For a different view on retirement savings Take a look at Simplicity New Zealand

I found an interesting alternative site with a different view on investing for retirement. The site caters to people in New Zealand and I wish we had this type of approach in Canada.  The site is called Simplicity and it  can be accessed here: https://simplicity.kiwi/

Simplicity is an online, non-profit KiwiSaver plan that only charges members what their account costs to manage, nothing more. I am posting just one of their articles that show their approach. If you live in New Zealand check this out if you don’t check it out anyway because it has a lot of great information

Women's retirement funds are typically 40% lower than men’s. Are you saving enough?

Here are a few stats that could make you go gray earlier than expected as a female.

·         Women makeup 61% of the 75-84 age group and outnumber men more than 2 to 1 in the over 85s.

·         Women live longer than men, and by the time we're 65, more than half of will be single or living alone.

·         Not only do women tend to take time out of the workforce to care for children and/or dependents...

...but, on average, they earn less and spend longer in retirement than men.

So, if women earn less, live longer and spend more time in retirement than men, you might expect there's a financial plan in place for that. Guess again?

Although the gender scales are fairly balanced when it comes to account sizes in KiwiSaver, men are still socking away close to 40% more than women in private savings schemes.

According to Statistics NZ, median balances for men are $69,000 while women's are $42,000.  The median value of non-KiwiSaver schemes was $53,000 – six times more than the $8,000 median value (the average is $15,000) of KiwiSaver schemes.

Reason to panic? Sure, but it won't change the outcome. A more productive response is to get a plan in place.

Start by reviewing your current situation. Tally up your assets and debts, and figure out your net position. If you are partnered, do the sums with and without your joint assets, or run two scenarios where joint assets are halved.

Hammer the debt as fast as you can, so you can boost your savings. Get a divorce from debt, so you don't go back again.

Take a close look at your savings strategies and vehicles. How much are you saving, how often, where and what assets are you invested in?

KiwiSaver is a great savings tool for a number of reasons: it's a diversified investment (Simplicity invests in more than 3,000 companies across 23 countries); it's regular savings (that's compounded savings optimised); both you and your employer contribute to it; and as an added bonus you get free money from the Government in the form of member tax credits if you are over 18 and under age 65.  

 Note: If you're self-employed and haven't already done so, make sure you pay $1,043 into your account before June 25th to be eligible for the full member tax credit of $521.

Contact info@simplicity.kiwi if you're unsure how to do this. See also KiwiSaver for the Self-employed blog here. 

Save early, save often, save a lot 

How much you'll need in retirement will depend on some of these scary stats mentioned above. How long you'll live, whether you'll have someone to grow old with, (and hopefully help with the costs), lifestyle choices and here's a big one: whether you've paid off your mortgage.

At current rates, New Zealand Superannuation (see current rates here), covers just the bare minimum. And the bare minimum (basic bills, food, no alcohol, movie nights, or dinners out) assumes you're not having to pay rent or a mortgage with your government cheques. 

Arguably, one of the best returns on investment will be paying off the mortgage -- as fast as humanly possible. Given house prices these days, and the size of many peoples' mortgages, it could be awhile. Saving for retirement as well as paying off the mortgage could be challenging but smart if you can make it work for all the reasons outlined above.

How will your savings grow?

Projections are tricky with managed funds because of the volatility of the stock market but there are some good forecasting tools to help you meet some targets.

Simplicity's member area (see My Options) includes a forecasting tool that shows you how different fund types and contribution rates will impact your financial future. Please read the assumptions so you understand how these calculations are made. Tools like these will help you see how much you'll need to save to meet a financial goal at a particular age.

Many advisors use $50,000 a year income in retirement as a hallmark to aim for. See also Craig's guide to retirement here for some numbers. 

Sorted.org.nz also has some excellent planning tools and calculators.  

KiwiSaver funds are eligible to be drawn down starting at age 65. New Zealand Superannuation, if you are born after Jan.1, 1974, will commence at age 67. If you were born earlier, it's 65.

When you're young, it's hard to fathom yourself a senior but one of the worse things you can do is pretend it's not going to happen, and risk missing out on years of compounding interest or returns. That's especially the case when you'll need more in retirement than your male counterpart. 

Especially if they live a long time.

A female born today is expected to live to 84. Get saving ladies

Did you see the news last week?

I'm actually not referring to anything in particular, but I'm willing to bet that your mind was able to instantly jump to something from the news last week.  Now let me ask you:  was it good news or bad news that sprang to mind?

The fact is, there are a million things out there all vying for our attention.  A million issues. A million causes. A million stories. And a million headlines. It can quickly become very numbing. Especially when so many of them are negative.

The thing I want to remind you about is that we always get to choose where we look. Choosing not to look at depressing or enraging headlines doesn't mean that you're condoning things or that you're allowing things to continue.  First and foremost, it means that you're choosing to own your life by owning your attention and deciding where to direct your focus.

We all have options, focus on the bad news and spring into action to do something about it; focus on the bad news and get angry and depressed about it. 

Maybe even re-post the bad news while adding in your angry/depressed $0.02. This is not helpful at all. Reposting doesn't help the situation and drags you and others down in the process.

Another option, see the bad news but focus on kittens and puppies instead. This is much less depressing, but not very productive.

Choose to focus on the things that really matter to you and throw yourself into them.  Who's with me on the last option?

Internet Literacy for Baby Boomers

It’s an undisputed fact that new technologies have the potential to revolutionize how we live, how we purchase and even how we retire. Take smartwatches, for example. The writers at A Better Way in Home Care, an LA Based home care referral service, report that a California scientist named Michael Snyder found a way to diagnose a mild illness through his smartwatch and prevent the onset of symptoms through therapy. This example is just one of many that demonstrate the great benefits of being a savvy tech user.

While the Internet may not be as new as smartwatch technology, it still represents a great unknown to Baby Boomers. However, that seems to be gradually changing. According to the 2016 Technology Survey for Older Adults, Age 59-85+ sponsored by Link∙age and conducted by Aging in Place Technology Watch, 50% of people 75+ use the Internet. This is an impressive improvement compared to 93% of this age group who were not using the Internet back in 2000.

However, at the same time, Boomers are reporting that they find the ever-advancing technology both good and frightening. A lot of this fear comes from the fact that technology is constantly changing and Boomers are slower to adapt to the changes without the proper instruction.

Within the past few years, remarkable changes in technology have permeated society, driven by smaller, cheaper core technologies, slick designs, and must-have information, reinforcing the importance of the following:

·       The Internet is a path to connections and engagement. Adequate access

·       to online information is a basic prerequisite to keeping up with change. The federal government has encouraged individuals to apply for Social Security and Medicare benefits online; and numerous coupons and discounts are only available online.

·       The Internet provides the ability to connect with family members, find new friends, locate a health care provider, learn about a new medical discovery, and buy lower-cost goods and services online.

Within the older age cohorts, access and interest is still limited but growing. Pew Research studies reinforce the digital dividing line for Internet access (regardless of device), finding that 50% of the 75+ population indicated that they go online. This represents a remarkable change over the past fifteen years, when 93% of those aged 75+ were not online in 2000.

The digital divide among older seniors is not surprising, given the complex process and cost to obtain: First, a senior must obtain both an Internet service plan (average price $60/month) and a relatively current device: a PC, tablet or smartphone fast enough to use with today’s graphics-rich websites. It must be customized for the user’s individual needs. Training in device use and ongoing support helps newcomers. A few senior-specialty vendors simplify complexity with senior-focused products or services, but most technology innovation is designed by the young for the young.

Older adults do not see their family members as the path to obtaining new technologies – or for that matter, asking them to use them. And as the updated version shows, health and wellness technology use by older adults has yet to happen – not surprising, because the general population is not yet fully convinced of their benefit

For those seniors, able to afford high speed connections, Internet access links them to families, enables them to learn about and find resources, take advantage of streaming services, and enables them to shop online – versus driving around -- for good deals.

To help seniors become more tech savvy, companies could:

Promote senior-friendly service plans. Having a senior-friendly plan is a good start.5 Offering a plan to low-income seniors is progress. Promoting/marketing it, along with available (and free) training at point of purchase is better

Provide training when upgrades are available. Some carrier and tech reseller organizations see a market for serving older populations and encouraging purchase of new smartphones – critically important because their younger market segments are saturated – and it is fast becoming a chore to get current owners to purchase costly upgrades.

Publicize and deliver more training opportunities. Some organizations have long been offering free online and in-person training for older adults (for example, AARP TEK and SeniorNet). Some of these have partnerships with carriers, identified, as with OATS, on the sponsorship portion of the websites.

Create and market online/telephone support services. If the future is online, then service should be there as well. Assume that over time, seniors will migrate away from special purpose technology and be more likely to acquire standard devices (designed for all), customizing to their specific needs through software.

Transportation costs in retirement

I present a workshop on Life without driving for seniors in BC, to help people make the decision to retire their car. One of the best reasons for retiring your car is the expense of driving a car.

Transportation accounts for 16% of annual spending by Americans 65 and older, according to the Bureau of Labor Statistics. Only housing takes a higher percentage of annual spending. That means transportation spending exceeds medical spending and taxes.

Keep in mind, these are aggregate statistics so the percentages may be different for you.

Transportation costs include vehicle purchases, finance charges, gasoline, oil, insurance, maintenance, repairs, public transit, taxis, rentals and leases and the list goes on

Of course, many of us purchase our last car before we retire, or many of my friends did, so the largest annual transportation cost for those 65 and older is gasoline and insurance.

The cost of buying or leasing a new vehicle often surprises retirees. They don’t buy a new car every year, so it often isn’t factored into retirement spending plans. Many also remember their parents owning the same cars through their senior years and assume they, too, won’t need new transportation.

If we are lucky and healthy, our retirement can last for over 30 years, so the purchase of a new or used car is a strong possibility. There is a possibility that you also could be driving less than you drove during the career years.

In your retirement planning, the best way to incorporate transportation costs is to turn vehicle purchases into an annual budget item.

One way to do that is to determine the monthly cost of leasing a vehicle similar to what you now have or would like to have next. Include that amount in your monthly spending estimate.

Another method begins with estimating how often you will replace a car in retirement.

Let’s say you’ll replace every five years and it costs $20,000 today. If you assume 3% inflation in the vehicle price, it will cost a little over $26,000 in five years. Divide $26,000 by 5 to arrive at $5300 per year. Divide by 12 to arrive at $442 for your monthly cost of acquiring a vehicle.

You might not spend the money until you need the vehicle, and you might pay in a lump sum. But adding the cost of your spending estimate through one of these ways ensures you’ve accounted for new vehicles in your spending plan, and created a cushion so that the money is available when you need to buy a vehicle.

Some people approaching retirement are paying leases or auto loans, so they should assume those costs will continue as part of their monthly expenses in retirement. But factor in inflation. The cost of buying or leasing a vehicle is likely to increase over the years.

Vehicles are important to retirees. They’re important emotionally as a sign of independence. They’re also important as a practical matter, because 79% of those 65 and older live in areas where cars are a necessity or close to it, according to a group called Transportation for America.

After budgeting for transportation costs, consider ways to reduce the cost of transportation in your retirement spending.

As people age, they also take fewer trips and drive less. At some point, you might consider eliminating a car from your life, even when you don’t live in a center city area that has everything within walking distance.

There are often options such as taxis (and similar businesses), public transportation, and car pooling with friends. There might also be a bus or shuttle service for seniors through your local government or a charitable organization.

You give up the convenience and spontaneity of being able to jump in the car whenever you want. But you save a lot of money by not owning or operating a car. When you’re not leaving the home on a daily basis for work or other activities, not owning a car can be a smart financial move. At some point, it also becomes safer.