Plans or no plans?
If you’ve wondered who that bloke is hanging around stores in the weekend watching people buy 3D television sets, it could be Blair Vernon.
He’s the AMP executive I had a bit of a go at in my last column because he thought more New Zealanders should have written plans on how to fund their retirement.
I said such plans are unnecessary, and often don’t make sense, given all the unknowns both before and after retirement. Some people, including me, prefer to just save what we can, expecting to adjust our retirement spending to match our savings.
Vernon has since responded: “I recognise having grandiose and detailed plans is not necessarily critical…. But often when you talk to people their plan is more like wishes and hopes than realism.”
Of the TV purchasers, he says, “People are happy to sign up. It’s frequently hire purchase or deferred payment…. The bias is towards consumption versus some element of consideration for the future.
“Do they understand the financial costs of what they are planning to do in retirement? Going on cruises all the time is not necessarily financially viable.”
He thinks everyone needs a regular warrant of financial fitness. “Are they spending more than they are earning? Some people don’t even know that.”
Fair enough. I won’t argue with any of that.
Vernon wasn’t the only reader commenting on that column. Says a former banker and lawyer, “The majority of those that succeed at something do have a plan…. The formality of the plan, given life exigencies, etc., is not the issue…. What is inviolable, however, is that there has to be a measurable plan, and a mechanism for regular review against it.”
I disagree. While such plans really help some people, others succeed brilliantly without them.
Interestingly, two accountants — one retired — supported what I wrote. “I often disagree with your column, and wonder if it was written to please some sponsor or other”, says the retired accountant. “But I totally agree with today’s article.
“I spent years wondering how much one needed in retirement in the days before someone thought up how to calculate the magic number. Or, more likely, how to confuse people with some mumbo-jumbo and charge heavily for so-called professional services. All you need to do is keep putting what you can away consistently over the years.
“Then, on retirement, keep regular tabs on your spending and compare it with your income. Banks are now offering software to facilitate this.”
Says the other accountant: “I’m glad I’m not the only one who hasn’t got a formal written retirement plan — I’ve felt for many years like a car mechanic who doesn’t look after his own car!
“Having said that, we have a retirement fund which I keep an eye on — and we put regular amounts into KiwiSaver as possible.”
He adds, “It’s no good putting every cent into a retirement fund and never reaching retirement age — so I always think it has to be a balance between enjoying today and saving for the future.” Hear, hear.
By the way, I never write anything to please a sponsor. I am not an adviser and I have no sponsors. Everything I write is my own honest opinion.
REMINDER TO KIWISAVERS
Non-employee KiwiSavers and employees earning less than $52,150 might want to check whether your contributions will total at least $1043 in the year ending June 30. If not, it’s a good idea to top up — by depositing directly to your provider before June 30 — so you can receive the maximum tax credit. For more details, see KiwiSaver Basics on www.maryholm.com. [This page has been removed from the website. Visit kiwisaver.govt.nz for up-to-date information.]
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.