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April 08, 2013 at 11:19 AM

Janine Starks’ article “Investment for grey Kiwis”, featured in the Dominion Post on Saturday, April 6, 2013 was very interesting.  Although, adding a couple of useful tips could have been more helpful.  The lady who is 70, and is left with $100,000 to invest may require more direction than what was provided, which was to invest in several term deposits maturing a different timeframes and to have interest paid quarterly.  With 10 or more healthy years left as the lady indicated due to her family history, there are a few things she could do to give her some more certainty in her situation.  For example, make sure she has adequate insurance e.g. house, contents, car and health (which may cover all the major diseases and/or operations and funeral costs when she passes).  Minor operations and doctors bills may come out of her pension.  As the house is new and should be under a builders guarantee contract then there will hopefully be no major maintenance surprises there.

With insurance costs and the household expenses in mind, a budget should be completed to check that the pension covers all these expenses and any minor health expenses.  Then it is a matter of finding out what would happen to her house if she did live longer than expected and on what past-time the lady wishes to do between now and when she dies, then work her $100,000 investment backwards – for example:

Set your goals (Say the wish list was as follows):

Go on two overseas trips to see friends in Europe, and a safari in Africa.  Budget for these two trips $15,000 each.

Continue developing the garden around the house and entertain friends and family.  Budget $2,000 per year for a further 15 years.

Sporting activities with friends – membership, travel, equipment, clothing, and café lunches.  Budget $2,000 per year for a further 15 years.

By working with setting some specific goals, with timeframes and an idea of a budget then many of the goals are possible. 

To also help with this process I believe a good solicitor or accountant can help with the finer detail of what happens if you outlive your money e.g. the house is in your name but you may have to move to a nursing home, what will happen in this instance and upon your death what taxes or other implications could occur in regards to your house.  These answered questions will help with deciding whether you can use all your $100,000 before 85 or whether you need to hold some money back.  If you need to hold some money back then how much, only then what return you receive on your $100,000 is very relevant to your investment and spending choices.

I’d recommend reading or taking courses about the different types of investments first and at least understand the different Asset classes and the risk profiles of each.  Then perhaps go to your financial advisor with some idea of what you need, for example:

• An average return required on your money is ?% (after tax and fees)
• Know your risk profile and how much volatility you are willing to accept
• The type of Asset Classes you wish to invest in
• The mix of Asset Classes and where (NZ or international) you want
• The timeframe before you require some money and what are the fees or penalties for withdrawal
• If an emergency happens what are your options
• Can you move your investment to other Asset Classes as you age or if you decide that the returns verses risk are no longer appropriate for you

In summary the steps that are a good starting point are as follows:

1. Get insurance for all your Assets including yourself
2. Complete a Budget
3. Write down your goals
4. Speak with a professional (solicitor/accountant) re: Asset Protection, Tax implications, and completing your Will
5. Educate yourself about investing, before approaching a financial advisor
6. Know what you want to get out of your investment before you invest

To help you along your way www.sorted.govt.nz can help with the budget and knowing your risk profile and www.calcfinancialservices.co.nz offers several money courses on budgeting basics and retirement planning.

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