i-grafix.com

Tags: Finance 

In his last article, David Underwood briefly mentioned the need to save for retirement. This month he advises that it would be unwise to depend on government superannuation

WHAT I would now like to do is consider some alternative ways of making sure that you have a reasonable standard of living when the time comes to stop working.
I have previously covered the need for accident and sickness loss of income insurance cover.
If you are on wages and if your employer has a subsidised super scheme then you should be a member and be attracting as much subsidy as possible. The same applies to the Kiwi Saver scheme as the subsidy from the taxpayer is too good to ignore.
An important basic matter is where you plan to live when you retire.
Will you stay in your own home or do you plan to move? If you live in rented premises then you will have the insecurity about rent increases and what you will be able to afford. In my view it is important for you to own your own home because of the
removal of uncertainty.
You may want to relocate but that can readily be done if you own your own house. Values may rise or fall but if you are selling and buying in the same market it will not matter.
Owning your own home should therefore be a top priority. It needs to be debt free if that is at all possible.
If you are in business then it is vital to have your home ownership held so that it does not secure any business borrowing.
It would be terrible to have your business fail but a total disaster if you lost your home as well.
Discuss your situation with your lawyer or chartered accountant.
It is then a matter of how much to save to secure your future and how much you can afford to save.
There are all sorts of tables showing how much you will need in retirement but the amount will depend on your personal circumstances.
Are there any legacies likely to come your way? Are you a beneficiary under a family or other trust?
Benefits such as these can really make a difference to your savings requirements.
You do need to save even if it is just to pay off your mortgage.
Saving $1 a day means you will have $365 at the end of the year.
Saving $10 a day will produce $3650. Those sums soon mount up.
If you are having trouble saving then the way to improve is to either increase your income or decrease your expenses.
There are no other options and you need to work through the figures with great care. Be realistic what ever you do but do not make your life miserable.
Once you have sorted out the numbers it is a question as to what to do with the money.
The best way is to start putting it into a savings account at your bank on a regular basis.
When you get to say $1000 then transfer it to a fixed term deposit as the interest rate should be higher thanif the funds are at call.
You will do even better if you have the interest compounded as that will earn the same rate of interest and make the total grow faster.
I would suggest you deposit for a one year term for starters but that will depend on how quickly you are saving.
While that is going on you should be making enquiries about a suitable financial advisor while you are learning all you can about shares and investments.
Remember though that if it sounds too good to be true, then it probably is.
The savings advice and risk profile that suits you will depend on how close you are to retirement.
The closer you are the less risk you should run.
You need to be clear what you will have to pay in fees for the advice given to you.
This lot is free because of your readership of the Printers’ Journal.
Make sure your advisor has a full understanding of your financial position and retirement requirements.
One plan will certainly not suit everyone. The important thing however is to get started.
You will not regret.