Monthly Archives: October 2019

Changing approach to inheritance monies, but don’t be a martyr for your kids!

Be very careful. Be wary of perceptions that different generations have had it easier than others. Rose coloured glass’s  on  past memories , and fear re the future has always been the case.

Helping the kids earlier than past decades is a trend, but at what cost? Some research is saying parents are putting their retirement income at risk. Susan Edmunds provides advice!

Should you make your kids wait for their inheritance – or give it while you’re alive?

First home buyers have had to mortgage to the hilt to get into a first home.

Kāpiti Coast woman Sharon says giving her daughter a big chunk of her house was the sensible thing to do.

“I had my own home, mortgage-free and my daughter was living in it while I was living in my mother’s home. When my mum passed away, my sister and I inherited the house and I bought her out. My daughter wanted to buy her own house with her husband so I sold her a third of the house and gifted her two-thirds.”

Sharon did not want to be identified to keep the details of her daughter’s financial life private.

The deal meant her daughter, who does not work due to a health condition, and her partner were able to buy a house. She was her only surviving daughter, and it made sense to help her and her young family rather than making her wait, Sharon said

“They might as well have the use of it now rather than wait till I die. My mother lived till she was 92. I’m 70, it could be a long time.”It also meant she did not have to worry about maintaining and paying for rates and insurance on two homes.

“I look at the way the young kids are having to really struggle today.,.. there’s a hell of a lot of pressure on them.”An increasing number of people are opting to pass on an “inheritance” to their children while they are still alive, particularly in areas where house prices are high.

Martin Hawes, a financial adviser, said he saw people getting a lot of enjoyment out of doling out their children’s “inheritance” early.People needed to make sure that they did not give away so much that it left them short, said Martin Hawes.

 “If I die at 90, my children will be in their 60s and that’s the case with a lot of people who are having children later.”You’d hope by the time they are in their 50s and 60s they’ve at least bought a home and made fairly good progress. It’s not as helpful as it is to a 30-year-old. It hits the bank account at a time when it’s really useful.”

He said people needed to make sure that they did not give away so much that it left them short. “If you overdo the giving you can become a burden.Tom Hartmann, managing editor of Sorted, agreed people should check they had enough to fund the lifestyle they wanted throughout retirement.

“People typically underestimate how much they need and how long they’ll live. We recommend people run their retirement numbers so they go into it with open eyes and know what tradeoffs there are so they can make the decision.”People would often help their children buy a house, pay off a mortgage, pay for their university fees or help them set up a business, said Liz Koh.

Financial adviser Liz Koh said people would often help their children buy a house, pay off a mortgage, pay for their university fees or help them set up a business.”There are two key issues to keep in mind. Firstly, there is a need to consider any relationship property matters. It is important to get legal advice on this.

“Money given to a child may become relationship property if that child has a partner, and in the event that the relationship ends, the partner may have a claim on it. One way around this is to give the money as an interest free loan repayable on demand. The second major issue is one of fairness and equality.”Children, and for that matter grandchildren, can have a sense of entitlement and there can be rivalry between siblings if one is seen to be receiving more help than the others. Often such resentment doesn’t appear until after Mum and Dad have passed away.

“It is important to record any gifts or loans, and be as transparent as possible with family members to reduce any potential conflict when the estate is wound up.”Karen said it made sense to help her daughter when she could.There is no gift duty applied but if you give more than $27,000 in a year you could be declined a residential care subsidy if you were to apply for support to pay for a rest home.

Auckland woman Karen, who also wanted to keep her daughters’ details concealed, said her daughters had contributed a small amount of savings to the deposit for a rental property she and her husband bought. Now, six years later, the value of the property is being split between the two women to help them buy their first homes.There had been significant capital gains over those years, she said, which boosted the equity they were taking into their first property purchases.

Posted Alec Waugh, 17 October

BREAKING NEWS: NEW KASPANZ WEBSITE COMING

kASPANZ  is reviewing its website, with the intention of updating its presentation and style to a more contemporary format. Progress is well underway, so watch out for the next update.

E-mail alert subscribers (those wishing to be alerted to a new post) may have to re-enter their details on the new site,  once we are up and running, and we fully  realise the importance of this mechanism, so we will be in touch.

kASPANZ  prides itself on regular new posts, and keeping up with new comments, while being alert also to past articles which remain relevant

Full details to follow!

 

Posted by Alec Waugh 14 October

 

NZ Super Costs

This 2018 article  is a real mixture of conjecture, fact and opinion. It illustrates the difficulty of getting  correct assessment of issues,  and a balance on both costs, political realities and model alignment. Keep in mind, NZ Super is taxable, most other OECD pension schemes are not, and the average OECD pension cost currently is over 8%, and our model is simple!

https://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&objectid=12028887

 

Posted October 7th

 

NZ SUPER IS IT ENOUGH: WESTPAC MASSEY FIN_ED CENTRE THOUGHTS

 

NZ Super is not enough, but most retirees doing OK


The Retirement Expenditure Guidelines measure the real cost of retirement.


The latest Retirement Expenditure Guidelines confirm New Zealand Superannuation is not sufficient to fund the retirement most people want, but most retirees are satisfied with their level of retirement income. 

The guidelines, which are produced annually by the Westpac Massey Fin-Ed Centre, calculate what retirees currently spend to maintain either a ‘no frills’ retirement, or a more fulfilling ‘choices’ lifestyle that includes some luxuries. Costs are calculated for one and two-person households in both metropolitan (Auckland, Wellington and Christchurch) and provincial areas.

The report, which covers the 12 months to June 30, 2018, shows all households, including those groups with a ‘no frills’ lifestyle, have a gap between expenditure levels and New Zealand Superannuation. Report author, Dr Claire Matthews from the Massey Business School, says a two-person household living in a city would have to save $785,000 to fund a ‘choices’ retirement, while a couple living rurally would need to save $492,000.

“While living on New Zealand Super is possible, for the vast majority of New Zealanders it doesn’t support the lifestyle they wish to have,” she says. “This report reinforces the need to save for retirement if you want to set yourself up to have the retirement that you want.

Housing-related expenses were the main contributors to rising costs for retirees, including home ownership, property maintenance, property rates and insurance. This was offset to some extent by reduced spending on fruit and vegetables and recreation.

Read the full article

https://www.massey.ac.nz/shadomx/apps/fms/fmsdownload.cfm?file_uuid=CBFAC201-B33D-4355-96D8-3FB1F6ADD90F