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Janine Starks looks at one couple's retirement readiness and what kind of stock you should put in financial advisers and managed funds.

Janine Starks looks at one couple's retirement readiness and what kind of stock you should put in financial advisers and managed funds.

By Janine Starks* (email)

From my mailbag:

All going well, my wife and I intend to retire in two years time at age 65. We own our home and have around NZ$450,000.  Half our money is in short term deposits and the other half in a couple of managed funds (down 25%) with a small proportion in gold shares and Kiwi Saver. We are at the stage of believing we need to secure our savings and start investing for income. We have met advisers who just seem to want to promote managed funds.  Being somewhat disillusioned with these, we recently cashed in a couple. We’re not sure if the funds we have left will appreciate. What options do we have for our money on short term deposit? 



There’s one thing about Baby Boomers – you’re a polite and resilient bunch. Being ‘somewhat disillusioned’ by managed funds is a fairly kind stance, given the recent conditions.  I look on your generation with a fair bit of admiration as financially you’ve been through the best of times and the worst of times.  Like a good Dickens novel you’ve watched the financial markets cycle through a history of destruction and resurrection.   

At one end of your working lives, you jumped on the property ladder and inflation paid off your mortgages, allowing a dizzy journey of property hopping. 

At the other end of your careers you’ve had to navigate a minefield of hazards; finance company failures; a global financial crisis which threw share portfolios into disarray; a surging currency devaluing your offshore investments; a raft of bizarre credit instruments packaged for your consumption; and wide eyed children who look to you for their house deposit. 

To top it all off you enter retirement in a low interest rate environment, so even if you survived the late-life battering, the ability to generate income from your portfolio is now more challenging. 

Email questionsto, subject line: Financial Agony Aunt.  Anonymity is guaranteed.   


When it comes to managed funds, your disillusionment is likely to be shared by others.  We’ve been through a very rough patch in markets and there is little ability to tart up the numbers. 

To give you the big picture, Morningstar performance tables* show that over a three-year period only 40 percent of all managed funds in NZ have a positive return (kindly, I included all the cash and bond funds, which helped plump that figure).

Long-term lens

If you compare them to a cash rate of say 4 percent a year, only 20 percent jumped the hurdle.  However, over a seven-year period 93 percent have positive returns and roughly half out-perform a 4 percent cash rate.  A small number have even produced returns in excess of 10 percent a year despite the challenges.  Managed funds should accumulate over your life and it’s difficult to judge them over short frames. 

Right now, you are two years off retirement and you need advice on how to pre-position your entire portfolio.  Don’t just focus on those short term cash deposits or whether equities will recover. 

Step back and start analysing the big picture from the bottom up.  Run the numbers as if you are retiring today, in order to figure out where to place investments in preparation for 2012.  If you retired today, your joint pension would be $26,575. 

Prepare a detailed budget of your expenses and figure out exactly how much extra income is essential.  Ideally, an adviser will want to encourage you to keep 20-30% of your portfolio in growth assets (such as managed funds), for inflation proofing during the first leg of retirement.  But if you can’t live on the remaining income, the pros and cons of fully stripping out income must be weighed up.   

I have to be careful not to give you any personal financial advice, but I can give you a few questions to start the ball rolling with an adviser:

Come with list

1.      If my whole portfolio was producing income (e.g. from bank deposits or bonds) what would my income be, if I retired today?

2.      If I had some money in high yielding shares, what are the risks?

3.      What would be the drop in my income if I kept 20% in growth assets?

4.      How appropriate are my current managed funds? (It concerns me that a large proportion of your savings are in a ‘couple’ of funds).

5.      Can you review my gold shares?  (While gold has been a good asset class recently, unless you’ve been currency hedged, they may not have performed as well as hoped).

6.      Should I be moving more money out of managed funds given my proximity to retirement?  (Time isn’t on your side anymore and even if an adviser likes the look of markets in the long-term, it’s generally accepted practice to make a portfolio fairly conservative as retirement approaches). 

7.      With the money on short term deposit, should I position this with maturities spread over the yield curve?  (Your current position of having 50% of your savings at the short-end is exposing you to a fair bit of risk at one point on the curve.  A wider spread out to 5 years could be considered, but an adviser needs to know a lot more about your circumstances/health before advising this).

8.      What is the effect on our annual income if we make small capital withdrawals to pay for holidays each year?

Do not give up on financial advisers.  As Dickens said “it was the age of wisdom and the age of foolishness”.  The best thing you could do is keep shopping around for someone who is more in tune with your views and prepared to work within your comfort zone.

*Please note Morningstar reference is one-year-old as this is a reprint of a column published in December 2010.


Janine Starks is Co-Managing Director of Liontamer Investments. Opinions in this column represent her personal views and are not made on behalf of Liontamer.  These opinions are general in nature and are not a recommendation, opinion or guidance to any individuals in relation to acquiring or disposing of a financial product.  Readers should not rely on these opinions and should always seek specific independent financial advice appropriate to their own individual circumstances.

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To have lost an average of 25% ($50,000?) on the managed funds would have taken some skill. The portfolio does not sound like it was well researched, diversified or risk managed. There are plenty of funds that  have made money over the last few years. The person who advised them about the managed funds they chose did not do well. Even if they had paid a good adviser $40,000 and it had gone nowhere they still would be better off than they say they are. Sometimes good advice is well worth the price (likely to have been about $2000)

Even if they had paid a good adviser $40,000 and it had gone nowhere they still would be better off than they say they are.

$40k down the drain.

Sometimes good advice is well worth the price (likely to have been about $2000)

Here's what I consider to be good advice, and it's completely free: "Take responsibility for your money and manage it yourself."


I look on your generation with a fair bit of admiration as financially you’ve been through the best of times and the worst of times.  Like a good Dickens novel you’ve watched the financial markets cycle through a history of destruction and resurrection. 

Baby boomers (and their parents) piled into the '80's share market with the greedy gusto of clueless fools and they paid the inevitable price.

When you don't understand something like the sharemarket, especially as it was at the time, you should stay well out of it...and any who lost money in 1987 clearly didn't understand it at all.

At one end of your working lives, you jumped on the property ladder and inflation paid off your mortgages, allowing a dizzy journey of property hopping. 

That's a euphemism for "You gleefully hitched yourselves to the property bubble, inflating it to ever more ludicrous proportions with your unfettered greed, even as you knew you were locking out at least one generation to come."

At the other end of your careers you’ve had to navigate a minefield of hazards; finance company failures...

"We can't lose, it's free money, GREED GREED GREED!"

...a global financial crisis which threw share portfolios into disarray...

It's easy to point the finger of blame at grossly overpaid suits, but they too are baby boomers, and were willingly empowered by their fellow boomers who at the time feted them for doing such a grand job.

...a surging currency devaluing your offshore investments; a raft of bizarre credit instruments packaged for your consumption...

See above.

...and wide eyed children who look to you for their house deposit.

Just as boomers did the same with their own parents, grandparents, inlaws, etc. Despite the endless self-congratulatory and entirely mythical "self-made (wo)men" stories we're forced to endure, very few of those patting themselves on the back for astute property investment schemes didn't benefit from the largesse of family.

An inherited house here, a gifted never-never "loan" of a deposit there...but now those lucky folk complain about "greedy young 'uns with a sense of entitlement". However, those young 'uns face a housing market shoved well beyond the reach of most of them by the greed of their parent's generation.

You nailed it Anon! Fantastic post. An honest delivery of utter truth. hear hear

Well wrote.


Well wrote ! " .......... where the hell on God's green earth did you go to school , steven ?

What is the language in your native land  ....... Did anyone bother to teach it to you ?

" Well written " ............ geez , it's not rocket science !


Mr tor lawn : ....... Irregardless of the dire straits of the world's oil , or the parlous state of the global warming climate , there is no need to be sloppy with our native tongue . .......

......And as good steven is a P.O.M. by birth and by heredity , I'd have thought that  he'd have set an example to us plebian colonialists as to correct usage of his home-land language ,

That an un-educated right-wing neo-liberal scum-sucking Don-Brash groopie ( moi ! ) should need to harangue him , is a sad reflection upon his primordial tutors .......

[....... and I am not personally acquainted with his grammer , ...... but I sincerely  wish the dear lady good health , and no peak-oil ! ...].....


NB not a pom...

The fact you cant get past your political blinkers is not my problem but are reduced to attempts belittle someone is really a sad reflection on you.


Hope the use of 'irregardless' here is deliberately ironic.  Because otherwise, damn, that'd be embarrassing.

GBH, I have poor appreciation of english, it isnt my bias, this one of my more than a few weaknesses doesnt really matter....

So what in effect you are saying someone who misses the odd (.) or uses "your" in the wrong spot is incorrect in the context of the messages, if this is the case you are one sad person.


Shocking start to the day...I find myself 100% in agreement with Steven.

spec,s---you're causing the the milk in my cereal to turn--you,re a cereal killer

steven's innovative mangling of the English language seems to have overwhelming support , here . .....

.....As such , I shall withdraw my original complaint . Mangle away , to your hearts' content , team .

Carry on , irregardless !

"doan get depress an downhearted". It can work...

Offing , I reckon , if your in a deep whole of you owe making , stoop diggin ! .... Gummi ain't not no energetric too cary on thus fred more no longer , so my best humble apoloxities to deer steven . Ewe is wroting a god style , buddy . Stick wit it , the god oil .  Yup ....

.... And  fank ewe Mr KW John for illuminating me on thus matter , more goodest wishes too ewe to , god  sir .

...... Chairs !



to Zenophobia born of jealousy.

Agn, do you really think you have higher values than your parents or grandparents?  ...perhaps you do, they may be particularly greedy people, but that does not imply that your offensive, zenophobic generalisations are justified.  It was the times that were different, not the people.

Good grief, Good nurse, I'm, like you it seems, quite away from 'retirement' age, but don't share your bitterness.  Being too bitter can't be too goood for the health!

Anon good nurse

Every generation seems to have criticised its previous one - remember that the next one's going to dump on you as well, but I dare say you'll take about as much notice of those comments as the baby boomer do of comments such as now.

Every generation has comprised people, all with various degree of dumbness, greed and ignorance - yours will no different on those counts as well, but I can already see in them an entitlement culture that was not there to the same degree in the boomers at the same age.

Wikipedia: The possessive pronoun version of you »

Our retiring couple are aged in their early 60s and have potentially 30 years or more life ahead of them.  The worst possible outcome would be not to inflation-proof their investment capital.  When you look at today's living costs,  virtually all of them are subject to the ravages of inflation.  Just look at your local authority rates for a start.

So our couple must have some of their capital in growth assets.  Where I differ from the above comments is by saying no to managed funds.  A far better way is to have a portfolio managed by an experienced qualified professional,  but via a selection of direct stocks.  The fees for this regime will generally be less half that of managed funds,  and you can have a say in the stocks,  markets,  sectors etc invested.

I am an AFA (Authorised Financial Adviser) managing lots of clients portfolios,  and the annual cost is around .75% (tax deductible) for a balanced portfolio.  Even in today's volatile climate it is possible to craft a portfolio with an average yield of around 7% with opportunity for capital growth.

Money in the bank at short-term rates will not achieve this.  After RWT you are not keeping up with inflation.



You are assuming inflation and not deflation....?

Have you considered deflation as a risk?

Have you considered what Peak oil will do to every (or most) asset class?

7%? ok but at what risk? So with 30 years life expectancy really their bank account could be worth $0 at cant take it with does it really need to grow? ideally you just need to live comfortably off it...but have a guarantee it will be there....

Now if like me, you see 2 or 3 decades of deflation and depression then actually bank deposits with their intrinsic Govn guarantee become interesting (oops), and if we see deflation then taking out and storing cash becomes sane...even maybe Govn bonds bought at the right time (in the future)....

I certianly think a retired couple should be putting some effort in to understand their own finances and the risks (if for only the great brain exercise)....we can see from the finance company fiasco that this doesnt seem to be the case.   For myself Im perfectly happy to do my own investment because I see the risks and I enjoy making the decisions...and I can turn on a dime say sell shares if I feel its justified (which I have)....which once you hand over control others cannot do....ive learned that the hard way....professionals can lose you money as quickly if not more quickly than you can.

Money in the bank, BUT its a risk free rate of return and if like me you see deflation soon and substantially then CASH is king...and minimal risk....and it has opportunity value, firesales become areas of big profit.

Volitility, indeed, and I think its going to get worse, so for me anything that locks in your money and exposes to risk has to be quickly moveable/convertable.

Spread the risk? trouble is when everything is a bubble you are just exposing yourself to losses from more directions.

For me right now Im trying to figure out just how to minimalise losses from the substantial drop I see coming, zero debt it the only obvious one.....I may only be 5ft 6ins but I could end up a giant amongst paraphrase Hugh Hendry.


From what I have read more than 70% of the finance company money that was lost was people using the Anon Good Nurse approach of DIY. Many people are so ignorant that they have no understanding of how little they know. Most current financial advisers will at least have some more idea of the various risks of most types of investments. While this couple appear "unlucky" with their "adviser" I suspect most of those they rejected would have a better job than the system they used.

"for the last 50,000 years"

Which is why humans have a society....and use their mass to deal with those who are immoral or amoral.


That's not 'financial darwinism'.  It's a rationalisation for crime.

It's also known as Capitalism.



Your entire post was so wrong it's beyond merely wrong. "Financial advisors" everywhere were recommending finance companies.

These so-called professionals are no less ignorant and greedy than anyone else, and just as prone to the latest get-rich-quick fad, no matter how ridiculous.

Most of the "mum and dad" investors who lost money in October 1987 had put at least some of their faith and trust in financial advisors.

Ditto finance companies and property.

Their clients may be financially illiterate and gullible as all get out, but these advisors had little to lose, since they were gambling with other people's money.

Moral hazard is the name of the game, and everyone was playing it

Happy holidays people. I haven't missed much here then. Steven's still going on about peak oil. Was that your letter to the editor last week in the Herald about PEAK oil Steven??

Nice rant Anon Good Night let those greedy boomers and greedy boomers have it!

There was an article on here by another advisor a few weeks back saying $1 million was the minimum starting point for retirement these days

I agree with Muzza take control of you own personal finances, this blog is a good source of info in amongst the end of the world predictors.

Well done for Getting Martin Hawes in, should be interesting to hear a different slant on the markets

Nothing personal to this couple, who seem dedicated and sensible, but what planet are you on 'admiring this generation'?

They had free education and health care for their lives, better income to house affordability than ever, massive booms in the economy in the 80's and 00's and a surge in the value of their homes on an unprecedented scale until 2008 on the back of massive opportunity and rampant liquidity in the economy. They also inherited their parents' mortgage free homes, which had been the working ambition of most people in that generation. Nothing was done to crystallise the opportunities New Zealand had offered to it, including a wasted moment where national super savings could have changed the future in 1977. They are the generation that enter retirement with the highest proportion of mortgates in history.

As a thirty something, the prospects look nothing as good for opportunity in my generation. As the debates around NZ debt in the future take centre stage and you can be sure the voting block you 'admire' so much will have self interest at its core - in health and superannuation.

SWRA - well said. One of the things to remember, is that they didn't do it knowing they were disenfranchising following generations.

They seriously thought that it would all continue onward and upward, if they thought about it at all. And -  their actions are only those of survival, from here on.

Sooner or later (better sooner) the younger generations have to elect someone who moves us all to a state of physical sustainability, while trying to keep some semblance of social cohesion.

I'll give you the tip - that won't come from either of our major Parties, in their present forms.

I like the balance you provide to my grinching, and the optimism there powder.

Implicitly, our challenge when the younger generation have that influence is to improve on the mistakes of the past. They say there could be a new consciousness building in our generation that reflects the GFC and 80's - so hard to comment on a generic attitude of a 'generation' until we see it in play of course.

As for the parties - agreed - they largely reflect their demographic still. My big concern is that we don't act while we are still able to without it being a true imperative.

and when that imperitive happens which ever party in Govn will move to ensure first and foremost their voting block gets to keep their part of the pie even as it shrinks at the expense of the others...



I think there is a legal thing, ignorance of the law is no excuse....however in mitigation they have been promised so much by pollies and long as they voted for the pollies.

I know I certianly didnt realise there was such an overwleming problem til 2006 or so......however there is quite a bit of info out there showing some ppl in Govn knew or could foresee 50 odd years ago but were at the kindest marginalised. So decades of pollies have kicked the ever growing can down the road....and another doubling? I can see it can double china's economy in 7 years again....and thats just china...

"Sooner or later" it will be a hard sell, the BBs will be in the majority until enough of them have died off to see a the only option left for the ypunger ones really is emergrate so they dont have to pay for the things the BBs expect as their right.....

"trying to keep some semblance of social cohesion"

if it can happen it will happen here in NZ IMHO....however we might just be simply swamped....



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Days to the General Election: 35
See Party Policies here. Party Lists here.