Big city payoff for small- town residents
Couple want to know how to invest their property windfall
which is one reason rentals can be riskier than shares. near where you will live. You would then avoid the substantial $ 11,000 mortgage break fee.
But beware of letting that fee drive your decision. That would be the tail wagging the dog.
You’re done really well financially by moving out of Auckland. I suggest you just accept the break fee as the price of making that big gain and invest in a share fund — as explained above.
You two are 10 years younger than the previous couple, so there’s an even stronger case for going into a share fund that’s likely to grow healthily over several decades.
P. S. I loved your “handful of young kids”. They certainly can be a handful. But I do hope you know how many you have!
Your idea is good, although you have a few details wrong.
As long as you’ve been in KiwiSaver for at least a year, you can take a contribution holiday — by filling out a simple form — which will stop your payroll contributions. You can then contribute any amount you like directly to your provider.
However, the amount you need to contribute to receive the full $ 521 from the government is $ 1043. Your money isn’t doubled, but subsidised to the tune of 50c for every dollar you put in. It used to be doubled, but that stopped several years ago. But the tax credit is still well worth getting.
You might want to set up an automatic contribution from your bank account of $ 20 a week or $ 83 a month to get the correct amount into KiwiSaver. That makes it pretty painless.
Others with a work super scheme might want to consider doing something similar.
Just one warning: make sure fees aren’t higher on the other scheme. That can eat into your retirement total.
Firstly, it’s not Inland Revenue that runs NZ Super, it’s the Ministry of Social Development. But there’s not a lot of point in asking them about this issue either. This is a decision made by Parliament.
The rule you’re referring to says: “To get NZ Super you must have lived in New Zealand for at least 10 years since you turned 20. Five of those years must be since you turned 50.”
I suppose the thinking behind it is that NZ Super is very inclusive. For example — unlike state pensions in many other countries — recipients include people who have never paid a cent of tax in their lives. Presumably, the politicians who voted in the 10- year and 5- year rule wanted immigrants to also be covered.
However, you’re not the only one to criticise the rule. Others say it’s too generous, and I take their point. I wouldn’t oppose a toughening up of the rule — perhaps giving people who have spent most of their adult lives out of this country a lower rate of NZ Super, at least for the first five or 10 years.
But I disagree that these people are more privileged than those who would receive extra income from an overseas state pension if that were allowed.
The basic idea — that practically every older person gets a state pension, but at the same time younger taxpayers don’t pay more than is necessary to do that — is a good one. More on this issue next week.
Mary Holm is a freelance journalist, member of the Financial Markets Authority board, seminar presenter and bestselling author on personal finance. Her website is www. maryholm. com. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to mary@ maryholm. com or Money Column, Business Herald, PO Box 32, Auckland. Letters should not exceed 200 words. We won’t publish your name. Please provide a ( preferably daytime) phone number. Sorry, but Mary cannot answer all questions, correspond directly with readers, or give financial advice.