NZ Herald 29 June 2024

AYikes! Do you want to start an all-out intergenerational war? Many younger people argue that the baby boomers have already got the best financial deal, and they may well be right if we look at data like house prices relative to incomes when we boomers were young.

I wasn’t sitting around the table when KiwiSaver was dreamt up, but I’m sure the thinking would have been that over 65s already receive thousands of dollars a year in taxpayer money through NZ Super.

When KiwiSaver started, people over 65 couldn’t even join, although if you were already in before that age, you could stay in. Since 2019, though, anyone can join at any age — a great change, as KiwiSaver can be a good spot for retirement savings.

But asking for further taxpayer support after 65 seems a bit over the top to me. Sorry!

P.S. I do hear, though, that many employers continue to contribute after an employee turns 65, even though they don’t have to. If you’re not getting that, perhaps point that out to your boss.

AYour email brought me up short. You make an excellent point, and I should have thought of it. While the environment has not in the past been an inherently financial issue, it has to be these days.

Just a couple of weeks ago I was at Mindful Money’s annual conference. Their website rates KiwiSaver and other funds on their performance on environmental issues and fossil fuel investment as well as human rights, animal cruelty, weapons, and social harm.

There was much discussion at the conference about how the environment and the dollar interact, and it was impressive to see how many people are offering investments and products that tick many environmental boxes as well as performing well. This is now a mainstream financial issue, and we’re all need to take environmental effects into account in our financial decisions.

Anyone who questions that might want to read your thought-provoking links.

So where are we with destination weddings — ceremonies held away from where the bride and groom live? Of course last week’s correspondent may have been talking about the marriage of a couple who live overseas, and most of their guests live nearby. But when the bride, groom and pretty much everyone else attending has to travel, there are several concerns, including the expense for the guests.

I’ve heard more than one person express their annoyance, or even anger, at the presumption that they are happy to spend that money. Maybe they can tack it onto a trip to that area anyway, but maybe it’s not the right time, workwise, to take a break.

Add to that the really important issues you raise, and perhaps engaged couples should rethink their plans. If you want to wed somewhere different, how about a marquee at a nearby beach or park?

All this raises the question of not just flying to weddings, but overseas trips in general. Should we stop them altogether? Or ration ourselves? New Zealanders do, indeed, tend to be travelaholics. There are no easy answers.

AGo for it! It sounds as if you’re fine financially. And — in light of the previous Q&A — most of your fun activities don’t involve much travel. But perhaps from now on stick to New Zealand for your skiing.

AFor someone in your husband’s position, with dependants, income protection insurance is essential really. And in your family’s case, it certainly turned out to be a good move.

On the tax situation, Inland Revenue says, “You can claim the cost of income protection insurance if the insurance payout would be taxable. Ask your insurance provider if your income protection insurance is deductible (can be claimed as an expense). This is also called ‘loss of earnings’ insurance.”

On the comparison between health and income protection insurance, in both cases if you don’t have cover you get help from the government. But I agree that in your circumstances, income insurance ihas been more important.

Oh, and it’s great to read about your husband’s recovery.

AYes, you can specify that the money is to go into each grandchild’s KiwiSaver account — and I assume you’ve checked that they have accounts. A Q&A last week pointed out the problems that can arise if they don’t.

However, you can’t specify how they spend the money down the track, an expert tells me. But there are usually only two options anyway — first home or retirement — unless the account holder gets into serious financial difficulties.

It’s not easy to make a “significant financial hardship” withdrawal. And I assume you would feel okay about a grandchild using the money in that case anyway.

AA good idea, although I suggest you be flexible about the definition of education. Some of the young ones may not be academic, and might instead need cash for other training. You might want to stipulate who decides what spending is eligible.

Another suggestion is to move to longer-term deposits. Usually they pay higher interest — your reward for tying up the money for longer. And I gather the grandkids won’t be spending it for a while.

True, in these unusual times, three-year rates tend to be a little lower than one-year rates. But if you go with three-year deposits, I would be surprised if you don’t find, in a couple of years, that that was a good choice, because one-year rates have dropped.

On staying ahead of inflation, most of the time over the past 20 years, term deposit rates have been comfortably higher than inflation. However, since 2020, there was a period when inflation was around 1.5 per cent and one-year deposits earned less than 1 per cent — hard to believe now! And then inflation zoomed to 7.3 per cent while deposits also zoomed, but “only” to 6.15 per cent.

But we’re now back to the usual, with deposit rates higher than inflation, and that will probably continue most of the time.

AWhen you say you miss out on the advantage of buying when the market isn’t performing, do you mean:

• You would like to try to time markets — buying more in downturns, or
• You would like to drip-feed in a steady amount all the time, knowing your dollar goes further when the markets are down?

If it’s the former, don’t bother. Most people get market timing wrong most of the time. But the latter is a good strategy. And there’s nothing to stop you opening an account in another fund, in or out of KiwiSaver, and drip-feeding into that. But is that your best move?

I suggest you think about when you expect to spend your savings. You want money for the next three years in term deposits or your cash fund, and longer-term money in your stable fund or another lower-risk fund.

On average you won’t get as high returns as in a higher-risk fund, but your balance will be less volatile. And I sense that’s what you want.

An alternative is to move all your money out of the teachers’ scheme and into KiwiSaver funds of a similar risk. If you choose a low-fee provider — by using the Smart Investor tool on sorted.org.nz — you’ll probably see more growth in your savings because less is taken out in fees.