Investment Advice, The Aucklander
Thursday July 23, 2009
by Tanya Kwasza
The very word to retire is suggestive of pulling back, slowing down and it even sounds tiring! I prefer the term to rewire. This implies that we have the time and the money hence the freedom to do things in life that we are passionate about. This may be traveling, exploring exotic gardens of the world, or working with people or animals in need. It may be as simple as spending quality time with your family and friends.
To achieve this, you need to set financial goals for your future. I have spent a decade reviewing people’s current financial portfolios and I start to see patterns in terms of spending, saving, investing and achievement. I meet so many people who have drifted financially through life. It is a turning point when people sit down and actually take responsibility for what they have created to date and where they intend to be in the future. Many Kiwis have been too reliant on the government superannuation and for many their only focus has been to pay off the home mortgage. We are now aware of the harsh reality that there is not going to be superannuation as we have known it and that if we want to live our lives to the fullest then we need to start financial rewiring now! It is no myth that the older we get the faster time seems to fly by and another Christmas is upon us. To be able to rewire in comfort, let’s look at what is needed to retire comfortably and how this is achievable.
There is unquestionably a gap between the NZ pension and required income. Recently the government has reduced its 2.5 billion annual payment to the Superfund to 250 million this year and suspended future payments possibly till 2021. It is unlikely that there will be any significant increase in these payments in the near future.
In order to work out what you require for retirement in today’s dollars, I work on the simple rule of 20. If you want an income of $50,000 per annum, multiply by 20 and you will need a million dollars of debt free assets. This can be a combination of cash savings, pensions, superannuation, Kiwi saver, property, shares and business revenue.
If you were to add only one debt free property to your portfolio, you will have the advantage of both a reasonable yield and also over time (10 to 15 years) you will see capital growth.
I still view housing as a basic commodity. In particular, Auckland has an increased demand for rental accommodation. At a recent international investment seminar I attended, the three largest growth areas were investments in water, green commodities or retirement. There is excellent opportunity and a huge economic drive to provide accommodation for the elderly in a home that is economical, well insulated and in good locations that are near facilities.
Catalyst2 can assist you in providing security for your own future and also assisting others by providing high standard accommodation for the elderly. With new building compliance a house can literally be heated in minutes, such a change from drafty damp older style New Zealand homes. We are strategists and we will look at your current situation and assess what you have in place for the future and how much of a shortfall you are faced with. From here we can put a conservative plan in place. If you had nothing more that one freehold brick and tile free standing asset that was low in maintenance, you are that much better off for your retirement than just owning your home outright. For some of you this in itself would be a dream realized. For others who are more aggressive we can work at your pace to work towards creating the passive income you desire in the future. I believe that the very act of sitting down with someone to review your current financial situation is the first step towards financial freedom. If you wish to have a consultation at no charge, either call for an appointment at 0508 CATALYST (0508 228259).
