Investment Newsletter - August 2022
What is YOUR number?
Having a target “number” for your retirement savings can help you understand just how big the mountain is. However, is that number sufficient to make sound financial decisions?
In 2021, Massey University produced a retirement expenditure guideline for New Zealanders to illustrate potential retirement costs.
The report outlines the weekly expenditure relative to NZ Superannuation in 2021, the key inflationary drivers for superannuants, and other factors to think about for retirement
It is a great effort by them after speaking to hundreds of retired Kiwis, to then detail how much retirement might cost us. However, just adding the numbers up in isolation of your actual circumstances does not always provide the full picture. The numbers are a useful guide about costs, but cannot factor in your big spending goals, health, family gifting, your longevity, inflation and the state of our economy etc. So, your reality could deviate from the facts and assumptions of those who participated in the survey. Therefore, we believe advice isn’t just about looking at a single number as the end goal, it also encompasses new information, and how this integrates with your needs.
As the years pass, changes could occur within your control, or many happen outside of your control. Therefore, with more information, the number may change, thus the need for regular reviews.
From a psychological standpoint, purely focusing on having a “number” will potentially lead investors to view (the amount of) money as a destination, rather than the fuel to achieve goals. We perfectly understand why investors want to focus on a number. This is because money is a critical aspect of our lives and is embedded in our financial goals, such as purchasing a house, or retiring. However, our experience working with many investors over a long period of time is that money is not the destination, nor a real source of happiness. Instead, money is the means to help achieve financial goals, which is intertwined with your wellbeing and ultimately what makes you happy.
When working with you, our job is to design the most appropriate strategy for your individual circumstances to help achieve those goals and take away the worry of running out of money. It may well involve a “number” to help plan how much to invest, the frequency and how it is allocated. We are mindful that this number could change with time. Therefore, the complexity of retirement planning is not justified by us asking “What’s your number?” as there will be numerous factors in play. We believe a more appropriate question will be "What will make you happy when you retire?".
If you would like to discuss your situation with us, we are only a phone call or an email away. Please get in contact with us on 0800 NO STRESS (0800 667 873) or email at info@foxplan.nz if you have any questions or would like your adviser to talk through your current investment plan.