FINANCE to accommodate children from previous marriages has proved impossible and they are at an impasse. Stephan Clark, a senior business analyst at Gareth Morgan Investments, says how you look to protect your family’s finances will always depend on the risks being faced. Trusts are a common way to help protect assets against types of legal and financial risks, as well as help ensure the assets being protected are used for the purposes you have intended. “To make sure you actually get the protection trusts offer, careful planning and advice from lawyers and accountants is normally needed. They can also make the process simpler and keep the trust properly maintained and easier to manage.” Relationship counsellor Maggie Bowen says simplicity and honesty are key to being able to organise money in late-in-life relationships. “So many people get enmeshed in all kinds of complex arrangements and often one or both of them gets really anxious about it,” she says. “But often a unique, rather than text-book, approach is the best thing for the relationship.” An example of this is Russell (72) and his partner, who live in an upmarket retirement village in Auckland. He moved from the South Island to be with her, and he paid cash for the house. However because she did not want to be an inequal partner in the relationship, she insisted they raise a mortgage on the house equivalent to her share of the purchase price, and she is solely responsible for those repayments. “I could have just paid the money to Russell like rent, but that would not have felt right,” she says. Having an arrangement that felt right was also important to Sarah, who after moving to a remote country station area to live with her new partner, realised she would be unable to continue her career. To compensate her for that, he offered to reimburse her $300 a week, as well as paying all the food and household bills. Fifteen years down the track, she now regards that as ‘pocket money’ and spends most of it on the garden. “And I put some of it aside for my own personal rainy day,” she adds. Not a bad idea, says Deborah Hollings. “I think squirreling away nuts is very important, especially to help through the initial period of a break-up.” NB. Some names have been changed.
For further information, go to: »» www.howtolaw.co.nz »» www.cab.org.nz »» www.grownups.co.nz Individual law firms also have useful information and case studies on their websites.
Mistakes impending retirees make ALAN CLARKE ticks off the list of common mistakes people make in the lead-up to and early years of retirement. Retiring too soon
Too many people think they have to stop at age 65 – without checking just how much cash flow they will need in retirement. If their cash reserves are just not enough, they would be better working a little longer. Working two years longer means you can save for two more years, probably enough for an extra two years in retirement. Also, by working the additional two years, your retirement funds only have to last only, say, 22 years instead of 24. Two more years of work can put you four or even five years ahead in retirement!
Spending too much
This is pretty obvious – do your homework and budgeting. However, you may plan to gradually spend your money and “die broke” (which is often easier said than done). Be smart and find independent advice to help you monitor how fast you are spending your money. Then if you ’live too long’, hopefully you won’t have to live out your golden years in poverty. My father lived to be 100, so you never know (he was prudent and found a good balance between living and spending).
A pauper in a castle
It is not much good owning a $500,000 house and having only $50,000 in the bank to supplement your (rather lean) Government super of $26,000 pa. Don’t get to retirement living in a castle with too little cash to supplement your super.
Worrying too much
The news media will drag you into the mire. Turn the news off and get out and about.
Hand outs to the kids
Love them or not, they have may have 25 to 40 years of working life in front of them. You don’t. Be careful to keep most of your money for yourself.
Not getting advice
If you fail to plan, you plan to fail. Get advice. $150 to $200 of financial advice is peanuts compared to what it might do for you.
Looking for utopia
Utopia does not exist, yet I have seen people move up to seven times in five years looking for it. Imagine the moving costs, real estate agents fees, or the cost of new carpet, curtains, a kitchen, or a new fence. This is all money down the drain. If somewhere else appeals (including the location of a great new retirement village), camp/house sit/rent in the area for a while and try it out, which is cheaper in the long run in case you are wrong.
Local holidays
There are dozens of free things you can do in New Zealand with an ordinary car and an inexpensive caravan. Be adventurous, go on the road, and enjoy it all. We have a beautiful country.
Being an ‘expert’
Beware of some apparently wonderful companies. The costs can be too high. After all, someone has to pay for their big buildings and glossy brochures – and it will be you. Also beware of commission salesman (and big organisations) and others who make brokerage for telling you to buy this, sell that, buy this, sell that. They are looking to generate income for themselves, and their ‘advice’ may be good for their pocket/profits, but it may not be good for you. No one can pick the hot investments. If you diversify properly, you will make good money in good times and survive the bad times pretty well too.
Alan Clarke is the author of Retire Richer, a practical guide for everyone age 25 to 85. Alan is an authorised financial adviser (AFA) and his disclosure statement is available on request and free of charge. Vol 4 Issue 3 Autumn 2013 11