This article was published on 2 April 2016. Some information may be out of date.

Q&As

  • Live well on $15,000 a year in Thailand
  • Reader questions last week’s correspondent’s dividend income…
  • …While another reader explains it, and wonders about adviser role
  • Better to read the column regularly than to chance upon it in some packaging!

QAfter reading the letters about retiring and asking “how much is enough”, well it all depends on where you live.

I am retired at 47, I get by on $15,000 a year in Thailand, and that provides a pretty good lifestyle with great food and even better weather. An option for the adventurous spirit, even if just for a few years.

I live in a small city in north Thailand, a hop skip and a jump from Laos and Myanmar.

I rent a fully furnished two-bedroom flat for $50 a week. It’s new and very comfortable, and that price includes power and internet. I eat three meals a day for under $6, authentic Thai food bought from a street stall or market. Sometimes I splash out and spend $6 on a western meal, usually good old bacon and eggs.

Last week I bought a block of Mainland vintage cheddar cheese, expensive in Thai prices. But the Countdown website proved that it was still a bit cheaper than in New Zealand.

Stopping in for a mid-afternoon coffee costs you $2 in some areas. Walk into an average Thai café in the burbs, that coffee is $1.

I have allowed myself $40 a day to live — $14,600 a year. Avoid the tourist traps and it’s way more than enough, considering a middle class Thai family earns less than $30 a day, and they have to raise two or three kids.

I get up at 6ish, go for a long cycle and stop for breakfast somewhere, home before it gets too hot, spend a few hours studying Thai (I have joined a Thai language school to speed up the process).

I do still have rentals in New Zealand that provide my income, so that needs a bit of management. I also play the forex game, sending money between bank accounts in a few different countries. It provides a bit of entertainment and a bit of profit and keeps the mind sharp.

Late evening, it’s out for dinner, maybe a beer or two. But I do tend to drink way more water, water is free in most eat outs, or a half liter of nice chilled water will set you back 20 cents.

Despite the rumours that Thailand is for single, middle-aged, bald men with big bellies, I have met numerous middle-aged females here, most from USA, Australia and England, retired and loving it.

An increasing number of people retire here. Care homes especially built for foreigners are popping up in weird and wonderful places. If you cannot afford a Ryman Retirement in New Zealand, you can here.

And now with various airlines flying to S.E Asia, flights are getting cheaper. A bit of research on the internet will point out good places to retire to depending on your budget. The bigger the city, the more you pay. For me a small sleepy little city is ideal.

If you are not afraid of a bit of a challenge, pack your bags and visit Thailand, Vietnam, Laos, Myanmar, Cambodia or the Philippines (apparently the Philippines is the cheapest place to retire). You will make friends, and you can guarantee the weather will be good.

AAre you sure you’re not also supplementing your income with a payment from Thai Tourism? You’re way beyond the loosely enforced 200-word maximum for letters, but it all sounds so enticing that you got away with it.

Not sure I “approve” of your foreign exchange trading, though. Unless you’re unusually lucky, you’re likely to lose as much as you gain, and pay costs to do it. But if you enjoy it and can afford it, go for it!

I’m sure some other readers will be interested in joining you over there, even if just for a few years. If they, like you, keep some property in New Zealand, that would make it easier to return here later.

Others should note that in some circumstances you may be able to receive some or all of your NZ Super if you live in another country. You need to set it up before you leave New Zealand. For more on this see tinyurl.com/NZSoverseas.

We should also note, though, that while Forbes magazine’s Top 25 countries for Americans to retire to in 2015 placed Thailand at number 10, it also included New Zealand, at number 15. Ecuador was top.

But that wasn’t based only on cost of living. They considered “everything from local entertainment to the availability of direct flights to the U.S. to discounts on utilities.” You’ve put up a pretty convincing argument that Thailand trounces our fair land when it comes to opening your wallet.

QI was amazed when I read in your last column the amount of income that a gentleman generated from $870,000 invested in NZ shares.

It was stated that his after-tax income was $52,000, which means he grossed around $75,000, which is an 8.6 per cent return. The current market value of my NZ shares is a similar amount, but my gross income is $48,500, therefore 5.6 per cent.

I question the accuracy of his figures. Was $870,000 the cost or market value? Certainly I would very much like to have his financial adviser if the figures are accurate, as it makes the management of my funds by one of the largest NZ firms look very poor.

ADon’t fire your adviser yet. The correspondent might well have been thinking of the amount he spent on shares some time ago, and their value has risen since. Or he might have specifically chosen shares that pay high dividends.

In general, companies that pay higher dividends are more mature companies, as opposed to start-ups. They don’t need to keep most or all of their profits for growth, and so they pay a fair bit out to their shareholders as dividends.

This means that, on average, their share prices won’t grow as fast as newer low-dividend, high-growth companies. But that might be a good trade-off for people in retirement — like last week’s correspondent — who aren’t planning to sell their shares and like the regular income. Read on.

QLast week a correspondent said his after-tax income from his $870,000 of shares was $52,000. That’s 6 per cent after tax, a very high return, (which I know is achievable, as I do it too). But it requires a portfolio skewed to high dividend shares, not well diversified, perhaps with correlated risk (electricity shares). And sometimes high yield itself is a sign of a volatile share price over time.

This individual, like me, presumably doesn’t use an adviser, or in his case his income would be $8700 a year less if paying 1 per cent on fund value, or hopefully only $2000 to $3000 less if using an adviser and paying for time and expertise only.

It would help me and perhaps others if you could ask advisers if they are able, within their professional “rules”, to “advise” on a high-yield portfolio like the one cited. I have wondered if indeed they could do so without acting against the regulations they have signed up to.

Many readers might want to replicate the cited 6 per cent after tax (and imputation credits) yield, but find unless they did it themselves and understood the risks this kind of portfolio poses, no adviser could in good faith achieve this for them. That would make the bank deposit vs share portfolio discussion clearer for most, I suspect.

AYou raise some interesting points.

A high-dividend portfolio might well be less diversified than a broader share portfolio. As you say, there might be several shares in electricity companies or concentrated in other industries, and perhaps none in high-tech companies.

This lesser diversification increases risk. We can never predict which industries might perform poorly in the future.

You also say, “sometimes high yield itself is a sign of a volatile share price over time.” To clarify for other readers, a dividend yield is the dividend as a percentage of the share price. If a share is worth $1 and it pays a 5 cent dividend, the dividend yield is 5 per cent.

To illustrate your point about volatility, let’s consider that $1 share. If its price plunges to 50 cents, and the dividend stays at 5 cents, the dividend has risen to 10 per cent of the share price. It’s become a high-yield share because its price dropped. And companies whose share prices wobble around that much tend to be riskier investments.

So, while many higher-dividend companies are more mature and therefore less risky, some aren’t. That plus lower diversification mean a portfolio of these shares could be quite risky.

Now for your question about advisers. Yes, it would be within the new regulations for an authorised financial adviser who knows about shares — probably working for a stockbroker — to advise you on setting up a high-dividend portfolio.

If they’re diligent, they should ask why you want this type of investment, what other investments you hold, your tolerance for risk and when you plan to sell the shares, if ever.

I reckon they should also check that you have at least $100,000 to invest, so you can diversify quite widely.

The adviser should explain the risks you’re taking — including that dividend rates can change considerably and that share prices can fall, sometimes to zero. A good adviser would work through a worst case scenario with you, to see if you could cope.

For most retired people, high-yield shares are too risky a substitute for bank term deposits. But if you, like last week’s correspondent, have considerably more in savings than you expect to spend over the rest of your life, why not go for high dividends? Your investment will certainly be more interesting than plonking the lot in the bank.

QI do not get the Herald, but the page with your article on the low interest argument (12 March 2016) was included in packaging for an item I recently purchased, and I felt I had to respond to some of the points made.

Firstly, the article lumped retirees in with other savers when giving examples of tax rates. Most retirees would have an income stream under $48,000 per annum and therefore be subject to 17.5 per cent on taxable income.

Secondly, most retirees are subject to non-discretionary costs that defy the laws of inflation, such as home and contents insurance, health insurance, rates and electricity. In my own case, health insurance that was $99 a month in 2007 rose to $450 a month by 2014; house insurance from $400 per year to $1500 per year; and rates and electricity exceed annual inflation regularly.

So even those of us that used calculators to plan a comfortable retirement have been severely hit by the reduced return on investments.

AWell, I suppose the way you found the column is better than wrapping greasy fish and chips, or lining the cat’s litter box.

In response to your first point, the Q&A was pointing out how people are worse off earning high interest in times of high inflation than earning low interest in times of low inflation.

The examples the correspondent used assumed the top tax rate of 33 per cent because those people are most affected by this problem. However, other taxpayers are also affected, and I could have included calculations for them — and half-filled the column with a lot of numbers that wouldn’t have changed the main point. And there are only so many calculations readers can swallow with their Saturday morning coffee.

Secondly — on costs that rise faster than inflation — several correspondents in subsequent columns made much the same point as you are making. See what you miss when you don’t read the paper regularly! But thanks anyway for writing.

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.