August 31, 2010
 Dont’ Retire: Reformat!
The word ‘retirement’ conjures up a range of confusing or even contradictory feelings for people these days. Once upon a time, retirement was a defined day, usually marked by a birthday, after which any form of paid employment ceased immediately. A combination of factors, including the end of compulsory retirement and increased longevity, mean that people are now working well past the age of eligibility for their pension. For some, this means just continuing on with their career as it was, either full time or part time, but an increasing number are seeing retirement as an opportunity to do something completely different in life. What better time in life to experiment, with a modest standard of living guaranteed by pension income, no mortgage payments and no dependent children to worry about?
There are many famous examples of people who have started businesses late in life, including Ray Croc, founder of McDonalds and Colonel Sanders, founder of KFC who had both celebrated their 65th birthdays before they created their global empires. For some, the motivation to try something new is driven by the desire to have a higher income in retirement, while for others, it is all about the excitement of trying new things; perhaps things they have always secretly wanted to do.
There is a great little book called ‘Don’t Just Retire: Reformat’ written for such people by Dr Lynda Falkenstein (Niche Press, 2005), full of ideas for how to reinvent yourself in retirement. Lynda suggests three important questions to ask yourself: If you could, with a wave of a wand, be doing anything you want, what would it be? What is it that gives you the greatest personal joy and fulfillment? What are you doing to ensure ‘it’ is an enduring feature of the rest of your life?
August 23, 2010
 Retirement Villages
Retirement villages are a great option for people who want a degree of independence in retirement but with the added benefits that come from communal living. There can be significant differences between retirement villages in terms of facilities and costs and it pays to do your homework before signing an agreement so as to avoid making costly mistakes.
There are four basic legal titles commonly used for retirement villages; licence to occupy, unit title, cross lease and lease for life. The type of title will largely determine how much it costs you to buy and live in your retirement unit. There are three types of cost that you will need to consider; the initial cost of buying your unit, the costs of living in your unit and the costs involved with selling your unit.
In many cases, the initial amount you pay gives you the right to live in your unit, but does not buy the unit itself. While you are living in the village, you will need to make regular payments to cover such expenses as rates, gardening, maintenance and healthcare. There are differences between villages as to what these ongoing fees cover. When you sell your unit, you may be required to pay for refurbishment of the unit to a certain standard as well as marketing and selling costs. In some cases, you may have no control over the sale process and when you sell you may not get the benefit of any capital gain on the unit.
Before you purchase, the retirement village must give you certain legal documents which set out your rights, benefits and costs and you are required to get independent legal advice on these before signing an agreement.
August 16, 2010
 Avoid a Mortgagee Sale!
Mortgagee sales are on the increase as a result of the recession and the property market downturn. If you are struggling with your mortgage payments how can you avoid having to sell your house? Here are a few tips that could help.
One of the first things you should do is talk to your lending institution or a mortgage broker. Your lender should be willing to work with you to find solutions to your repayment problems so as to avoid a mortgagee sale.
Most lenders offer repayment holidays of up to 90 days, which may be enough to let you build up your reserves or pay off other short term debt so as to reduce your weekly outgoings. Another option may be to convert your mortgage to an ‘interest only’ mortgage. This will have the effect of reducing the amount of your repayments because you are not paying back principal. Yet another option is to extend the term of your mortgage, say from 20 years to 25 years, which will also have the effect of lowering your repayments. All of these options should be seen as short term solutions because ideally you should pay off your mortgage as quickly as possible.
A mortgage broker may be able to help you shop around for a mortgage at a lower rate of interest, however bear in mind that depending on your circumstances, there may be penalties involved in repaying your existing lender, so get this information from your lender first.
Selling your house because you can’t keep up the mortgage payments should be a last resort. Real estate agent fees, legal fees and removal costs will eat into your deposit, and there is always the uncertainty of whether property prices will move ahead by the time you can afford to buy again.
August 9, 2010
 Money Conflicts
According to the experts, arguments about money are one of the main causes of conflict in relationships and are also one of the key reasons why relationships end.
Differences between couples over how money is spent, saved or earned arise largely from different attitudes towards money and risk, and different money values. Very often these attitudes and values stem from childhood, but not in a predictable way. For example, someone who endured frugality in childhood may be frugal as an adult or may conversely be keen to ensure their own children have everything they want. The starting point for resolving money conflicts is to explore the differences in values and attitudes.
There are two key questions that should form the basis of discussion:
- What things were said or taught to you about money in your childhood and how have these affected your attitudes towards money?
- What is the purpose of money in your life?
Sayings from childhood, such as ‘money is the root of all evil’ can often instil a negative attitude towards money, which is a sure way to avoid attracting it into your life. The purpose of money in your life will depend on what you value. Perhaps security is important to you, or it might be helping your children with education costs. For some, the purpose of money is to be able to have fun and interesting experiences. Having a conversation with your partner about your attitudes and values will help uncover the points of conflict. The next step is to find ways of resolving the differences, which usually requires a logical analysis of the issues and some degree of compromise.
As with most other conflicts in relationships, money conflicts can generally be resolved with good communication and an understanding of each other’s perspective
August 6, 2010
 UK Pension Transfers
Immigrants from the UK and New Zealand residents who have worked in the UK usually find themselves leaving behind their locked-in pension funds when they arrive in New Zealand. This can present a number of difficulties.
Once you become eligible for payments from your fund, you will need to pay tax on those payments as well as bank transfer fees. You will also be exposed to exchange rate changes so that the amount you receive as a pension will fluctuate over time. If you pass away with your money still in a UK scheme, your spouse is likely to receive a pension worth only half of what you would have received, whereas New Zealand retirement schemes pay the whole benefit to your spouse or dependants. UK pension funds are classed as Foreign Investment Funds by Inland Revenue which means that if you are a New Zealand tax resident you may have to pay tax on the investment gains.
UK pensions can be transferred to New Zealand but can only be transferred to a Qualifying Recognised Overseas Pension Scheme (QROPS) without incurring tax. Up to 40% of any money you transfer may go into an unlocked fund and can be withdrawn before retirement age without tax liability if withdrawn more than six years after leaving the UK. By contrast, some UK pensions allow you to take 25% of your funds after the age of 55 without paying tax. Being able to withdraw funds can help with changing circumstances such as marriage, birth of a child or change in employment status.
Having your funds in New Zealand means it is easier to obtain information on how your investment is performing. The transfer is best done with the assistance of a financial adviser to avoid unnecessary penalties and to be aware of your options.
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