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February 2011 Newsletter

Welcome                                             

Hi, February is NOW.  We are well and truly into 2011.  Events around the world, politically, socially and environmentally are changing.  2011 is going to be pretty significant for NZ, our economy is teetering on the verge of falling back into recession, the World Cup Rugby is hosted here in NZ, and it is an election year.

Some advice to you this month, do not let the media frenzy around these events, distract you from your goals and plans.  Heads down, bums up and get on with making your life full through experiences, friendships and laughter.

Warm Regards,

Jamie Coltman.


 


February's Articles

  • What age do you want to retire?
  • What is the Saving Working Group Report?
  • World Life Expectancy, how does NZ compare?
  • Reading Round-up
  • Event of the Month





What age do you want to retire?


Surely you have heard in the wind, tales of the retirement age being raised to 67, the process starting in 2020. ASB asks the questions, 'should the retirement age be raised to 70 if not 75?' and asks 'whether the NZ Super payments to the elderly are too generous?' (payments are $280 a week). More banks are giving out mortgages to people who will be paying off their homes into their 70’s.

New Zealand has a large baby boomer population, and 2011 is the first year that the baby boomers begin to retire. By the middle of this century, one in four New Zealanders will be aged 65 or older, compared with one in eight today. Whether or not, you are a ‘boomer’ the consequences of baby boomers being out of the workforce and in our welfare system are going to be huge.

So how do these factors impact on your retirement plans? Are you going to be proactive and plan to be able to retire when you want too? Are you going to be inactive and do nothing, working until you do not have to or can’t? Are you going to be reactive and have to sell your assets to survive your retirement?

These questions should be answered sooner, rather than later. A little bit of planning can go a long way. If you need some help in getting a retirement plan in place, please get in contact.






What is the Saving Working Group Report?


There has been a lot of referencing to the Savings Working Group recently from the media and the government. In case you are unaware of what they are referencing, here is a quick run down.

The Savings Working Group was established by the government in August 2010 and presented it's final report to the Minister of Finance in January 2011. The report was made available on the 1st of February.

The purpose of the group was:

  • to provide a point of reference for the government as it develops its medium-term savings strategies; and
  • to stimulate a public discussion on issues of national saving in the New Zealand economy, linking this discussion to investment and growth.


Go to www.treasury.govt.nz for more info.



Savings Group releases recommendations:


New Zealand’s level of debt is too high.
It has borrowed too much overseas. Net Foreign Liabilities (NFL), mainly debt, are 85% of gross domestic product (GDP), which is a similar level to the troubled countries of Europe. Australia is at 58% NFL.

This liability makes the New Zealand economy vulnerable.
Sudden events over which we have no control could cause a dramatic and damaging fall to the economy. In the absence of that we simply face a continuing deterioration in the economy and living standards.

Increasing saving is essential to reduce vulnerability.
Saving, the difference between what we earn and what we spend, must be increased – especially in the government and household sectors. This would reduce New Zealand’s vulnerability and establish the basis for sustainable economic growth. Continued foreign borrowing is not a viable option.


Other recommendations included:

The report said it “fully agrees that reducing effective tax rates on income from investments” is needed.

PIE tax rates changed so that the rate of reduction relative to marginal tax rates is benchmarked (at around 5-10bp) for all investors;

KiwiSaver remain voluntary but all employees aged over 18 (or potentially 16) be automatically enrolled with the ability to opt out, and the default employee contribution be increased to 4%, with the ability to opt down to 2%; creating a single low-cost default KiwiSaver scheme that invests only in index-based shares and bonds, with a limited number of basic combinations for such investments;

Contributions to the NZ Superannuation fund be restarted, with funding potentially coming from the introduction of a social security tax (offset by lower income taxes);

Making financial literacy part of the compulsory school curriculum.

Indexing interest income at a notified rate for tax purposes that reflects the rate of inflation; and, lifting GST from 15% to 17.5%.

The Group said that one “gaping area” beyond its scope was the retirement age of 65 and whether it needs to be increased. “Economically and fiscally the answer is simple in
our eyes, although not so politically,”


 




World Life Expectancy


After all this talk of retirement and savings, you might want to check out this fascinating site: www.worldlifeexpectancy.com.  The site allows you to compare how New Zealand is doing compared to other countries, in regards to Life Expectancy, Health, Death Rates and Happiness. It is fascinating to take note that we are only the 24th Happiest country in the world. Do you think we would have ranked higher?

It is not at all surprising that we have the 2nd highest death toll caused by skin cancer in the world and that Coronary Heart Disease and Strokes are at the top of the list of causes of death.  The stats speak for themselves.  Do you have adequate medical and life insurance in place, because the numbers are staggering.

It is also interesting to take note that we are living on average 10 years longer than in the 60’s, which means we are going to need more savings in the nest egg than our grandparents.

www.worldlifeexpectancy.com
 



Reading Round-up


Economy still fragile: Bollard
Reserve Bank governor Alan Bollard is warning that while the economy is expected to grow this year, a raft of shocks could push it off path. (Stuff)

Banks imagine the future of savings
Taboo-busting suggestions to promote the Kiwi savings habit – such as lifting the retirement age, introducing a capital gains tax on property, and raising KiwiSaver contribution rates for both employees and employers – have been delivered by the big banks to the Savings Working Group.

Kiwi investors would get first pick of SOEs

New Zealand investors would have to be at the front of the queue to buy shares in state-owned enterprises if the proposal to partially sell some of them goes ahead, the Government said today. (Stuff)

Auckland houses less affordable than New York

New Zealand houses are among the world's most expensive when incomes are taken into account - and Auckland and Tauranga homes are less affordable than those in New York, says a major survey released today. (NZ Herald)

Home front quiet as prices droop
The residential property market ended 2010 on a sour note with median prices and the number of sales slipping back below levels at the end of 2009.

Diana Clement: Plenty of ways to burn through your cash

Is your hard-earned money vanishing before your eyes? Those evil marketers who part man from money have a lot of tricks to get us to fritter our cash. And we fall for them. (NZ Herald)


 




Event Of The Month - Auckland Lantern Festival

Auckland Lantern Festival, Auckland CBD, 18 February 2011 – 20 February 2011
 


Bring all the family to celebrate the Chinese New Year of the Rabbit in Albert Park, amidst hundreds of beautiful feature lanterns specially imported from China. Browse dozens of delicious food stalls and picnic on the grass.

Non-stop entertainment will include magical rod puppets from Sichuan, a jazz band from Shanghai, and rockband Askar Grey Wolf from China's far western Xinjiang province, fresh from a successful tour of Australia.




 


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