Life expectancy is increasing all the time, and now actuaries and retirement experts say young people need far more information on what they’ll need to do with their money if they live to 100. Don’t worry, we’re here to help.
The message from the Retirement Income Interest Group of the New Zealand Society of Actuaries is very clear. In their submission to the 2019 Review of Retirement Income Policies, they said people who are young today need more information to plan their retirement so that they might live comfortably until the age of 100.
That’s not beyond the realm of possibility in a country like New Zealand. Life expectancy is now 81 years, and over the past 50 years that has gone up from the low 70s. Far fewer of us smoke or drink heavily now, medical technology is always improving, and people have much better information about healthy living generally, so it’s fair to assume that will keep rising.
But with the super age of eligibility currently at 65, that leaves a long period of time to be contemplated of potentially not working, and being on basically a fixed income. So early preparation is critical to ensuring that you’ve got enough set aside. That’s not just financial preparation either – it’s also about building up knowledge that will be useful for such planning, so you can adapt with the world.
Let’s assume you were born in the year 2000, and have had a life so far of good health and education. What should your goals be for each stage of life, and by each year? Note: the following is a guide only, and should not be taken as personalised financial advice.
2019 – age 19: By now, you should have a KiwiSaver set up. Basically, if you’ve ever had a full or part-time job, you’ll be automatically enrolled, and with employer and government contributions, it’s a really wise move. KiwiSaver is also useful if you plan on putting down permanent roots and buying a house, as the balance of it can be used for a first-home deposit.
2022 – age 22: It’s a good idea to study when you’re still young, to build up the skills and qualifications you’ll need for your future career. But you’ll also want to be working over summer breaks – seasonal agricultural and horticultural work is a great way of building up some funds to save up and sustain you when you get back to uni. Plus, you get to spend summer working outside, and it can never hurt to build up a bit of a connection with the food-growing areas of the country.
2026 – age 26: When you’re younger, it’s not a bad idea to have your KiwiSaver invested in higher-risk, higher-return funds – after all, there’s more to gain, and there’ll be plenty of time to recover if it all goes wrong. However with that, you might be vulnerable to fluctuations in the market that are outside of your control. For example, there could be a crippling drought in Canterbury which dents the country’s export figures, ultimately dragging the whole sharemarket down with it. But don’t worry, because given a long enough term the overall trend is always up, so stay the course.
2030 – age 30: Unfortunately for you, political agreement has finally been reached on raising the age of super eligibility. It will be phased in over a 30-year term, but the bottom line is that by the time you get there, the age of eligibility will be 67.
2032 – age 32: The increase in super eligibility age has been paused, after a change in government. In a final act of electoral benevolence, the baby boomers vote for it to stay down, so future generations might have what they did.
2035 – age 35: By now, you should have enough capital accrued for more a more aggressive investment strategy. Look for early stage companies in rapidly growing industries, such as water desalination and private security contracting.
2040 – age 40: The world is getting more competitive, and if you want to keep your career and savings goals on track, you’ll need to keep up. Keep your mind and body sharp by learning skills like bow-hunting and Krav Maga.
2045 – age 45: Try not to have too much of your asset base invested in the Auckland property market, because it’ll be a real lottery. Yes, prices for many will be up, with the increasing inundation of coastal properties limiting supply. But the flooding will be inconsistent, and with the collapse of the insurance market you might find yourself having to cover increasingly large repair bills.
2050 – age 50: A good age to start moving your KiwiSaver into a lower risk bracket. Retirement is now only a few decades away, and you don’t want a sudden jolt to your savings.
2055 – age 55: Success! Earlier diligent efforts to build connections with the more fertile food growing areas have paid off, and you’re now able to ride out the Great Famine that is gripping the cities. Look to reclaim some abandoned land, and get a small herd of goats going – hardy creatures that can survive in all sorts of harsh conditions.
2056 – age 56: A wave of refugees are sweeping out of the cities. This presents excellent business opportunities for those who have prepared early. Remember only ever sell the goat milk, never the goats themselves, as you’ll want to maintain your asset base to ensure future revenue streams.
2060 – age 60: The malarial mosquitoes that invaded Northland have kept moving further south, and you’ll need to keep a few steps ahead of them. Look for new opportunities on the scorching plains of the Manawatū, where wetlands restored 40 years earlier are maturing into scarce water sources.
2064 – age 64: Congratulations, you’re very close now to receiving Super payments!
2065 – age 65: Bad luck, the total collapse of the banking system means that you’ll no longer be receiving Super payments.
2070 – age 70: You need a group. Cooperation is the key to survival, and these people are probably the best chance you’ll get. Consider merging your asset base (goat herd) with co-investors (armed militia) who can help protect and grow your portfolio.
2075 – age 75: With Super payments no longer on the table, you’ll unfortunately need to keep making an income. Look for something artisanal that you can do in a relatively static physical position, so you can take the pressure off your knees, which hurt so much from so many years of wandering.
2080 – age 80: You come across a previously unknown freshwater spring, bubbling out from between the cracks in some volcanic rock. You wisely elect not to tell the rest of the group, even though they start to suspect something when you stop complaining about dehydration related headaches.
2082 – age 82: A child followed you to the water spring, your most precious remaining asset, and saw you drink from it. He says he’s going to tell the rest of the group. You know what you have to do.
2083 – age 83: In hindsight, the collapse of the group was inevitable. When people disappear, trust evaporates. Continue moving south.
2089 – age 89: There was a documentary you saw once, and there was a bunker in it, and there was food, and it was somewhere around here. But your Nokia brick doesn’t get the internet, it only has Snake.
2095 – age 95: Did people really once live here? You forget the name that this place once had. A great swampy lagoon stretches out in the valley in front of you, as you look down from the hills. The wind whips at your face, and you see the tops of the buildings shooting starkly up from the murky water. The wind is all you’ve heard for weeks. Sometimes it feels like it is talking to you.
2100 – age 100: Congratulations! You’ve made it to 100, and your financial position is no worse than that of anyone else.
