7 June 2016

Retirement: make your money last

We tend to believe if you live until you are 70 or 80, you have generally done pretty well. However, the stats now show you could be around significantly longer …

In fact if you are already 65 and in good health, you can now expect to live well into your 80’s - and this longevity is only set to increase - with the average girl born in 2014 having a life expectancy of 95.

Longevity is only set to increase

So how does that affect your retirement income?

Well, instead of spreading your wealth over 10-15 years - you may now need to stretch that over 25-30 years… Significantly affecting your lifestyle in your final years.

One of the most commonly asked questions wealth advisor Maryann Pratt hears is: “How much money do I need to retire?” Instead she says the question we need to be asking is “How much money will I need to live the life I want?” and plan back from there.

"It all depends on the lifestyle of the individual. For those that own their own home, aren’t planning on doing much travel and planning on leading a simple life close to home - $50,000-$100,000 might be enough to last the distance and ensure they can fix their car, replace some carpet around the home, and maybe go on a little trip. However, others may have quite different expectations of how they would like to live in their retirement.”

So when should we start thinking about retirement? According to Carissa it’s when you reach 55 or from when you own your home - whichever comes first. And get ready to start thinking about how to secure a regular income during your retirement years.

The advantages of Lifetime Income Fund:

  • Your payments are reliable – your income remains the same, whether the markets fall or not, for as long as you live
  • You have flexibility – if circumstances change you can access all or part of your investment.
  • The timing is up to you – you can start receiving payments whenever you wish.The longer you defer, the higher they’ll be when they do start
  • It’s tax effective – your income payments are tax paid
  • Your fund is part of your estate – any remaining balance is paid to your estate on your death

Lifetime Income Fund invests your savings in balanced fund. Regular withdrawals are made from the fund to provide income payments to you. Income payments are guaranteed regardless of how the fund performs.

If you choose to invest in the Lifetime Income Fund and defer when you start the income payments, Lifetime locks in your gains. If the markets go down for a year or two your income payments are based on the higher value locked-in earlier.

If your regular income payments use up all your savings, the Lifetime Income Fund continues paying your regular income for the rest of your life, however long you live.

About Carissa Fairbrother
Carissa Fairbrother practices as an impartial financial adviser at RIVAL Wealth in Masterton. She is a member of the Institute of Financial Advisers and is an established Key Note Speaker at numerous events held throughout New Zealand.

About Maryann Pratt
Maryann Pratt runs a financial planning firm Professional Investment Services Manawatu with Alison Lissington. They have hosted many successful seminars on wealth creation.

About Lifetime Income
We’re committed to helping New Zealanders who’ve managed to save something over their working lives to turn that investment
into a retirement income that they can depend upon for as long as they live.

Retirement Income Group Limited and its subsidiary company Lifetime Asset Management Limited are regulated by the Financial Markets Authority as a Fund Manager and Issuer of the Lifetime Income Fund.

Another subsidiary of Retirement Income Group Limited, Lifetime Income Limited, is a licensed life insurance company and regulated by the Reserve Bank of New Zealand.