NZ Herald 19 October 2019

AMy vote is for you to sell your home, and free yourself up to spend more time with the children.

It’s not as if you’ll be left in a bad situation. You’ll still have your home, with just a small mortgage if any — which puts you way ahead of many young families. And given that you can earn good money, you’ll be able to get back into your career and do some serious saving once the kids get older.

Picture yourselves at 80. Can you really imagine saying, “I wish we had worked harder when the kids were young,”?

Life is not all about maximising your finances.

AI’m afraid not, unless your children are over 18. The government contribution starts at that age, and parents of students 18 and over might want to consider helping their young people with contributions then, so they receive the government money.

You’ve also got a couple of other details wrong. The government gives just 50 cents for every dollar you contribute, to a maximum of $521 if you contribute $1042 or more.

But I don’t want to be discouraging. It’s still good to sign up your son. When he starts working — even if it’s a part-time job as a teen — 3 per cent of his pay will go into KiwiSaver. It’s a great way to get him into the savings habit, and perhaps set him up to buy a first home some time later.

ASays an ASB spokesperson, “Unfortunately we can’t make assumptions around which tax rates customers should be on, regardless of their age. We have to rely on investors to give us the appropriate rate.

“We know it can seem complicated to calculate this, which is why we have a tool on our website to help investors figure this out.

She adds, “We also regularly communicate to all members encouraging them to check their prescribed investor rate (your readers should bear in mind your applicable rate may change over time e.g. as your income goes up or down).”

My tuppence worth: Banks do a lot of things badly, but I don’t think it’s fair to blame them in this case. When someone joins KiwiSaver, they are asked about their tax rate, and it’s up to them — or their parents — to get that right. As ASB says, it has a tool to help you.

Unfortunately, the prescribed investor rate, or PIR, system is a bit complicated. But it’s great that Inland Revenue is now helping people, like your son, to get their tax rate right.

Meanwhile, says the ASB, “If anyone is unsure of which rate they are on, we encourage them to get in touch with their provider.”

AOr any shopping at all, when we’re buying stuff that people don’t want or need.

You’ve expanded the conversation from Father’s Day to birthdays. And it’s the same for Mother’s Day and Christmas.

It’s great to acknowledge someone’s special day — perhaps with a phone call, a snail mailed card, or a hand-made or grown gift. And there’s nothing inherently wrong with bought gifts.

I just don’t like seeing people running up credit card debt for the sake of handing over something expensive just because it looks bad if they don’t.

ATragic? There are plenty of ageing rock stars sporting ponytails. Get with the action.

Still, even without haircuts, it’s true that costs for over 65s are rising a bit faster than for the average New Zealander.

Since 2008, Stats NZ has been collecting data on the cost of living for 13 different types of households. They include: beneficiaries; Maori; superannuitants; households with different expenditure levels, and households with different income levels.

Costs for superannuitants have risen 22.9 per cent over the ten and a half years, compared with 17.3 per cent for the average household.

Stats NZ notes particularly that house and contents insurance prices have risen strongly in recent years. “Both of these impacted on superannuitant households the most, and beneficiary households least. Superannuitant households are more likely to own their own homes, while beneficiary households are more commonly renters.”

How else does superannuitants’ spending differ? While housing and then food are the biggest items for most types of households, people over 65 spend just a bit more than half the average household on housing, and about two-thirds of the average on food. They also spend considerably less on transport and interest.

This is probably because more superannuitants have mortgage-free homes, most no longer travel to work, and there are probably fewer mouths to feed in their households.

It’s also true that:

• The gap between the CPI and interest rates has narrowed lately, making it harder for retired people.
• It’s never a good idea to invest money you plan to spend in the next ten years in shares, a share fund or property. Whether we see share or property downturns soon or not, they will happen at some point. They always do, every now and then.

So things are not rosy for retired people with money in term deposits.

I don’t agree, though, that those who saved are shafted. You’re still better off than those who didn’t save.

Your example, of spending the returns you make on $1 million, implies that you don’t spend any of the capital. That’s a rather old-fashioned attitude.

These days, most people tend to use up at least some of their savings during retirement. The kids can have the house — or what’s left in the house after a reverse mortgage. That’s a pretty good inheritance, especially given there are usually only one, two or three kids.