New announcement. Learn more

Blog Articles

GabrielleDowns SyndromeAnalysisStock intersectionsHealthFitnessEducation seminarEvsTeslaTaylor swiftPharmaHealth careExerciseNvidiaMillieAIRPAAgingJewelleryScam investmentInvestment fraudInvestment fraudsScamsCyclonesFloodingInsurance premiumsInvestment managerArtesianOrgans on a chipManaging household moneyCouplesTravel insuranceTravel cardTravelPlastic WasteStewartCollaborative engagementBest Ethical Financial AdviserAwardHuman skinCrash test dummyAkzo NobelBieresdorfUnileverThe 3 R'sAnimal crueltyAnimal testingSyndicated propertyWholesale investorBreast cancer, mammogramGender diversityDiversity40:40 vision30% clubFemale leadersOutlookIndicatorsRecessionFossil FuelsWomenChildrenCyberVisaMagellanDEIDiversity, equality and inclusionGHG emissionsNet ZeroNorway Oil FundEngagementActive EngagementWealth protectionPasswordsBank of mum and dadBank loansBull marketReparationsVolunteeringB-corpGarden festivalCompensationClimate changeBuilding portfolioPortfolioBusiness as a force for goodB corpFinologyNanukPlasticPackagingEsg investingFear of missing outConfirmation biasBehavioural financeRetirement villageEsg ratingsSustainableWalking the talkProxy votingVotingAwardsBear marketEthical preferencesIndependent informationGreenwashingNastiesGMODonationsMindful MoneyRIAAWarEthicsAuctionImpact InvestingCyber securitySustainable InvestingResponsible InvestingMarketTimingCoronavirusCovidAiaCignaEthical investingEsgEnvironmentActivePassiveEPAProperty Relationship ActTax returnWearable DeviceArtificial IntelligenceUnderwritingDNA TestingGenetic TestDe Minimis ExemptionFair Dividend TaxForeign Investment FundTax ratesKiwiSaver feesChinaBrightline TestEQCAdvice FeesInvestment feesJunk InsuranceWarrantiesConsumer Guarantees ActRetirement IncomeNew Zealand SuperannuationBridgesFitness CoachingWellnessSally MellorInvestment PropertyTenantLandlordRental PropertyCar RentalCar InsuranceRelationship BreakupProvisional TaxBeanyAccountingTrust DeedBeneficiaryTrust ActTrustSkin cancerProstate cancerMelanomaLung cancerCervical cancerCancer mythsFirst home buyerOpinionFactsSwindlerScamTreasuryVolatilityDollar cost averagingFamily trustsResearchMilfordInvestor confidenceFMAInvestment assumptionsTerm depositsKiwisaver monitoringKiwisaver comparisonStress freeHolidaySecurityBanksTax refundRiskReturnInvestingGreedFinance companiesContents insuranceOwing moneyCredit cardCredit cardsPropertyExpertsBubblesBorrowingLendingFloatFixMortgageLoansInterest ratesFinanceBrokingLegislationForeign superWordingOmbudsmanHouseCoverContentsBalanced fundSchooling costsEducationCredit ratingsTradingSecondary marketTerminologyFixed interest investmentFixed InterestLegalGuarantorUk pensionPension transferSpendingChristmasConsumer behaviourUK Pension TransfersQROPsInvesmtentWays to dieInsurance claimsWinz#residential care#assetsTrustsResidential care subsidy#residentialcaresubsidy#gifting#familytrustsSavingsLottery#bonusbondsSpecific injuryCase stuffyTrust expensesEstate planningAsset protection#trust#family Trust#incomeprotectioninsurance#incomeAdriennes storyQuizLife expectancyLVR ratioHouse depositBorrowing to buy a house#firsthomebuyerKiwisaver returns#kiwisaver feesReitrement savingsFirst home buyersUncategorized#financialplanningPersonal financesFinancial management#personalfinances#mortgages#finances#fidelity#kiwisaverperformance#redundancy insurance#incomeinsuranceRetirement ageJohn KeyFirst home buyer withdrawalKiwisaver rulesFirst home buyer grantUnclaimed moneyMoney refundsPortability superBringing home KiwiSaver#australia KiwiSaver#liability#insurance claim. Insurance claim#income insurance protectionFirst home grantDumb ways to dieUnder 18 years oldTax creditTrans-tasmanPortabilityAustraliaAsteronRisk profilesMoving funds#changing kiwisaver managersInvestment returnsTibTerminal illness benefit#claim#sil#kiwisaver analysis#shares#mighty river power#electricity#partners lifeTrusteeSafety of KiwiSaverFunBeerCredit ratingBad debtTax rebateInvestment advice#retirement planningLapseExpensesFighting fundEmergency cashRipping off elderlyFinancial planingPass backUnit pricingGareth morgan#Medical Assurance Society#MAS#investment analysis#travel insurance#insurance claimFinancial planningBudgettingReporting#insurance commissionInsurance commissions#commissions#career in insuranceSouthern crossClaimingInsurance excessesRussiaJohn clarkeHumourGfcCyprusHome insuranceEarthquakesCrisisStand down periodPolicy wordingChurningContributions holidayTaxesPayrollEmployer contributionsEsctEmployee contributionContribution holidaySil kiwisaver. westpacKwiisaverBitAsset allocationAsbAnzAwarenessReturnsPerformanceProstate canerWillsRelationship PropertyPlanningLegal AgreementsLawyersDivorcePremiumsTowerFund ManagersFisherKiwibankDefault schemesBnzAMPPetsPet insuranceMoney managementBudgetsHouse insuranceFire and general insuranceAccChilds trauma insuranceChilds traumaProtectionFund managerClaim trauma insuranceTotal and Permanent Disablement InsuranceOnePath LifeClaimsSmokingSmokers ratesInsurance researchInsurance analysisImageFree quotesSavingMoneyInfographicInflationVideoTpd insuranceTPDSovereignDisabilityCase StudyAxaHeart attackLoveIncome protectionCancer insuranceBreast cancerTerranovaMinimum wageEmployer contributionTraumaIncome protection insuranceCancerSortedRisk profileRetirementOnepathInvestmentsWestpacBTWho can joinRetirement savingsFuneral plannerFuneralDyingDeathTrauma insuranceLife InsuranceInsurance News & ViewsInsuranceIncome insuranceHealth insuranceDisability insuranceUS citizenRetiring to live in new zealandInvestmentFATCAReturning to new zealandRetiring in new zealandMember tax creditKickstartTransitional residentTaxationRetiring to new zealandNew migratnFifFdrDe minimisSuperannuationRetiringNZ superannuationNew zealandEligibility for NZ SuperMorningstarInvestment ReturnInvestment performanceFund sizeFeesTaxPIRPIEMoney News & ViewsIrdMinimum contributionKiwiSaver News & ViewsKiwiSaverContributions1 April 2013
TAGS

Managing your retirement investment funds – the risks of living off interest from fixed interest investments only

In New Zealand, NZ Superannuation is a generous after tax income provided by the Government.  At present, this is $30,000 after tax for a couple where both qualify with no means or asset testing.

 

However, most people wish to have additional income each year, and this is where their investments come in.

Well diversified investment portfolio working for you

As Financial Planners, we work hard to ensure that our clients have an even income stream in their retirement regardless of the investment environment.  This involves cash-flow planning and modelling and ensuring that our clients investment portfolios provide an after tax and fees return over the long term that keeps ahead of inflation.

For the majority of our clients, having a comfortable life in retirement means that they will use up some or most of their investment portfolio, leaving their freehold home as an inheritance.  Based on our experience and international research, as retirement can be for a time period from 20-30 years, it is vital to have a well diversified portfolio including shares and listed property.

Living off income from a fixed interest portfolio and aiming to retain your capital

However, we are aware that a number of investors (who possibly haven’t had the opportunity to learn about the options from a financial planner) are determined to invest only in fixed interest investments, to retain their capital and live off only the interest earned on their investments.

Unfortunately, when interest rates on term deposits in New Zealand are low as they are at present and are likely to stay low for a long period of time, this philosophy means that these investors will have difficulty paying for all their expenses.  It is likely that investors taking this approach will have to start using up some capital, which in turn will reduce their future income streams.

Increased risk to get increased return

Using this approach to managing your retirement capital can end up being a vicious circle, as the only way that you can increase your income stream is to invest in higher returning investments (which, by their very nature are highly likely to have a higher risk).

We have outlined two types of higher risk fixed interest investments that investors seeking return may have purchased or may be considering below.

The vicious circle arises when these increased risk investments fall over. Credit Ratings are a good initial guidance to the risk of the investment. How do Credit Ratings work?  

The more risk you take, the more likely your investment is to fail, taking your hard earned savings with it.  It is vital that you weigh up the extra return that you are getting for the additional risk that you are taking on board.

While a Balanced investment portfolio has additional risk with Equities and Shares, the diversification can provide you with lower risk than investing in Tier 2 Fixed Interest that – while it doesn’t fluctuate in capital value, could fail entirely and lose all your funds.

We have listed below a range of blog posts that we have written on Term Deposits and Fixed Interest Investments to highlight the risks that you face by increasing your risk and return on a Fixed Interest only portfolio.

If you would like to discuss the options of creating a well diversified portfolio and a plan for managing your retirement capital with one of Moneyworks Financial Planners, contact us by clicking here.

If you have any thoughts or opinions that you would like to share, visit us at our Twitter, Facebook or Linked In pages, and comment.

 

 



 

This product has been added to your cart

CHECKOUT