Retirement a much more fluid concept, says investment expert Joe Bishop in the first of a series of columns bringing a different perspective on KiwiSaver.
It's a great time to be alive and that can often be seen by the way over-65s are pursuing life these days.
It wasn't so long ago, maybe 30 years, that the societal norm was to work until your 65th birthday, be presented with a carriage clock, a hearty farewell and walk out the door with your clock and the firm's thanks.
No thanks, as far as I am concerned personally…According to the government's Office For Seniors, many others are thinking the same; 20 per cent of people aged over 65 are still working and that number is expected to rise to 33 per cent by 2031.
Retirement, 30 years ago, was often cynically seen as the relatively short period between giving up work and passing away. Now, retirement has become a far more fluid concept.
Sure, some are still working because they don't feel financially secure enough to retire. Many others are working because they have a passion for what they do and still others because they want to keep the structure, the regularity and the contact with others alive – and keep themselves alive in the process.
We at Kiwi Wealth can see this in our members' operation of their KiwiSaver accounts – about 60 per cent of the over-65s are continuing to pay into their accounts and/or are keeping their funds in place.
The emergence of this phalanx of over-65 workers is another thing that's changed in the past 30 years, closely allied to our lengthening life expectancy. OECD data shows Kiwis now have a life expectancy of 81.4 years, up from 71.5 in the 1970s.
Many are planning to live for another 20-30 years; they still have long-term horizons and goals. Most 60-65 year olds are fit and active and not at all like their parents at the same age. We have one private investor who is 91 and still investing in (higher risk) growth funds to pass on their wealth to the next generation.
The over-65s often have experience, life experience and perspectives incredibly useful in a workplace, especially one heavily populated by young people. There is an awful lot of knowledge passed on in those circumstances.
They are also creating a whole new dynamic in the job market – the concept of over-65s choosing to work for companies which continue to make KiwiSaver contributions…making those companies "employers of choice".
At present, the law is that employers do not have to continue KiwiSaver contributions once an employee has turned 65 – but many do. I know of one telecommunications company which contributes 4 per cent as opposed to the normal 3 per cent - and so does Kiwi Wealth and our sister organisation, Kiwi Bank.
Just like some employers offer staff certain perks and benefits – free or subsidised health insurance, for example – those who continue contributions to over-65s' KiwiSaver accounts will be very appealing. Older Kiwis will prefer to work for them.
This age group, and the 50-60 bracket as well, are already pretty well focused on their retirement savings, even if they don't think of it like that. Those who have passed 65 either don't touch their savings and keep paying in or operate them a bit like a savings account, taking some out when they need it.
Many want to leave an inheritance while some have grandchildren living overseas and want a future that includes the ability to travel to see them.
But as well as financial horizons, we all have emotional horizons. By that, I mean as well as focusing on a financial portfolio, any couple or individual also needs to look at their EQ, their emotional quotient. What will make me/us happy in retirement? What do I want to do to be fulfilled? How will I fill the gap when I no longer have work colleagues?
Many over-65s are answering those questions by continuing to work and it is the 40-50 age group who maybe need more help in this direction. That's why we have created Future You, a digital tool allowing people of that generation to look at themselves in future years.
They can intuitively assess that future by testing their needs. For example, how much income would be needed if the mortgage was paid off? Would the kids still need financial support? What about that annual holiday overseas? That's the money side of it – but it is also a mindset change. It is not effective scaring people into contemplating their future as the numbers can, for some, be intimidating, especially if some experts hammer on about large numbers they think are needed.
It's not always true. Depending on circumstances, smaller amounts can be quite enough and are attainable. The key is to approach retirement by positively visualising and preparing for that phase of their lives.
*Joe Bishop is general manager of customer, product & innovation for wealth & investment organisation Kiwi Wealth.