to expense in an already expensive solution.
On further consideration I think really simple along the line of various duration TD's and a small proportion of equity funds - with drawdown being imposed appropriately on both to achieve income goals - is the most practical solution. However, this does not solve the longevity problem.
Taxpayers stump up though! They provide an annuity known as NZ Super. Is it enough? No, and its bound to be reduced as the generations of MP's change.
Last edited by peat; 05-02-2014 at 09:16 AM.
For clarity, nothing I say is advice....
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Annuities maybe deserve a thread of their own. Great idea, but are there actually any secure providers left in NZ? (I like Mercer's suggestion that the government look at a "Super Plus" form of annuity where retirees could buy a higher level of super from the government and the investment would be managed by the NZ super fund.)
I also wonder how MSD would treat them in regard to nursing home subsidies (which I think are more asset tested than income tested)?
Last edited by Lizard; 31-01-2014 at 07:31 PM.
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I have been a property investor for many years, and now only buy into listed property trusts. Eventually I will have sold all my buildings and put all funds into a variety of the LPTs. Breaks every rule in the book, but I simply don't know enough about any other investment to rely on.
The advantages are - good reliable income, spread over a large number of quality buildings. They are all PIEs so tax effective and absolutely no administration or paperwork, record keeping etc. required. They are low geared, and you can gear into them as well if it suits. Automatically inflation proof. Excellent liquidity. So worth thinking about particularly for aging landlords. It doesn't take a lot of capital to set up a living equal to the average wage, from there some may sell off a few shares as they age, but if you can generate sufficient income you may have to keep increasing your holdings and spend your days deciding which cat-home to leave it to.
I'm sure there are plenty of equal or better ways of establishing a retirement income, but this way allows me to sleep very soundly. That's my penny's worth.
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Might I suggest the soon to be registered? charity.....(co-incidentally located at my residence) the Birman Home for Unwed Mother Cats. Anonymous donations of larger denomination bills in plain envelopes only please. May God bless you and all who sail in you. On a more relevant note..property trusts have done well for me previously but I did get a bit nervous about exposure to earthquake related issues so have shifted funds into diversified spread of debt securities and shares. All focussed on stable and reliable div/interest producers. Of course the downside of these is that stability and reliability usually go hand in hand with smallish gains as opposed to huge leaps in value. But a good mix of PIE/s, prop trusts, bonds and selected shares is a fairly "safe" way to go. I would like to see the NZX start up some new investment vehicles like for example "Dividend Producers Fund" and "Bond Fund" and also perhaps a "PIE Fund" to go along with there other "Smart Shares" offerings.
Originally Posted by fungus pudding
I have been a property investor for many years, and now only buy into listed property trusts. Eventually I will have sold all my buildings and put all funds into a variety of the LPTs. Breaks every rule in the book, but I simply don't know enough about any other investment to rely on.
The advantages are - good reliable income, spread over a large number of quality buildings. They are all PIEs so tax effective and absolutely no administration or paperwork, record keeping etc. required. They are low geared, and you can gear into them as well if it suits. Automatically inflation proof. Excellent liquidity. So worth thinking about particularly for aging landlords. It doesn't take a lot of capital to set up a living equal to the average wage, from there some may sell off a few shares as they age, but if you can generate sufficient income you may have to keep increasing your holdings and spend your days deciding which cat-home to leave it to.
I'm sure there are plenty of equal or better ways of establishing a retirement income, but this way allows me to sleep very soundly. That's my penny's worth.
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