Put simply the 4% inflated rule involves retirees withdrawing 4% of their savings in the first year and adjusting this amount annually for inflation. The model, based on historical market data, aims to ensure a portfolio lasts 30 years or more. For most people, this means their nest egg, no matter how small or large, should last until they’re at least 95, give or take a few years according to various factors and risks.
The 6% rule allows retirees to withdraw 6% of their total retirement savings annually. The money isn’t going to last as long, but research shows that people tend to spend less as they age, said Alison O’Connell, a member of the New Zealand Society of Actuaries who has a background in the pensions industry.
It’s the end of the tax year, and who has handed too much of their hard-earned money over to the Inland Revenue Department?
Tax eats up anywhere between 10.5% and 39% of every dollar we earn. Yet there are legal ways to minimise the tax you pay.
In New Zealand, taxes fund essential services such as healthcare, education, social welfare and infrastructure. Some people, however, pay more tax than they need to.
For most wage and salary earners, tax deductions will be correct and the Inland Revenue Department’s (IRD) annual automatic tax assessments will ensure that any refunds find their way into taxpayers’ bank accounts automatically.
It’s one thing to dream of retiring overseas, but quite another to untangle the bureaucracy, tax rules and legal minefields that come with it.
New Zealand Super portability and health insurance is mind-boggling, but wait until you start thinking about tax. A handful of countries, such as Malaysia, have tax-free retirement visas. But in most cases, you need to walk the tightrope between not just one complex tax system, but two.
Also, chances are that if you’re moving overseas to retire, you’ll die overseas. That might be sudden. What if you can’t look after yourself? Will someone scoop you up?
Take advice from lawyers or trustee companies in New Zealand before you leave, and a lawyer in the country you retire to. Do you need a local will? Is there an inheritance tax in that country?
For many New Zealand families, the reality of aged care arrives suddenly. In my case, a relative had a fall, spent months under Auckland Hospital care, and eventually needed to be discharged somewhere with 24/7 support.
Usually a spouse or adult child ends up navigating the system, finding a rest home and understanding subsidies. Like most people, I’d only thought vaguely about how this all works in practice.
The first thing to know is that your relative must be assessed as needing long-term care.
Rest home and other aged care is subsidised if the person lives on NZ Super alone and has assets below the threshold.
The best time to think about aged care is well before it’s needed. Getting enduring powers of attorney in place is really helpful.
Is private health insurance worth it? That question was from a colleague who grew up in a country where health insurance was the norm. She wondered if she really needed it.
The answer: yes and no. You can live without it, but it makes life easier if you need specialist care. It’s a “nice to have”.
If you can’t afford health insurance premiums the public health system in New Zealand is largely free or low-cost and funded by our taxes. But non-urgent treatments aren’t easy to qualify for, and it’s often difficult to get on the waiting list in the first place.
Those without health insurance sometimes realise they need to go private, and may end up using crowdfunding, KiwiSaver, or loans to pay for private healthcare because of public waiting lists.
