1 November 2016

A Happier Retirement

The key to a happier retirement is two words beginning with C


The morning after you leave fulltime employment should be a time for rejoicing. Now you’re free to start doing all the things you couldn’t manage when your boss, staff or customers were demanding your attention. Let the good times roll!

In reality, many people find retirement more expensive than they expected. While the government provides superannuation to the over-65s, it’s a sum designed to meet basic needs rather than fund a fulfilling lifestyle.

The best way to avoid this scenario is to look closely at two concepts starting with the letter C: Costs and Certainty.

The goal with costs is to cut them

That doesn’t mean living on pennies but it does mean setting things up so your bank account isn’t constantly drained by needless expenses.

On the runway to retirement your goal should be to get rid of debt. Get the mortgage paid off and ruthlessly eliminate any other debt you may have accumulated. While you’re earning a salary or wages it can be easy to get into the habit of running up costs on credit cards, buying vehicles on tick and generally financing your lifestyle on the never-never. If you haven’t done so already, set a budget that will see all debts cleared by the time you leave fulltime employment.

Once you’ve retired the goal should be to get rid of ‘lazy expenses.’ These are regular monthly costs that are easy to tolerate when a pay check is coming in, but quickly eat into your retirement income.

Do you really need satellite TV when you can access cheaper content online? If you enjoy reading, make the most of your local library instead of patronising Amazon or your local bookshop. Book holidays off-season rather than paying full price during peak periods. Use websites such as to search out the best deals on large purchases. The idea is to trade time (which you have more of) for money (which is fixed).

It’s a good idea to check the direct debits on your bank and credit card accounts – you may be surprised at what’s coming out. Then cancel the ones you can do without.

After tackling costs, the second C is Certainty.

It’s similar to cutting costs, in that the objective is to take control. But the real focus here is to create an income stream you can rely on.

While Term Deposits are secure, the interest rates they offer are far from certain. Global financial forces continue to exert downward pressure on the interest that banks can offer savers, so you’d be rash to rely on them for stable long-term income. Conversely, shares may offer higher returns but they’re subject to the swings and dips of the marketplace.

A better approach is to buy a lifetime income. In return for investing your nest egg you will receive a monthly income net of tax and fees. Your money is managed under a trustee structure and regulated by the Financial Markets Authority, so you know it’s always there. And there’s an insurance component to ensure your monthly income continues even if you live long enough to use up all the original nest egg.

Financial adviser and commentator Martin Hawes, who is a Director of Lifetime Income Ltd, has followed his own company’s advice, and invested in a secure retirement.

“I am still a long way from retirement but when I do retire, I will have a guaranteed income for the rest of my life of at least $5,000 per annum from my $100,000 (i.e. 5 per cent). It could be more than 5 per cent depending on when I choose to start the income. The 5 per cent (or more) that is paid includes a part of the capital so that the capital does gradually reduce over time.

“The account will probably be down to zero when I am 80-85 years but, because there is life insurance with the annuity, the income continues for as long as I live.”

It’s an approach that makes sense for many Kiwis. By controlling costs in retirement, and adding certainty to your ongoing income, you can enjoy something else beginning with C.