4 hacks to save for a bach in retirement
New Zealand doesn’t actually have an official retirement age, but 65 is when superannuation payments kick in – and when many of us plan to step away from the ol’ 9-5.
And what could be more quintessentially Kiwi than a dream to own a bach in retirement, where you can nip away for days, weeks, or even months at a time? From old weatherboard baches with a few signs of ageing (we understand), to the modern snazzy baches of recent years, this highly sought-after cultural icon is something many of us aspire to for our retirement.
So, how can you make it happen? Here are four ways to hack your savings for a retirement bach.
1. Have a goal
In this case, it’s saving for a bach for retirement, but it could equally be a boat, a worldwide cruise, or even a fund for the grandkids’ tuition fees.
Whatever it is, working towards an exact goal is far more productive than idly putting money away with no fixed plans.
Do your research and find out exactly how much you’ll need in the bank to make the dream happen. Set a suitable budget and decide whether you’ll be purchasing your bach with cash or if you’re prepared to take on a mortgage. Keep in mind that you may want to invest in doing the bach up, or simply fitting it out with new furnishings. Once you have a total figure in mind, you’ll know exactly how much to put aside – simply divide the total amount by the number of weeks (or months) you plan on saving for.
2. Plan your financial strategy
Unless you discover the secret to time travel, there’s no better time to start planning your retirement savings than right now. The sooner you start, the easier it will be to hit your savings goals, as you’ll have time on your side.
The best way to start is by setting out your financial strategy. It’s a good idea to talk to a financial advisor about this as everyone’s individual needs will be different. A common approach for a lot of people is to take advantage of compounding returns. That means you put money into a high-interest savings or investment account (such as a term deposit) so that you can earn interest over time.
You can also get in the habit of adding any windfalls to your bach savings. This includes tax returns, bonuses at work, or other unplanned income. Pay a visit to your super fund’s calculator online to see how much these occasional top-ups can add to your retirement savings.
3. Get the most out of your KiwiSaver
Your KiwiSaver account is supposed to work for you, and if it isn’t, it’s time to do something about it.
Take a look at your provider. Some offer lower fees than others, and some have higher returns even if their fees cost more. You may also consider the split in your investments. For example, are your savings split across a conservative portfolio, a growth one, or somewhere in between?
The Sorted Fund Finder is another tool to help you decide the best provider and fund types for your goals. And don’t forget, you can regularly review your investments and adjust them for better performance.
Another handy tool is Sorted Kickstarter, which can help you find your investor type, and point you in the right direction for an investment mix. It can also show you what you can expect in terms of results (and whether those results mean a one-bedroom bach or a four-bedroom palace).
And of course, one of the great things you can do for your KiwiSaver every year is to make the most of your member tax credit. This is essentially a scheme where if you put aside a minimum of $1,042.86 each year, the government will top up your account by half that - $521.43.
4. Downsize wherever possible
You’ve probably heard the term ‘empty nesting’ before – if this applies to you, it might mean you have a lot to gain (and not a lot to lose) by downsizing.
This means selling your spacious four-bedroom home and moving into a smaller place, which could free up some funds and even reduce your ongoing maintenance costs.
Downsizing can also mean opting for a more affordable car, selling off extra furniture, electronics, and other valuable gear that you no longer use. You can go one step further by restricting yourself to essential purchases only. It’s simple – the less money you spend on other things, the more money you’ll have for that dream bach!
It’s all about getting financially prepared for retirement by doing everything you can to safeguard your future self – and your bach-shaped dreams.
Hopefully you’re now a few steps closer to turning your dream bach into a reality. Good luck!
19 Mar 2020