This article was published on 16 October 2004. Some information may be out of date.

QI was very interested in your reply to the reader who was asking about splitting his income for tax purposes between his wife and himself.

I understand all the pros and cons of this. But as the Government has decided that everyone has to pay tax on their own income can you explain why, when trying to get the unemployment benefit, the first question asked is, “How much does your partner earn?” And that income is taken into account to calculate if any benefit can be claimed.

This seems to me a case of having your cake and eating it.

AIt certainly does.

Keep in mind, though, that when we’re looking at taxes and benefits, the government is actually us.

If the policy were changed so that every unemployed person received a benefit, regardless of his or her partner’s income, where would that extra money come from? Higher taxes.

While I think that it’s fairer to tax people as individuals rather than couples — although that is certainly debatable — it seems clear that benefits should be paid according to need.

If that means that our tax and welfare policies are inconsistent, so be it.

It allows most of us — except unemployed people with earning partners — to enjoy endless cake.

And many of those unemployed people don’t really miss out either. They will be earners at other times in their lives. And while they are earning, they, too, will pay lower taxes than they would if welfare was more generous.

A note for the grammarians: I know I should have written, above, “the government is actually we.” But it sounds just too weird.

QIn last week’s column you asked readers how much they needed to live on in retirement.

You are correct when you say that everybody’s circumstances are different and that their needs, desires and plans to achieve those needs and desires will differ markedly.

I would consider us a ” Joe Average” couple, I am sixty nine, retired nine years and my wife is sixty seven and most unlikely to ever retire.

We started out in 1959 with a simple plan: She would stay home and be a housewife and mother, and I would provide the family finances. We are still on that plan.

Sadly most people would put more time and energy into planning the financing, building and furnishing of a new house than they would into their retirement

There are four conditions conducive to a good retirement: the condition of your health, the condition of your house, the condition of your car and the condition of your debt.

If you have arrived at retirement with no debt and everything else in good condition then the New Zealand Superannuation will allow for a reasonably comfortable retirement.

If you are savings conscious and have “wrapped’ your hot water cylinder, use energy saving lamps, walk to the shop to get your morning paper, grow your own vegetables and make your own bread then add in a couple of weeks in Australia or one of the Pacific Islands.

You can either look back and say, “Where did it all go?” or look forward and say, “This is what we are going to do”. A world of difference.

AGreat attitude. And what you say is backed up by another reader, who wrote: “What I have learnt from doing tax returns is invaluable.

“Some couples can live on NZ Super alone, as they have learnt from experience to do without or make your own.

“Others,” he adds, “who are a generation behind spend everything they earn, sometimes more. These people are going to get a shock when they retire.

“The waste of money that I see daily whilst writing up cash books would astound you.”

For other readers’ information, NZ Super, before tax, is currently about $23,830 a year for a couple; $14,450 for a single living with others and $15,710 for a single living alone.

I can’t resist adding that it doesn’t seem quite fair that you’ve retired but your wife hasn’t. Give her a hand, mate!

QI believe that common assumptions about the level of income required for a satisfactory retirement often miss some important points.

Living debt-free in your own home, with control over capital assets additional to those delivering your budgeted income level, is a very different thing from being dependent on a fixed pension only, while paying rent or a mortgage.

We are not yet eligible for NZ Super. For the last four years we have lived very happily on an annual income of about $29,000.

This amount comes from small inflation-adjusted pensions of about $14,000 net and about $15,000 gross from part of our investments. The pension income covers our basic living expenses. The investment income is used for car running costs, personal and optional household items, entertainment and holidays.

In our perception, our standard of living has not decreased since retirement. The (considerable) additional income we enjoyed then went on things no longer needed, with support for children at unversity being the main item, along with building up savings.

Life-long habits of saving and budgeting and the enjoyment of no- and low-cost pursuits helps, but our current indulgences nevertheless include expensive items such as opera, overseas magazine subscriptions and overseas travel.

By maintaining carefully chosen priorities for regular discretionary spending, we are able to reserve a proportion of our capital assets for growth, and can call on capital for health-care, car purchase etc without compromising our chosen income.

The sense of control and ability to make choices that comes from managing our own savings enhances our sense of well being.

P.S. At risk of exceeding the word limit, may I add that we have found your columns to be extremely useful over the years in which we have actively managed our savings.

Our approach to investing, which has enabled us to retire well before qualifying for NZ super, has followed your general precepts.

AFeel free to exceed the limit if you’re going to make such kind comments! Many thanks.

It’s interesting that your income is not that much more than NZ Super.

The message from three of you, then, supports a survey a while back that showed many retired people were reasonably happy living on what the government gave them or not much more.

Does that mean workers who expect to have mortgage-free homes by the time they retire should stop bothering to save?

Only if you’re confident NZ Super will continue at current levels — and that’s a pretty optimistic assumption — and you’re prepared to live fairly frugally.

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Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to [email protected] or click here. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.