Silent generation

Aged 73-100+

You’re probably in retirement and trying to make the most of the money you have. You may be considering downsizing the house to free up capital, or moving to a retirement village. Some of you may be in a rest home.

You might want to invest your money conservatively because your time is getting shorter and income is a priority. Having said that, the average life expectancy for people at the age of 75 is nearly 15 years. In other words, if you’ve got through to age 75, the chances are you’re going to live pretty close to 90. It’s certainly not time to give up on life and living yet!

Your income needs may have declined or, perhaps, they’re starting to. They’ll likely become less than when you first started retirement.

Having access to your money is critical in these years. The chances of needing surgery or some kind of care will place demands on your money. Aim for only a little of your capital in shares and property; consider putting most of it in fixed interest and cash (term deposits).

From 1 July, over 65s can now use a KiwiSaver account for savings, often for lesser fees than you’d pay in other managed funds. If you do use KiwiSaver for your savings, a conservative fund is probably best.

Baby Boomers

Aged 54-72

You may already be in retirement, or perhaps it looms but, in any event, life is going to be different. Retirement, with all its change, dominates Baby Boomers’ thoughts and conversations.

You can expect to spend at least a couple of decades in retirement, so prepare for this time frame.

If retirement is still some way off for you, these are the gravy years. If the mortgage and the kids are gone, with lower costs, you can really start to squirrel away some money.

Many people over 65 will keep working, but that work will probably be for fewer hours and could

be different in nature to what you did earlier in your life.

Only a few of you can look forward to their ‘20 good summers’ in complete comfort. For most of you, there’ll be a lower income and less spending.

Retirement requires planning and adjustment. Rethink how you’ve been managing your finances and change the way you invest. It’s a good time to ask a financial adviser to do a plan for you.

In general, most people will start to lower risk in their portfolios a little as they approach this change in life. However, this is a phase in life that may still last a long time. During those years, the economy could throw anything at you – recession, depression, high inflation, deflation.

It’s great to spread your investments across all asset classes: shares, property, fixed interest and cash. Your investment mix will be critical for a good retirement – few people will want more than 50 per cent shares and property in their portfolios, and this mix will change as you get older.

Gen X

Aged 38-54

You should make a lot of financial progress through this time of your life. Hopefully, you’ll have bought a house and started to make good inroads into repaying your home loan. A good goal is to have no debt by age 50.

Whether you own a house or not, contribute to KiwiSaver. This means paying in an amount to attract the maximum subsidies, both employer and government, but, usually, no more than that.

Bear in mind that KiwiSaver is an ‘illiquid’ investment – you can’t withdraw the money at any time. KiwiSaver traps your money, usually until age 65. Your circumstances may change, meaning you need to access your money.

Instead, focus on paying off debt with any spare money. When all debt is repaid, set up some other form of investment account, possibly a managed fund, or look at investing through a financial adviser.

At this stage of your life, most people have their KiwiSaver and other investments in growth funds. If you’re one of the few who are easily unnerved by market volatility, the risk profile of a balanced fund might suit you more. This is an important time for saving and you need your returns to be as good as they can be.

Millennials

Aged 24-38

This is one of the most crucial times in your financial life, as you grow your career, set up your spending patterns, save for a house, and grow your KiwiSaver balance.

Many in your age group will use their KiwiSaver balances to save for a first-home deposit.

If you’re looking to buy a house soon, it might be a good idea to move your money to a conservative fund. You want your money to be there when you’re ready to buy a house, and not get caught out by a market slump just when you need to withdraw it.

Send any spare money you have into KiwiSaver to help grow your balance.

When you’ve bought a house, move your KiwiSaver account to a growth fund and contribute an amount that will give you the maximum employer and government subsidies.

Aside from KiwiSaver contributions, concentrate hard on paying off your mortgage, increasing payments as you can. Use any pay rises to pay off debt – be careful that you don’t just spend more as you earn more.

Gen Z

Aged 4 – 24

Time is on your side – even quite small amounts of money will grow well given the amount of time you have. The force that is compound interest is with you!

When it comes to a student loan, remember having a qualification is better than no qualification – even when it does come with debt. But look into this carefully – you don’t want to be stuck with NZ$40,000 in student debt if you’re not putting a qualification to good use, or not getting the financial benefits of an increased salary for it.

Learn about investment. KiwiSaver ought to be a good vehicle for this and aim to make enough contributions that you get the maximum subsidies.

Get your level of risk right. Mostly, people in this age group will be in growth funds and it’s worth using an online calculator to see what’s best for you (see sorted.org.nz). Remember that the biggest factor for successful investment is to be in a fund type that offers a suitable level of risk for you and your situation.

Published 26 May 2019

This article does not contain any financial advice and has not taken into account any particular person’s circumstances. Before relying on it, we recommend you speak with a financial adviser. This story reflects the views of the contributor only. Content comes from sources that we consider are accurate, but we do not guarantee that the content is accurate.

Martin Hawes is the Chair of the Summer Investment Committee. The Summer KiwiSaver Scheme is managed by Forsyth Barr Investment Management Ltd and a Product Disclosure statement is available on request. Martin is an Authorised Financial Adviser and a Disclosure Statements is available on request and free of charge at www.martinhawes.com. This article is general in nature and not personalised advice.