Money Matters Webinar - Q&As

We hosted a "Money Matters" webinar with Liz Koh from Enrich Retirement, Ralph Stewart from Lifetime Income Retirement, Austin Fisher from Monument Insurance, and Charissa Mackenzie from Public Trust,  to answer some of your most pressing questions about money management, debt reduction, insurance, wills and retirement.  You can watch the full webinar recording here.

In this blog post, we asked our guest speakers to answer questions from the webinar, so take a look below.

Webinar Questions about Money Management and Retirement

1. How to manage debt & savings while still being able to 'live a little'

Liz Koh:  The first challenge is to work out how much you think you can save each payday. Your savings then need to be split into categories – savings for emergencies and short term goals (such as holidays or new furniture), short term debt repayment (credit and store card debt), long term debt repayment (mortgage) and retirement savings. So long as you are contributing to KiwiSaver, your focus should be on paying off your mortgage well before you plan to retire, giving yourself enough time to add to your retirement savings after the mortgage is gone. If you are on track to do this, your next priority is to have a plan to pay off any short term debt. Your remaining savings will be what you can use to ‘live a little’.  It’s all about keeping a balance between these priorities and feeling confident that you can meet your goals over time while still enjoying life. 

2. When you’re a couple with sharing a joint account, it can sometimes be challenging keeping track of funds. Is there a tool you can recommend for keeping track of your personal finances? 

Liz Koh:  The best way to keep a handle on this is to have separate accounts for personal spending. Simply pay yourself some ‘pocket money’ each pay day and use this account for personal items such as clothing, entertainment, gifts etc. It’s best to have two joint accounts – one for your fixed costs such as mortgage, rent, insurance etc and one for other household costs which are not fixed – such as food and petrol. Have your pay go into your fixed expenses account and then transfer an amount each payday to your household costs account and your two personal accounts. That way you can easily monitor your spending without having to keep track of every purchase. 

3. 10yrs-ish to retirement and I know there is so much I should have done already. Can you give me some tips re what you should make sure you do, and in what order? Thank-you.

Liz Koh: In the last 10 years, make it an absolute focus to pay off your mortgage as quickly as possible, while also contributing to KiwiSaver. Once your mortgage is gone, you can ramp up your retirement savings, at least to the equivalent of what were your mortgage repayments. Think carefully about the balance between how much of your wealth will be tied up in your house and how much will be in liquid assets by the time you retire. By liquid assets I mean investments that can easily be converted to cash to top up your income in retirement. As a rule of thumb, you should have roughly a third to a half the value of your house available as liquid assets. If you are not on track to achieve this goal, then think about moving to a cheaper house or working a bit longer to increase your retirement savings.

4. We own our house and have a mortgage on a rental, which is paying for interest only at this stage. Our modest savings are in the rental. What's your advice for increasing funds for retirement? Keep focusing on the mortgage? Other activities?

Liz Koh:  The new Government has decided to bring back tax deductibility for mortgage interest on rental properties. That being the case, you may wish to consider building up an investment portfolio rather than having a goal of paying off the mortgage. This will help you become familiar with managing investments other than property. At some stage, you will no doubt think about selling your rental property so you can spend the equity and take a break from being a landlord. Rental properties are a great way to build wealth through capital gain, but they are not so great at producing income for retirement.

5. I'm 32 years old. Who knows if the super/pension model will work when I retire? Who's to know if KiwiSaver is going to fail, Who's to know if ACC will be around or if I will be able to afford my healthcare? Never mind reverse mortgages and retirement. How do I generate enough money in my 30's to ensure I have a good nest egg. What kind of investments could enhance my resilience in my retirement?

Liz Koh:  There are a lot of uncertainties in life! However, there are some basic principles that will improve your resilience to whatever comes along.  These are:

• Spend less than you earn
• Stay away from short term debt
• Have an emergency fund on hand – enough for three months of living expenses
• Buy a house as soon as you can and pay off the mortgage as quickly as you can. You may need help from others to achieve this goal.
• Make sure you have good insurance cover – its one thing to build wealth; its another to maintain it, and adverse events can destroy wealth
• Diversify your investments

6. As someone in my mid '30s, everything feels a bit hopeless. I am still renting, and even though I've worked full time since age 21, buying a home feels impossible. You're suggesting that we also can't count on NZ super. Is there any point to putting money into superannuation schemes when we're in our 30s?

Liz Koh:  It might not seem like it, but you have plenty of time left to achieve your goals. If you are not able to buy a home just now, then build up some investments. Your KiwiSaver funds will be available for withdrawal for a first home. Alternatively, you can talk to a financial adviser about supplementing your KiwiSaver by investing in a diversified fund which is not locked in. Save as much as you can and stay out of debt. A good savings track record will help when it comes to getting your first mortgage. Get some help from a mortgage adviser or a bank about strategies for getting into your first home faster.

7. Any suggestions for those who cannot have KiwiSaver (due to USA tax regulations being awful)?

Liz Koh:  While USA tax regulations make it difficult to invest in managed funds, you can still invest directly in term deposits, shares and property. Get some advice from a tax accountant and also an investment adviser who can help you create your own portfolio. 

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If you want to learn more from Liz Koh, we've partnered up with her and the team at Enrich Retirement to provide all the information and resources you need to answer these questions and so that you can plan to make your retirement the best time of your life. Just click on the link below to find out more.

Webinar Questions about Life and Health Insurance

1. How much Life Insurance should I have? What if I have no dependants?  Are there age limits?

Austin Fisher: The amount of life insurance you should have depends on your individual circumstances and financial goals. While having dependents is often a key factor in determining the amount of coverage needed, there are other factors to consider as well.

If you have no dependents, you may still want to consider life insurance to cover any outstanding debts, funeral expenses, or to leave a legacy for your loved ones or a charitable cause. Additionally, life insurance can provide financial protection in case you develop a health condition that may make it difficult to obtain coverage in the future.

When deciding on the coverage amount, you can consider factors such as your current and future financial obligations, including mortgage or rent payments, outstanding debts, and any future expenses you may want to cover, such as education or retirement savings for a spouse or partner.

As for age limits, there are typically no upper age limits for obtaining life insurance coverage. However, the cost of premiums may increase as you get older, and some insurance companies may have restrictions or limitations based on age or health conditions. It's best to consult with a financial adviser who can assess your specific situation and provide personalised recommendations.

2. What is the cost, particularly when you get to 65? – should I consider asking my adult children to help with the premiums?

Austin Fisher:  The cost of life insurance can vary widely based on factors such as your age, health, coverage amount, and the type of policy you choose.

Generally, life insurance premiums tend to increase as you get older.  When you are young the annual change will be gradual however as you age, the annual increase will become more significant.  This can become a real issue as you enter retirement where you overall income may be impacted.

Asking your adult children to help with the premiums can be a consideration, but it depends on your financial situation, your relationship with your children, and their ability to fund the premiums for and unknown period of time.   For a Life Insurance policy, they are the ones likely to benefit so it may well be in their interests to help make sure that some life insurance is there when you die.

But here are some points to consider:

Financial Situation: Assess whether you can comfortably afford the premiums on your own. If paying for life insurance would strain your budget or affect your financial well-being, involving your children might be a reasonable option if they can afford it.  They do however need to consider what would happen if you live for say another 30 years?

Relationship Dynamics: Consider your relationship with your adult children. Are they financially stable? Are they willing to contribute? Would asking for their help strain your relationship in any way?

Open Communication: If you decide to ask for their help, communicate openly about your reasons and expectations. Be clear about the financial impact on you and why you think it's important to maintain life insurance coverage.

Alternative Options: Explore other options such as downsizing coverage, opting for a different type of policy, or looking into insurance products specifically designed for seniors.

Long-Term Plans: Think about your long-term financial goals and how life insurance fits into them. It's essential to have a clear understanding of what you want to achieve with your policy.

Before making any decisions, it might be helpful to consult with a financial advisor who can provide personalised guidance based on your specific circumstances. They can help you evaluate your options and make informed choices about life insurance and any potential involvement of your adult children in covering the premiums.

3. Can I still get Life & Health insurance if I have pre-existing conditions?  What about cancer?

Austin Fisher: Pre-existing conditions are usually excluded, however you may still be able to obtain life and health insurance even if you have pre-existing conditions, including cancer.  That said,  the availability and terms of coverage may vary depending on several factors:

Health Information: When applying for insurance, you are typically required to provide detailed information about your medical history, including any pre-existing conditions. It's important to disclose all relevant health information truthfully and accurately to ensure that you receive appropriate coverage.

Underwriting Process: Insurance companies in New Zealand assess applicants based on their health status, age, lifestyle factors, and other relevant criteria. Depending on the severity and type of pre-existing condition, insurers may offer coverage with certain exclusions, higher premiums, or waiting periods.

Type of Policy: Different types of life and health insurance policies are available in New Zealand, such as term life insurance, critical illness cover, and health insurance plans. Some policies may have more lenient underwriting criteria or be specifically designed to provide coverage for pre-existing conditions.

One thing to mention here is group insurance.  If you have an employer who offers a group insurance policy they may not ask specific medical questions and there may be no pre-existing condition exclusions as its a company wide policy

Also, you may find some insurance providers in New Zealand specialize in offering coverage for individuals with pre-existing conditions. These insurers may have tailored products and underwriting processes to accommodate the needs of applicants with specific health concerns.  You do however need to read the policy terms and conditions and we would recommend that you seek assistance from a financial adviser to be sure that the policy is right for you.

In New Zealand, there is a public healthcare system (the Ministry of Health) that provides medical services and treatments for residents. However, private health insurance can offer additional benefits and coverage options, including access to private healthcare facilities and shorter waiting times for certain treatments.

It's essential to research everything from public health to different insurance providers and policies to find the best coverage options for your individual needs.

The best place to start would be consulting with an financial advisor who can help you navigate the process, compare quotes, and understand the terms and conditions of various policies. Additionally, be prepared to provide comprehensive medical information during the application process to ensure that you receive accurate quotes and suitable coverage.

4. Life Insurance - Pros and cons of going direct to an insurer rather than through an Adviser

Austin Fisher: If you know exactly what you want, it can be quicker to go directly to an insurer. However, Monument Financial Advisers offer a 10% premium discount and can use all available insurers – comparing terms and prices and products on your behalf.

Our Advisers are regulated – so this gives you an extra level of reassurance that the advice is sound.  Another extra level of protection is the (free) Dispute Resolution Service that covers financial advice, if there are any problems further down the line.

Most people value the fact that they have an Adviser to help them, particularly if there is an issue with a claim. 

5. What are the main types of life and health insurance?  (e.g. life insurance vs mortgage insurance?)

Austin Fisher:

Life Insurance:

• Term Life Insurance: Provides a tax free lump sum payment to beneficiaries if the insured person passes away during the life of the policy.
• Funeral Insurance: Specifically designed to cover funeral expenses, providing a lump sum payment to cover funeral costs.
  

Read our Life Insurance Guide here to learn more

Health Insurance:

• Medical Cover: Provides coverage for medical expenses, including doctor visits, hospital stays, surgeries, specialist consultations, and prescription medications.
• Surgical Cover:  Focuses on covering the costs of surgical procedures, including pre-operative and post-operative care.
• Specialist Cover: Offers coverage for specialist consultations and treatments, such as visits to chiropractors, physiotherapists, or psychologists.
• Dental:  Covers dental treatments, including routine check-ups, cleanings, fillings, and major dental procedures.
• Optical: Provides coverage for eye examinations, prescription glasses, contact lenses, and other vision-related expenses.
• It's important to note that the availability and specific features of these insurance policies may vary between insurance providers. It's recommended to consult with Monument Financial Advisers who can provide personalised advice and help you choose the most suitable coverage for your needs.
  

Read our Health Insurance Guide here to learn more

6. I am mortgage free and have been saving a lot and upped my percentage for my Super per fortnight to put in. However, health insurance is going to be an issue when I retire as I won't be able to afford it. Your advice on this would be very welcome

Austin Fisher:  It's great that you've been proactive about saving and planning for your retirement, including contributing to your Super. Health insurance can indeed be a significant consideration as you approach retirement, especially if you're concerned about affording it on a fixed income.  That said you might actually be able to afford the cover !  As you will have money to call on, you could agree to pay a higher excess (say) the first $5,000 of any claim. Then you may find that health insurance becomes more affordable.  

I suggest reaching out to a financial adviser for guidance and support in navigating your health insurance concerns.  They can evaluate your options, research the different health insurance providers and policies available in New Zealand. Compare premiums, coverage options, and benefits to find a plan that meets your needs and budget.

7. Is life insurance at a particular age, e.g. 55 years, less expensive if you have an existing policy, compared with starting a new policy. Austin mentioned that it is more expensive to extend cover than to hang onto it.

Austin Fisher: Not at a particular age, this is a general rule of thumb. If you set up a new policy to replace one that’s already in place, it is probable the new insurer will charge more in premium or exclude pre-existing conditions.

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If you are interested in finding out more about your life and health Insurance options, we have access to a nationwide team of Monument financial advisers who can provide you with more personalised approach. Monument has been our appointed business partner since the early 1990’s to provide financial advice to our members on life and health insurance products (HealthCarePlus is not legally able to provide financial advice). Click below to find out more.

Webinar Questions about Wills and EPAs

1. My assets are all jointly owned with my partner do I need a will?* 

Charissa Mackenzie:  There is value in establishing a will that has provisions for what happens when you have both died e.g. if you sadly died in an accident together or the survivor of you died without making a will.  When there is no will - Intestacy | Public Trust NZ.

KiwiSaver cannot be jointly owned so many New Zealanders have funds within KiwiSaver in their sole name over the value of $15K that that would need estate administration.

2. What do I need to think about when choosing an Executor for my Will?*  

Charissa Mackenzie:  The person you appoint faces time commitments, legal and accounting procedures and a high level transparency.  It is important to ensure that who you appointed has the capability and capacity to carry out their duties. You can read more about Executor of a Will and Estate | Public Trust | NZ. 

3. I have a will do I need an Enduring Power of Attorney?*

Charissa Mackenzie:  A will only comes into effect when you die.  Enduring Power of Attorney, EPA | Public Trust NZ.

Without an Enduring Power of Attorney, a legal process through the Court is required. Enduring Power of Attorney for Property Responsibilities | Public Trust NZ

4. What options should I consider when I have an adult child dependent on me?*

Charissa Mackenzie:  A comprehensive estate planning conversation would be valuable to review a wide range of matters to consider and how they may impact on your individual circumstances.  A few examples (but not limited to) would be:

• What is your expectation as to the financial needs of your adult child?
• Are there practicalities, such as they currently live with you, that need a plan should you enter into resthome care or die?
• Do you have other children that any decisions regarding the above matters will impact?  Is there any one in particular you’d like to nominate to be consulted with in regard to the estate provisions you make for your dependent child in your Will or when your Enduring Power of Attorney is acting on your behalf?
• Should you be incapacitated or die, is the dependent child going to need ongoing management support of their legal and financial affairs for their lifetime?  Who is the appropriate person/organisation that has the capacity and capability to provide this?

5. We have assets in other countries, what should we do?*  

Charissa Mackenzie:  It is possible for your will in New Zealand to deal with your overseas assets and liabilities, however, depending on the country the assets are held in and the value and the type of these assets, it may be best to have a Will in that country. Come in and talk to one of Public Trust's Trustees to get advice about whether you need to have a will for your overseas assets or not.  

6. What is the impact of Residential Care Subsidy?*

Charissa Mackenzie:  Income and assets are considered.  Residential Care Subsidies are provided through Work and Income: Residential Care Subsidy - Work and Income

7. If a Trust is in place, with family members in the trust, are the trust members similar to someone appointed as a EPA?*

Charissa Mackenzie:  Each trust is individual as to their provisions and ongoing management so face to face discussions with your preferred solicitor or Trustee organisation such as Public Trust would be of benefit to explore this further.
Family Trusts | Public Trust NZ.

*Please note that each situation is individual to that person.  These examples are for consideration, but are not limited to just these points.  Please take the time to seek professional advice about your individual situation.

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And remember, as a HealthCarePlus member, you can access great deals on Public Trust’s online services for the preparation of wills and enduring powers of attorney. Click below to find out more.