How much capital do I need to retire comfortably on ?

[Bjauck]

Some answers here and I think the total may surprise some people
https://www.nzherald.co.nz/business/...ectid=11972404

Do the figures assume that by age 65 that you own a mortgage-free home? Home ownership rates are dropping in each age group as affordability has deteriorated. Whether you own your home or not will drastically affect what you need in KiwiSaver and other investments.

The NZ tax and financial system encourages home ownership. These days, the system should be unbiased. Home ownership may not be the right deciison for some people and their circumstances. If you don’t own a home, you should be given greater tax concessions (to match the untaxed imputed rent and the untaxed leveraged capital gains currently enjoyed by home owners) with a portfolio of financial and other investments.

[artemis]

There are a lot of people living in social housing on income related rent. Much better option than owning or private renting - cheap rent, water paid for, maintenance done. Home for life under this government, and longer as offspring are increasingly allowed to stay on when the tenant parents die or go into care.

Waiting list (approved, waiting for a vacancy) up 63% year to September 2018.

[winner69]

Watching the Salvation Army handing out food parcels on TV News last night I would hazard a guess that retirement is the last thing on many people’s minds

[Bjauck]

There are a lot of people living in social housing on income related rent. Much better option than owning or private renting - cheap rent, water paid for, maintenance done. Home for life under this government, and longer as offspring are increasingly allowed to stay on when the tenant parents die or go into care.

Waiting list (approved, waiting for a vacancy) up 63% year to September 2018.

Isn’t the waiting list so long because the last government did next to nothing when housing became ever so more unaffordable and did next to nothing to ensure the number of dwellings kept up with the number of immigrants.

I am not sure your point is in relation to necessary retirement assets. Quit your high income job? Sell your home and donate all your tax free leveraged capital gains to charity? Divest all your assets so that you become eligible for social welfare and join the lengthening waiting list for social housing?

[Bjauck]

Watching the Salvation Army handing out food parcels on TV News last night I would hazard a guess that retirement is the last thing on many people’s minds

Yep. A previous lack of planning has meant accommodation costs have soaked up a greater proportion of income and has brought about an accommodation crisis in many parts of the country. A previous lack of planning for retirement schemes has meant many people have relied susbstantially on their own home as their nest egg. The fixed KiwiSaver annual tax credit does not encourage the amassing of large KiwiSaver balances. For those, even single people, who can afford it, home ownership remains the best tax-preferred, albeit overpriced, way of amassing the retirement nest-egg.

[Beagle]

I would think $400K at age 65 which if skillfully invested might give a return of 6% average or $24,000 plus the national super of $31,000 for a married couple = $55,000 income before tax to be comfortable (if you can call living on $55K comfortable) would need to be in a debt free home.

I think its refreshing to see more realistic targets as portrayed in that Herald article and I suspect many participants on this forum would be ahead of those targets at the various age's mentioned.

I for one think conventional thinking mainly espoused by kiwisaver funds and others with a vested interest that one needs at least $1.5m to retire comfortable is complete nonsense if one owns their own home outright. As I suggested much earlier in their thread all this does for the majority of people is completely undermine their motivation to save as they see $1.5m as an unattainable goal.
I also suggested there are many ways to skin a cat and even having a simple flat or apartment, just one, plus the super is probably enough for a reasonable retirement income provided one doesn't have aspirations of fancy trips every year or need significant private health care.

Now I will get on my hobby horse / soap box properly and opine on how young people are bleating about how tough it is to get started on the real estate ladder...WARNING, if you're easily offended or don't like hearing the harsh truth just stop reading right here !!

Fact - It has always been incredibly difficult to save the deposit for one's first home. Its requires really serious discipline and going without luxuries and serious saving for several years and always has done. Much has been made of the average house in Auckland being about 9 times the average household income but few if any ever objectively note that interest rates are just one third of what they were in the late 1980's or early 1990's. Back in 1987 earning just $28,000 before tax I decided that I would save $10,000 per year for my first home. There was absolutely no money for travel, beer, socialising, entertainment of any kind other than free at parks and beaches...I was absolutely determined. I went without what many people consider to be basic necessities for three whole years to save $30,000. $10,000 per annum was nearly half my take home pay. I can't help wondering how many young people could put aside having the latest smart phone, trips to cafe's, overseas trips, trendy clothes or even simple cheap restaurant meals ? My first home cost me $138,000 in a very modest suburb in Auckland and was a modest 3 bedroom house in 1990. It was about 4.6 times my gross in come at the time of purchase had a mortgage of just over $100,000 at 15.5% which after paying I was even more broke than when I was saving for the deposit.

I started working two jobs to make ends meet for a few years but over time with salary increases things became more comfortable.

What I find annoying is how our kids have expectations that they will start at the top with no effort required on their part ! We tried to help our oldest daughter into a modest two bedroom flat as a starter and would have been the bank of mum and dad to help with the deposit. If was a 1960's basic flat in New Lynn Auckland about 5 years ago and was for sale for $270K. She and her boyfriend turned their nose up at it as it wasn't good enough and needed a lot of work. What has happened to young people's work ethic ? Have they never heard of sweat equity ? Do we need to see even more TV programs beyond the already nauseating level of home renovation projects adding value ?

If she and her boyfriend had of rolled their sleeves up and got stuck in and painted, redecorated and refurbished that flat five years later is probably worth $600K today...but remember it wasn't good enough for them. I think a lot of young people need to lower their expectations, (start at the bottom) and grow some serious spine and backbone and some serious discipline with their saving otherwise they'll always be renting and in that case will always struggle to save enough to have a comfortable retirement. "Make the most of now" a lifestyle so fervently encouraged by social media in all its forms and classic thinking of life is too short to drink bad wine probably ends one way, in hardship in older age.

Anyway...I share my story of how I did it so anyone who wants to follow suit can but I think we have a generation of young people that have grown up without being taught properly how to save.
I blame in many respects all the interest free deals retailer shout at us. I ask young people sometimes what about saving up for consumer items...why should we is the standard answer when its freely available on 5 years interest free terms ? End of soapbox rant.

[Bjauck]

I think estimates of retirement wealth should always clearly specify whether a mortgage free home is included or not. Home ownership should not necessarily be the pre-eminent goal it has been in the past. However I recognise that to encourage other housing and investment goals would be politically difficult. The fact remains that not all people are home owners and the trend is for even fewer to be home owners in the future.

Also there should be different estimates depending on the value and type of the mortgage-free home as those with a high value in-demand home could downgrade and reinvest surplus capital from the sale. However if you want to remain in your high value and/or high maintenance property after retirement you would need a bigger portfolio of investments to cover the expenses.

6% income on $400,000 these days would involve taking on board a fairly risky portfolio.

I appreciate Beagles insights and experience. It is always tough getting into a first home. Your daughter was lucky to have the bank of Mum and Dad able to offer help - even if she did not use it. Not everybody has that option. I would guess that since Beagle bought his first home, price increases have risen faster than after-tax income inflation with the result that deposits have become even more difficult to save towards, especially without a family able to help and especially if you do not want to take on more than 75% LTV debt.

Perhaps because deposits have become more daunting explains why some may conclude that saving for one is impossible so why not join the consumer binge society instead? I don’t subscribe to that point of view but I can understand how some may feel like that in some circumstances. Indeed some may be overawed at the amount of mortgage debt needed for a first home buyer (without substantial help from a rich family) to get into a home today.

If/when interest rates start to rise from their current low levels, this debt could easily become unaffordable. Certainly at this point in the housing market and interest rate cycle, I would suggest caution. Five years ago was different however.

When it comes to renovating old properties, that is a complex issue. A lot depends on personal skill and the amount of free time available. Anything to do with building products and trades expenses seems to have risen in expense beyond the rise in the CPI and rise in average after-tax income too I would guess. So even doing-it-yourself is expensive and doubly so if you make a n]botch of it and need to call in a tradie later (yep I speak from personal experience on that issue!)

[percy]

I would think $400K at age 65 which if skillfully invested might give a return of 6% average or $24,000 plus the national super of $31,000 for a married couple = $55,000 income before tax to be comfortable (if you can call living on $55K comfortable) would need to be in a debt free home.

I think its refreshing to see more realistic targets as portrayed in that Herald article and I suspect many participants on this forum would be ahead of those targets at the various age's mentioned.

I for one think conventional thinking mainly espoused by kiwisaver funds and others with a vested interest that one needs at least $1.5m to retire comfortable is complete nonsense if one owns their own home outright. As I suggested much earlier in their thread all this does for the majority of people is completely undermine their motivation to save as they see $1.5m as an unattainable goal.
I also suggested there are many ways to skin a cat and even having a simple flat or apartment, just one, plus the super is probably enough for a reasonable retirement income provided one doesn't have aspirations of fancy trips every year or need significant private health care.

Now I will get on my hobby horse / soap box properly and opine on how young people are bleating about how tough it is to get started on the real estate ladder...WARNING, if you're easily offended or don't like hearing the harsh truth just stop reading right here !!

Fact - It has always been incredibly difficult to save the deposit for one's first home. Its requires really serious discipline and going without luxuries and serious saving for several years and always has done. Much has been made of the average house in Auckland being about 9 times the average household income but few if any ever objectively note that interest rates are just one third of what they were in the late 1980's or early 1990's. Back in 1987 earning just $28,000 before tax I decided that I would save $10,000 per year for my first home. There was absolutely no money for travel, beer, socialising, entertainment of any kind other than free at parks and beaches...I was absolutely determined. I went without what many people consider to be basic necessities for three whole years to save $30,000. $10,000 per annum was nearly half my take home pay. I can't help wondering how many young people could put aside having the latest smart phone, trips to cafe's, overseas trips, trendy clothes or even simple cheap restaurant meals ? My first home cost me $138,000 in a very modest suburb in Auckland and was a modest 3 bedroom house in 1990. It was about 4.6 times my gross in come at the time of purchase had a mortgage of just over $100,000 at 15.5% which after paying I was even more broke than when I was saving for the deposit.

I started working two jobs to make ends meet for a few years but over time with salary increases things became more comfortable.

What I find annoying is how our kids have expectations that they will start at the top with no effort required on their part ! We tried to help our oldest daughter into a modest two bedroom flat as a starter and would have been the bank of mum and dad to help with the deposit. If was a 1960's basic flat in New Lynn Auckland about 5 years ago and was for sale for $270K. She and her boyfriend turned their nose up at it as it wasn't good enough and needed a lot of work. What has happened to young people's work ethic ? Have they never heard of sweat equity ? Do we need to see even more TV programs beyond the already nauseating level of home renovation projects adding value ?

If she and her boyfriend had of rolled their sleeves up and got stuck in and painted, redecorated and refurbished that flat five years later is probably worth $600K today...but remember it wasn't good enough for them. I think a lot of young people need to lower their expectations, (start at the bottom) and grow some serious spine and backbone and some serious discipline with their saving otherwise they'll always be renting and in that case will always struggle to save enough to have a comfortable retirement. "Make the most of now" a lifestyle so fervently encouraged by social media in all its forms and classic thinking of life is too short to drink bad wine probably ends one way, in hardship in older age.

Anyway...I share my story of how I did it so anyone who wants to follow suit can but I think we have a generation of young people that have grown up without being taught properly how to save.
I blame in many respects all the interest free deals retailer shout at us. I ask young people sometimes what about saving up for consumer items...why should we is the standard answer when its freely available on 5 years interest free terms ? End of soapbox rant.

You don't know how lucky you are..!
25 years ago we fronted up with the deposit for daughter's and Gunna's house.
2 years ago we fronted up with the money to pay out Gunna's half as the marriage was over.
2 years ago we fronted up with the balance the daughter owed the bank,as there was no way she could run the house with her daughter,and pay a mortgage on the wage she was on.
Just over a year ago I gave her my old car,yet I continue to pay all its costs,insurance,maintance,and petrol.
The other daughter lives in a modest one bedroon flat,the mortgage of which we paid off about 5 years ago.
Retirement.My wife and I live very modestly.We downsized about 30 years ago,into a ownership flat with no mortgage.I ran my business from home,with next to no overheads,just petrol for the van and the phone bill.Just kept plugging away at the sharemarket,and continued to work until I was 69 as I loved my job.With dividends,earnings,super.and a great run on the market I retired comfortably.
So I think if you can live within your means, and pay off your house, and invest wisely you can look forward to a good retirement.
If you are flash big spending trippers you will need about $4 mil invested,plus a mortgage free home..
Sensible and wise,a bit over $1.2 mil invested,plus a morgage free home.
A bit short.Downsize to a modest house with no mortgage or into a retirement village,and hopefully $200,000 to $400,000.invested carefully.
From what I hear most people retire with a mortgage free house, and are lucky to have between $50,000 and $100,000 of
savings.
ps.A friend of mine owns rental properties.Rents one to his son.
Wish we had done the same with daughter and Gunna.

[winner69]

Percy ..I hope your daughters are eternally grateful for your support.

Our kids bought houses in “partnership” with us / jointly owned.

Now they get grumpy when they offer to buy us out and I say no - such a good investment why should we “sell” I tell them

[777]

Percy ..I hope your daughters are eternally grateful for your support.

Our kids bought houses in “partnership” with us / jointly owned.

Now they get grumpy when they offer to buy us out and I say no - such a good investment why should we “sell” I tell them

I like your style.