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  1. #21
    Guru justakiwi's Avatar
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    It’s a bold move to assume you will live to 90. What would be your quality of life in the 10 or 15 years preceding? This is a very valid question as when people age, the cost of medical and care sky rockets. What if you ended up with a medical condition that would drain all your $? What if your children decided to use all their invested $ to go pay for an important operation that you required?
    I prefer to call it “optimistic.” My mother is 84 and my father was 91 when he died. My grandparents lived to 89/90. So genetically, I think my chances are reasonably good. As to my quality of life - who knows. It will be what it will be at the time. I have confidence that our very good public health system will still exist, and will meet my needs at the time. My kids are unlikely to have the ability to fund any major medical costs not covered by public health, and I would have no expectation that they should do so!

    I see no point in worrying myself into an early grave, stressing about the “what if’s” of old age. What will be will be. I am doing what I can now, to create additional financial security for myself. It may not be “meaningful” in your eyes, but your idea of meaningful, is vastly different to mine. All any of us can do is our best.

    It makes logical sense not to tax your investment earnings during the year where you're earning a lot of income, and deferring those investment gains to be taxed during retirement time (60s to 80s) for where it's very unlikely the person would have wages or salary income. We don't have this approach in retirement planning here in NZ.
    I totally disagree. I do not want to be paying tax on my KS or investments, at the other end of my life, when I have no income other than govt super. I would far rather get the tax out of the way now while I am earning. Yes, I do realise paying tax as I go impacts on my investment growth, but I’m ok with that. If and when I need to draw down on my KS/investments, I do not want to be having to draw down extra to pay the tax.

    I think we have hijacked this thread enough. Best to get back to helping the original poster with his question.
    Last edited by justakiwi; 17-02-2020 at 11:01 AM.

  2. #22
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    Quote Originally Posted by justakiwi View Post

    I totally disagree. I do not want to be paying tax on my KS or investments, at the other end of my life, when I have no income other than govt super. I would far rather get the tax out of the way now while I am earning. Yes, I do realise paying tax as I go impacts on my investment growth, but I’m ok with that. If and when I need to draw down on my KS/investments, I do not want to be having to draw down extra to pay the tax.

    I think we have hijacked this thread enough. Best to get back to helping the original poster with his question.
    Deferred taxation doesn't draw down extra to pay at time of withdrawing the investment. The issue of deferring means, you ONLY pay the tax if there's a gain in the future (unlike KS under FIF that taxes on paper returns that go negative during the growth period). The tax deferred account will have a much larger balance than the NZ KS example and that means you would withdraw a smaller portion of the balance. Again, tax is only paid upon withdrawal so there's no other 'out of pocket expense' to pay the tax owing.

    https://www.investopedia.com/article...-investing.asp

    "In 2019 the Schwab Center for Financial Research evaluated the long-term impact of taxes and other expenses on investment returns. While investment selection and asset allocation are the most important factors that affect returns, the study found that minimizing taxes also has a significant effect.1



    





    There are two reasons for this. One is that you lose the money you pay in taxes. The other is that you lose the growth that money could have generated if it were still invested. Your after-tax returns matter more than your pre-tax returns. It's those after-tax dollars, after all, that you'll be spending—now and in retirement. If you want to maximize your returns and keep more of your money, tax-efficient investing is a must."



    Like the financial advisor I met on Saturday, the issue of tax is not part of his role and mentioned that area is for the tax specialist. What utter rubbish as the 2 (investment income and taxation) are intertwined. CFP in N. America are qualified to advise on taxation.. why should NZ financial advisors be not qualified to give advice in the area of taxation?

    We're not being off topic as we're speaking on the issue of compounding returns.

  3. #23
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    You are quite off-topic unless you have advice on how to improve returns in a straight forward way for New Zealanders, rather than simply complaining about the prevailing tax environment.

  4. #24
    Guru justakiwi's Avatar
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    Quote Originally Posted by SBQ View Post
    Again, tax is only paid upon withdrawal so there's no other 'out of pocket expense' to pay the tax owing.
    So you are saying, if I need to withdraw X amount of dollars from my KS or my investments when I am 70, for example - I will pay tax on that withdrawal. Where is that tax payment coming from? from my KS/investment balance, right? Which is exactly my point. I would rather pay the tax now and nothing at withdrawal. I’m sure you will correct me if I am interpreting this incorrectly.


    We're not being off topic as we're speaking on the issue of compounding returns.
    Yes we are. This ongoing discussion on the evils of the NZ tax system is of little help to anyone, least of all the original poster.

  5. #25
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    Quote Originally Posted by mfd View Post
    You are quite off-topic unless you have advice on how to improve returns in a straight forward way for New Zealanders, rather than simply complaining about the prevailing tax environment.
    Previous page I mentioned if funds are sufficient, better to open a direct brokerage account abroad and invest directly. Keep it under the $50K NZD limit (or $100 for joint daddy/mommy account) But no one seems to recognise this as an option???

    Kinda like how unaffordable houses are in NZ, complain complain rah rah when there are ways to make houses affordable. It's a matter of having the balls (Trump balls) to change things around but I guess under MMP election, we're never going to get things done? Or can they? How was the FMA and FIF pushed through??

  6. #26
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    What is the advantage in opening an overseas brokerage account rather than buying international funds through, say, InvestNow?

  7. #27
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    Quote Originally Posted by justakiwi View Post
    So you are saying, if I need to withdraw X amount of dollars from my KS or my investments when I am 70, for example - I will pay tax on that withdrawal. Where is that tax payment coming from? from my KS/investment balance, right? Which is exactly my point. I would rather pay the tax now and nothing at withdrawal. I’m sure you will correct me if I am interpreting this incorrectly.

    Yes we are. This ongoing discussion on the evils of the NZ tax system is of little help to anyone, least of all the original poster.
    Your tax deferred portfolio would be x times larger as it compound growths more. We don't need to disagree that at the end you will have a much larger portfolio balance. The benefit is the amount is so considerably larger that even you pay the tax portion on ONLY what you want to withdraw, you will still end up with a much larger amount. There's no point in paying taxes on the investment when you're at the highest tax bracket when it can be deferred later at a much lower tax bracket. Likewise, why pay tax under FIF on years when the portfolio goes negative? IRD is short changing you and taken away how you control your investment. When at the end, if you can make it compound tax free, it's entirely UP TO YOU how much tax you want to pay on how much YOU want to withdraw (and this varies between person to person). But under the current KS scheme, there is not distinction to any person on their income - it's blanket take for all tax.

  8. #28
    Guru justakiwi's Avatar
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    Quote Originally Posted by SBQ View Post
    Previous page I mentioned if funds are sufficient, better to open a direct brokerage account abroad and invest directly. Keep it under the $50K NZD limit (or $100 for joint daddy/mommy account) But no one seems to recognise this as an option???
    You are either deaf or simply incapable of understanding anything I have said.

    It's a matter of having the balls (Trump balls) to change things around
    slaps head - remembering why it’s always a bad idea to “discuss” pretty much anything with you
    Last edited by justakiwi; 17-02-2020 at 01:54 PM.

  9. #29
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    newborns should day-trade
    without a doubt.
    For clarity, nothing I say is advice....

  10. #30
    Ignorant. Just ignorant.
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    JamesW - here come 2 cents worth

    You are investing or saving on someone elses behalf, so you want to be more cautious than if it were your own money. Whatever you choose to do, it should tilt more toward "don't lose the bl**dy stuff" than it would if it were your own money. So whie you want to make a good return, that is not your only criterion.

    This means diversifying - diversification is a strategy for avoiding or minimizing losses.

    If you decide on shares, then diversify among sectors, diversify among geographies, and diversify among currencies. Once you've decided on what the portfolio should look like, start picking the vehicles which you think will be best for each of your criteria. It's called "making a plan".

    You may have (say) an NZ share fund and a global share fund. Buy non-NZ shares when the NZD is strong, buy NZ shares when the NZD is weak. You are thinking in years and decades not in months or years

    Set a target or goal, and build up each of your chosen vehicles to it to give yourself the greatest tactical flexibility.

    As you build up, do a performance review at regular but not necessarily frequent intervals. That's called "monitoring". As you see things change, change with them.

    Good luck, and occasionally keep us posted on what you decide to do
    Last edited by GTM 3442; 17-02-2020 at 07:18 PM. Reason: spellling

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