What a difference two years makes
By Fisher Funds
11 April, 2017
Remember the song lyrics, “What a difference a day makes, twenty-four little hours …”? Well, two years doesn’t trip off the tongue as well as a day, but this time period could make a big enough difference for some people’s retirement as to warrant its own soundtrack!
You’ll be aware that the National Party recently announced its election policy of lifting the age of entitlement for NZ Super from 65 to 67. Their plan is to implement the policy gradually, starting in six monthly steps from July 2037 until it reaches 67 in July 2040.
Now it’s important to remember that this is only a policy at this stage and will only become a reality if National wins the General Election in September. Because it is such a gradual policy, we’re all going to be impacted differently depending on our age.
The people most affected are those born on or after 1 January 1974. The bottom line effect for you is that you’re going to have to replace two years’ worth of income that you were previously expecting to get from NZ Super. If you’re single, you will need to find another $40,000; and if you’re a couple, it’s $60,000 (and these numbers are after tax).
Theoretically, by signalling a change this far in advance, you’ve got plenty of time to plan. And actually, a Massey University study of people aged 18 to 22 found that 73% were already expecting the age of eligibility for NZ Super to rise. So maybe you’ve already starting planning!
KiwiSaver can help you bridge the gap. The effect of compounding over long periods of time means that your KiwiSaver account is going to play an important role in ensuring you have sufficient retirement savings, whatever the official retirement age.
Give us a call if you’d like help with your planning. Two years need not make a difference at all.