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The myth of “Retirement Savings”

Written By: - Date published: 10:18 am, June 9th, 2015 - 101 comments
Categories: cost of living, Economy, employment, equality, Financial markets, infrastructure, jobs, kiwisaver, monetary policy, Privatisation, superannuation, sustainability, tax, welfare - Tags:

Advocates of Kiwisaver and other funded “retirement savings” schemes perpetuate the fundamental misunderstanding that “conventional” in New Zealand’s case “neo-liberal” economists, speculators, finance companies, politicians and those with a lot of share holding wealth in non-productive enterprises like to perpetuate.

In other words all those who gain from wealth transfer from workers to non-productive wealthy parasites.

The myth is that, if we give our wealth to any of the above they will magically increase it due to the “miracle” of compounding interest from investment. Then give it back to us with extra when we retire.
US retirees are already finding out how that works.
The wealthy are keeping the retirement funds. Thanks very much!

“Saving” for retirement relies on three assumptions.

One. That an ever increasing amount of money equals a similar supply of real wealth and real capital.
Two. That an exponentially increasing wealth per person is possible in a finite world reaching resource limits.
Three. That putting money into increasing land prices and increasing derivative prices in the USA, a failing State, will somehow, “magically” mean more money (Healthcare, food, Housing etc) to support you or me in our retirement.

Retirement income, real income as opposed to monetary income, as does schooling healthcare, infrastructure supply and food, always comes from current production. If I do not eat my dinner today, it does not mean there is someone who can give me my dinner in my eighties.

If however, I ensure our young people have enough to eat, good health, training in skilled jobs, functioning and effective infrastructure and good jobs, or if these are not available, at least enough to live on, then New Zealand will be prosperous enough to support me in my old age.

The best investment for my old age then, is not giving my money away for financial wizards to lose, but to pay taxes to make sure that the next generation are happy, healthy, educated, employed and comfortable

101 comments on “The myth of “Retirement Savings” ”

  1. dukeofurl 1

    Have you not read Piketty ? Ok , even those who say they have, probably didnt get past the first 100 pages.

    To boil it down, the rate of return on capital is GREATER than the economic growth.

    • Draco T Bastard 1.1

      Do you actually understand what you wrote?

      • Colonial Rawshark 1.1.1

        I am guessing: nope.

        The reality that there are now far more financial claims on real world resources then there are actual real world resources to redeem those claims, seems to have missed the attention of quite a few people.

  2. Paul Campbell 2

    Having lived in the US for a while “retirement savings” there means lots of things:

    – social security (a compulsory tax on your first $80-90k of income) that pays out somewhat equivalently to the NZ pensions

    – an employer’s pension scheme – these are largely going away (replace by 401ks with an employer contribution) – these are the things from older companies that are being preyed on as mentioned above

    – 401Ks – these are work organised but independantly managed – they’re a bit like Kiwisaver – the main difference is that money put into them is pre-tax – that means that you still owe the govt tax on money in 401Ks (and any income) the idea is you put the money in when you’re earning at your highest tax rate, but take it out (and pay the income tax) when you’re retired and paying income tax at a lower rate. Kiwisaver is already taxed money and you pay taxes on increases in value of your funds

    I worked in Silicon valley for 20 years I’ve never worked for a company with a pension scheme (I don’t think I know anyone who ever did – these are mostly at older, maybe heavily unionised (or once unionised) companies – auto companies, IBM, those sorts of companies), all had 401K schemes and of course social security is mandatory.

    I’m generally in favour of Kiwisaver, and currently pay the max – the Aussie compulsory retirement scheme has pushed 10% of people’s income into investment in the Aussie economy for the past 40 years or so ….. it’s a large part of why so much of NZ is owned by Aussie companies – all those banks, all our big stores – and as a result we lose so much of our wealth across the ditch – if we don’t start investing in and buying back our own economy we wont get back our financial independance.

    I also think we should move our high marginal tax rate back to where it was – English’s promise that reducing it would be ‘neutral’ was obviously crap at the time and has now been proved to be such – it was a scam to benefit the National Party elites. The continual comparisons of NZ tax rates with Aussie federal tax rates, while ignoring Aussie state taxes (another 5-6% as a payroll tax) is a sham.

    • Draco T Bastard 2.1

      if we don’t start investing in and buying back our own economy we wont get back our financial independance.

      Which, of course, is the point of globalisation and FTAs.

      Really, the only way we’re going to get our independence back is to ban, outright, offshore ownership and investment. The reality is that we’ve never needed it and it’s always been bad for our society.

      • Paul Campbell 2.1.1

        I think that NZ has a particular problem – Australia and its compulsory retirement system have been buying us bit by bit for decades now – we don’t have a bunch of money in our economy seeking around for places to go in the way the Aussies do – it’s why many of our big box stores are really Aussie stores and send their profits off-shore (as do our banks).

        I see Kiwisaver as a long term play trying to right that – it will take us 30+ years though, it wont happen overnight

        • Draco T Bastard

          I don’t think that trying to buy our country back will work as it’s still playing within the neo-liberal rule set.

  3. vto 3

    hands up who believes that kiwisaver will not be grabbed by some future government under the pretext of some national emergency?

    • Charles 3.1

      That’s the problem alright, which is why the final sentence of the post is so important. Alternative options (to one summarised in final sentence/s) rely on a social attitude/order that is too unstable to offer/promise long-term security.

      • dukeofurl 3.1.1

        Based on what evidence ?

        The US has had its ‘Social Security’ system since the 1930s, payout is broadly based on what you pay in ( up to a max income)
        The UK has had its pension scheme based on variable payments when working. In fact if retire to NZ or move during your working life you have still get paid.

        In fact recent evidence, Greece, shows the reverse is true. Relying on the State funded pension from taxation ‘could’ mean your payments will be cut after you retire

        “The Greek pensions system faces two fundamental problems. First, it is dominated by the state system pillar, funded directly – and in present circumstances unsustainably – by the stricken public purse. Public sector pensioners are paid directly by the government. State pensions for employees in the private sector and the self-employed operate on a defined benefit (DB), pay as you go basis and consist of an earnings-related primary pension, an earnings-related supplementary pension and additional benefits.”

        An additional problem in Greece is the reliance of private pensions who invested heavily in Greek Government bonds.

        • KJT

          The fact, that Greece has had a high level of inequality for a long time, As one of the last countries in Europe to get out from under Fascist rule.
          And, the wealthy taking as much as possible, while avoiding taxes, was endemic.

          Has nothing do with Greece’s problems, of course?

        • Colonial Rawshark


          I do quite like you but at the same time some of your assumptions of stability and certainty give me the shits.

          The financial system is going away sometime in the next one or two decades. You’ll wake up one day and the US dollar assets that your retirement savings are denominated in won’t be worth toilet paper, or some other catastrophe shifting financial wealth from the workers to the financial parasitic class.

          When it comes to the future real value of retirement savings, if you are over 50 maybe you’ll get away with it. But any kid still in primary school is stuffed from the start.

    • tc 3.2

      Like it hasn’t already been undermined and made less attractive by Blinglish with a few slashes since 2008. It’s a fig leaf over an elephant of a problem anyway because we left it way too late.

      To quote a well respected financial services colleague ” why would I give money to the white shoe brigade so they can clip my ticket and eventually give me what everyone else gets, i want to be ahead of that…”

      Invest in your future by looking after your kids and grandkids, eliminate debt and get your monetary cost of living as low as possible is my advice.

      I trust the financial services industry as much as I trust Shonky Python and a recent chat with a major OZ broker reminded me why, it’s a rigged game.

      • dukeofurl 3.2.1

        If History is a guide:

        the Share market was a corrupt and rigged institution which crashed and ruined many peoples investments under Labour in the late 80s

        The finance companies were a nest of corruption and financial deceit which crashed and burned under Labour in the period of the GFC and ruined many peoples savings.
        For the last one I put a lot of the blame on Dalziel, who gets an F – ( continuing her poor stewardship in Christchurch City)

        Im not sure who to point the finger at for the 80s, as I wasnt around, but you cant go to far wrong with that pig farmer Roger Douglas

        • RedLogix

          That 4th Labour govt you’re referring to dofurl – being in fact the first and only ACT one.

        • KJT

          Yes. Shows the reason why less than 1% knowingly vote for ACT policies, nicely.

    • KJT 3.3

      As have State and civil servant pension schemes in the USA.

      • tc 3.3.1

        As George Carlin predicted

      • Colonial Rawshark 3.3.2

        and plenty of private sector pension schemes have been utterly and deliberately gutted via corporate reorganisations and bankruptcy. Those actions being organised by the banking class, of course.

      • David 3.3.3

        “As have State and civil servant pension schemes in the USA.”

        How’s that working out in Detroit?

    • Jones 3.4

      They might try but the safe will be empty… the banks and fund managers will already have looted it.

      • tc 3.4.1

        Yup just how accurate are those fund statements as to what’s behind it in terms of shares/property/cash, is it worth the paper it arrives on ?

        It’s an enormous house of cards all lined up back to back to back etc where once the bottom card goes it crashes in a heartbeat.

  4. Michael 4

    I think there is an important difference between investment and gambling. And investing can do good things..long-term people can make good returns and it is worthwhile.

    But I think that more can be done to offer a more secure option too. NZ should allow people to invest in NZ long term government bonds as that would allow a guaranteed annual return if people don’t want to take on any risk. Also perhaps a public option Kiwisaver fund to reduce fees. The US offers risk-free, inflation-protected guaranteed returns on government bonds. http://www.forbes.com/2010/01/15/i-bonds-risk-free-yield-personal-finance-bogleheads-view-lindauer.html

    Look at the NZ Cullen super fund. It’s been great and has built up a lot of extra money on top of surpluses invested.

    I don’t think you can just point at Kiwisaver and say “bad”. Generally saving and investing is a good thing, it just needs to be made more secure and fair.

    One can get a healthy return of 5-7% per annum over a term of 30-40 years with very mild risk.

    I do also agree that more can be invested in public pensions…but why not have both better state pensions and better individual savings?

    • Draco T Bastard 4.1

      NZ should allow people to invest in NZ long term government bonds as that would allow a guaranteed annual return if people don’t want to take on any risk.

      Nope, for two reasons:

      1. The government should never borrow. If it needs more money it should either create it or tax it.
      2. Such a guaranteed safe ‘investment’ should have negative returns.

      Generally saving and investing is a good thing

      Another fallacy of modern economics. Basically, just because you save money doesn’t mean that there will be enough capacity in the economy to spend it later. In fact, it’s almost guaranteed that there won’t be because the system is designed to produce shortages.

      One can get a healthy return of 5-7% per annum over a term of 30-40 years with very mild risk.

      Nope, that’s just BS. See above.

      I do also agree that more can be invested in public pensions…

      Why have pensions at all when we could just go for a much simpler and more efficient UBI?

      • Michael Calderwood 4.1.1

        Why not have both a UBI and pensions on top of it?

        • Draco T Bastard

          Why have pensions on top of the UBI when the UBI will be set at or greater than present pensions?

    • Colonial Rawshark 4.2

      I think there is an important difference between investment and gambling. And investing can do good things..long-term people can make good returns and it is worthwhile.

      Yes why don’t you “invest” your savings in something worthwhile and substantial that Standard and Poors says is “Triple A rated” BWAHAHAHAHAHA

  5. Richard 5

    Or you can pay high taxes and get absolutely nothing of value in return, as we did 1999-2008. Personally, I’ll invest or spend my own earnings, thanks.

    • b waghorn 5.1

      I’m assuming you’re a high earner so got quite a increase with the nats tax cuts in 08 I’ve had a theory that a lot of those tax cuts have gone to fueling the housing problems in Auckland and would be interested to know you’re take on it. ?

      • dv 5.1.1

        Richard obviously missed the 60% tax rate in the 70s then.

      • mickysavage 5.1.2

        Real estate speculation, overseas luxury items and trips, all those things that are really good for the local economy /sarc

        • Richard

          None of the above actually. I did pay the 60% rate, and subsidised the local car “manufacturers”, the inept Post Office and Railways, the various Govt Stores depts set up for the unemployable, and the triennial spend up by whoever was in Govt to try to buy re-election. I don’t live in Auckland and have no desire to. I got a little back in the 2008 tax readjustment, but not much. It was nice to finally be treated as something more than a cash cow for the Govt. No overseas trips (too busy working), no speculation. Just saving for retirement, although I fully expect some or all of that to be redistributed by a future Govt to those they believe are more deserving of my earnings. But paint me in whatever hue you desire, I am certainly an ex-Labour voter.

          • One Anonymous Bloke

            Once, just once, it would be nice to hear an argument from the centre-right that didn’t amount to petulant cry-baby whining and a massive sense of entitlement.

            • Nessalt

              As opposed to the constant whine from the far left that the system doesn’t work because a) they can’t succeed under it and b) they’ve dreamed up something better where they don’t have to work to succeed.

              When the left gets it act together and decides on it’s common goals without the arguments that amount to literally hair splitting over the right ideaology to subscribe too, we’d have a chance to roll the nats. it would certainly be better to have a coherent and thought through plan than viciously attacking anyone who doesn’t believe whatever narrow faction you belong to believes.

              • One Anonymous Bloke

                What a load of rubbish – show me someone from the Left who says any such thing.

                Do you honestly think making up lies about people is the same as thinking for yourself? Pathetic.

                Edit: seriously – the furthest Left you can go is Marxism – “the means of production lie in the hands of the…” fill in the blank and then reflect that you’re blithering about the labour movement.

              • Draco T Bastard

                As opposed to the constant whine from the far left that the system doesn’t work because a) they can’t succeed under it and b) they’ve dreamed up something better where they don’t have to work to succeed.

                Interestingly enough, nobody on the Left has ever done either of those two things. The RWNJs, on the other hand, always seem to be looking for ways of not working while getting larger and larger incomes. In fact, such a system even has a name – it’s called capitalism which should tell you why it doesn’t work.

            • Jones

              We have… but they’ve all been discredited…

          • Draco T Bastard

            I am certainly an ex-Labour voter.

            And, considering that you actually believe the BS that you just wrote, a complete idiot with about as much understanding of the world as a bug.

          • KJT

            Subsidised your schooling, health care, housing, roads, and everything else you used. But you got nothing for your taxes?

          • sabine

            oh you must be talking about Mrs. Bennett, National MP. I think she would have bennefitted muchly from the amount of tax you paid.; 🙂

    • dukeofurl 5.2

      Nothing in return ?

      Tax cuts during those years would have been highly inflationary as the economy was at full capacity – and nationwide, not like the bubbles in Auckland/Christchurch and flat mostly elsewhere.
      Cullen knew that the boom wouldnt last and looked to the future and paid down debt.
      Thats made it easier for English to borrow more than all previous finance ministers combined, and he will borrow $6 bill this year and $7 bill next year and so on.

      English promised tax cuts when he came into office but that was just a swap for Cullens tax cuts ( to counter the effects of GFC)

    • vto 5.3

      “Personally, I’ll invest or spend my own earnings, thanks”

      Except the fruits of these lands are not your own earnings are they Richard, they are the earnings of a multitude of inputs, only one of which is yours..


      • One Anonymous Bloke 5.3.1

        Considering the private sector always does better under Labour-led governments, I suspect the reason Richard found 1999-2008 so disappointing is that he’s a little bit shit at being a master of the universe.

        I certainly did ok.

      • Richard 5.3.2

        Sorry no I don’t. The wage packet has my name on it.

        • One Anonymous Bloke

          And you’d have no wages at all if it weren’t for the society you take for granted, the taxes you no doubt begrudge paying.

          Like an infant, you have no concept of that which sustains you. Tragic.

          • Richard

            Nice. Thanks for the debate.

            • One Anonymous Bloke

              Am I wrong? You describe your chagrin at Lab5 doing nothing for you, then laud National’s tax cuts. It is hard to escape the conclusion that you are ignorant of the benefits of the progressive society that nurtured you.

              I look around, and I see the infrastructure and social goods our taxes provide and I feel proud – “look what we made!”

              Tell me how the policies you support differ from negligent penny-pinching.

              • Richard

                Actually you are wrong about that. I am not complaining that Labour did nothing for me. My complaint is Labour seemed to think an increase in spend over their portfolios was the goal. I’m all for increased taxes so long as the money goes to better social results. It seems to me (and most NZ’ers based on poll and election results) that National achieve more with less. Now I’m sure you will fly into a rage and hurl more insults, but that is the perception.

                • Draco T Bastard

                  It seems to me (and most NZ’ers based on poll and election results) that National achieve more with less.

                  Except that they don’t. When you put in less you always end up with less. Simple physics really.

                  • Richard

                    Not so. If you throw money around with no perceptible goal or measurement you will get less that if you managed your resources carefully. Simple logic actually.

                    • Draco T Bastard

                      Two points:

                      1. National is throwing money around with no perceptible goals and
                      2. They’re also decreasing the amount of money going to places and getting less for it

        • RedLogix

          Which is true at one level, but an illusion at another. Take away the functioning community around you – and that pay packet would vanish.

    • Macro 5.4

      Richard – you are obviously too young to know – but the real jump in wealth transfer from the poor to the rich in NZ didn’t happen in 2008 (although there has been a significant wealth transfer from that point). No the real jump in inequality began in 1991 with Richardson’s “mother of all budgets”. That was when the upper tax rates were slashed dramatically and to pay for it benefits were cut to below poverty level. Subsequent governments have tinkered with this but our society was dramatically altered at that time and has suffered since.

      • One Anonymous Bloke 5.4.1

        Ask not what your country can do for you, ask it what it’s ever done for Richard, and don’t forget to call him “Sir”.

      • Richard 5.4.2

        I think you’ll find the upper tax rates were slashed in the late 1980’s under the Labour Finance Minister whose name I dare not breathe in this forum. I certainly remember that.

        • One Anonymous Bloke

          How were profits back in the evil days of high taxation?

          How would you even know – you’re on a wage. 😆

          • Richard

            Profits were good, so long as you were on the good side of the Govt when it came to allocating import licenses.

      • Mike S 5.4.3

        I’d suggest the massive wealth transfer started earlier than that, in the late 80’s with deregulation, privatization, etc, etc. The traitor Roger Douglas sold our country out from under us.

        • Macro

          Actually if you were to investigate – as I have – the rise in disposable income across percentiles within NZ, you would find that the rot started in 1991 (there is a clear upward trend starting in 1991 of wealth accumulating in the top 10%ile while the rest of NZ goes downhill – and has so continued – with slight bumps – to this day). Sure Douglas and Prebble in the first ACT govt, set the thing in motion. They were held in check to some extent by Lange who had actually entered Parliament with some form of social conscience – but it left the door wide open for the Nats (Ruth and Jen in particular – evil women) to finish off the destruction of society as we knew it.

          I’m sorry I can’t link to this work (I haven’t published it). But you can get all the information to do the work for yourselves from the Statistics website.

          However Atkinson and Leigh published a very good analysis of the top incomes in 2005 which has some useful data here:

          • Richard

            Maybe, but it wasn’t Richardson who slashed the upper tax rate. That was Lange/Douglas.

            • Macro

              true – but Lange ensured that the lower income percentiles were compensated to some extent and that there was a more equitable distribution of income by maintaining collective bargaining. It was after 1991 that the rot set in.

              Ken Douglas, then president of the New Zealand Council of Trade Unions, said:

              Ruth Richardson was very clear, very blunt, very honest about (the ECA’s) purpose. It was to achieve the dramatic lowering of wages, very quickly, by allowing the high levels of unemployment to pull the cost of labour down; that the market would determine and an oversupplied market would reduce the price. The other reason, of course, was to de-unionise and that’s why the government is in trouble with the International Labour Organization because the ECA doesn’t enhance or promote collective bargaining.

              from the link above.
              This shift had the effect of lowering disposable income to the majority of NZers while those in the top income brackets continued to enjoy a transfer of wealth from the poor to the rich.

    • One Anonymous Bloke 5.5

      What have the Romans ever done for us, anyway?

    • Stuart Munro 5.6

      You’re paying half what your parents did – don’t expect the same level of service.

    • Anno1701 5.7

      2 words for you Richard

      Galts Gulch

      Jog on son…….

  6. Philip Ferguson 6

    Interesting how, despite all the technological developments that should make human life easier, *capitalism* is chewing up more of our day with work and now more of our years alive with work.

    On making us work more years:

    On whatever happened to the promise of a leisure society?

    And on the tyranny of time in this form of society: https://rdln.wordpress.com/2014/10/03/capitalism-and-the-tyranny-of-time/

    • maui 6.1

      The leisure society post is interesting. Are you able to give a real world scenario where a Keynes 15 hour work week is possible? Say with travel agents, because of computers they might be able to organise travel twice as fast as they used to pre-computers. Is the real problem then that they’re not getting the same relative profit as they used to per booking made. If they were then they would be able to work part-time?

      • Draco T Bastard 6.1.1

        Are you able to give a real world scenario where a Keynes 15 hour work week is possible?

        Humans need not apply
        Will Automation Take Our Jobs? estimates that “Advances in data mining, machine vision, artificial intelligence and other technologies could, they argued, put 47 percent of American jobs at high risk of being automated in the years ahead.” And that’s the US which does have a more developed economy than ours.
        ZeitGeist: MOVING FORWARD (2011) estimates 75% of work today could be done by technology available today.

        So, the research does seem to indicate that our work week should be well down on what it is. The real problem is that all the benefits of improved automation and increased productivity are going to the richest who don’t do any work.

      • Descendant Of Sssmith 6.1.2

        A real world scenario is what used to exist prior to 85. Time and a half for extra hours worked.

        That meant my employer had to weigh up giving me more work and meeting that additional cost versus employing someone else.

        In most cases, unless it was a sudden unplanned for profitable job, he employed more people.

        So I had more leisure time and less work time.

        Of course I was also paid a more meaningful minimum wage than today.

        Quite simple really.

        Draw a line in the sand at the point employer costs increase for hours worked.

        Other real world scenarios – become an executive sitting on a board, a superannuation who has cut down their hours to live off NZS and part-time job, a provider of services via the internet – I know several who work only two hours per week as they are simply middlemen with a website or are providing a digital product.

  7. Tracey 7

    the problem with kiwisaver is that those on median income or below will accumulate bugger all if they pay in…

    nice post kjt.

    • RRM 7.1


      I joined kiwisaver right at the beginning, I was putting 4% into Kiwisaver and by doing that I was able to get the deposit for our first house together in about 4 years without really trying.

      I was earning about equivalent to the average wage throughout this period.

      The returns from almost any Kiwisaver scheme are significantly better than putting the money into retail bank products (like a cash account or even a term deposit.)

      If you don’t have a coherent savings and investment plan already, that you believe will out perform a kiwisaver growth fund, you should get into kiwisaver right now.

      • Paul Campbell 7.1.1

        remember that there are different sorts of Kiwisavers – you get to trade risk for return – essentially most schemes have 3 points you can choose – the mostly-stocks higher risk choices are exactly that.

        In general if you’re investing for retirement you should pick a fund that matches your stage in life, are you 20-40? then you probably have a higher risk ‘growth’ fund – the stock market will likely crash at least once before you retire even includding but theincome from a ‘growth’ fund will likely long term be a plus (mine has, including the GFC crash). as you approach retirement (I’m in my 50s) you should be moving to a more balanced sort fund, reducing your risk, as you retire and start to depend on this money for living off you should be moving your investments into the safest (but lower income) funds.

        Yes there’s risk in investing, the trick is to think long term (it is for retirement) and manage it carefully in respect to your time of life.

        RRM has been lucky – you’ve essentially been investing short term, another GFC at the wrong time (or maybe the collapse of the Auckland bubble) would have crapped on your plans. This is not to say you shouldn’t put your money into Kiwisaver, just think (very) long term and invest appropriately.

      • Draco T Bastard 7.1.2

        I was earning about equivalent to the average wage throughout this period.

        So, greater than ~75% of the working population and about double the median income.

        You really shouldn’t by into the Nats spin that everyone gets the average income.

    • Nessalt 7.2

      Milford active growth fund returned 15% in the last 12 months. something like 2.5% higher than benchmark nzx50 portfolio fund

      • One Anonymous Bloke 7.2.1

        What did “owning the means of production” return, lazy Nessalt?

        • Nessalt

          either rent, wages or interest on capital bitter one

          • One Anonymous Bloke

            The means of production, deluded one, are the hands of the workers.

            Unless there’s a reasonable return for their time, our investments are useless. Please try and get a grip on that basic fact.

  8. Mr and Mrs Brillo 8

    Because we are retired, we can speak with certainty about what happened to our attempts to save for retirement. We decided to put our money into personal infrastructure.

    We were never eligible for any work-related superannuation schemes, and they were gradually abandoned after the 1980s anyway, so we always knew we could not rely solely on government super and would have to do our own saving. We set about becoming financially literate. Went to adult education courses in it, now of course adult education has had its funding cut off by the National government.

    From a ramshackle but affordable cottage in an old area full of dungers, we traded up twice to a big house in a gentrifying suburb. Never got ambitious and bit off more mortgage than we could chew. We made sure we were very cautious with our outgoings till our house was freehold, then put the equivalent mortgage payments each month into insurance, bank investment funds, bonds and shares, all but one ethically chosen (the one whose ethics we decided to get shot of eventually was Sky City).

    The insurance, calculated to mature and fetch $88,000 when I turned 50, in actuality returned $27,000. A big disappointment. The banks also made more than we did on the investment funds available in the 1980s and 90s, so we renewed none of them. We did fine on the shares, though, having decided there was a crash coming and selling out in 1988.

    We put the released money into a second property, but found we did not like being long-distance landlords, so eventually we stopped that too – making a surprising lot of money from its resale, because of a suddenly rising property market in a boom area. We then re-entered the share market and shopped round the banks to find one which gave a better rate of interest for a long term, large deposit investment. (They don’t do that now, apparently, but if you shop round you can still find a better bank interest rate even on lower amounts. Make the b—–s compete for your custom. And always read the T&Cs.)

    Then we retired, sold the big house and traded down, releasing more money for investment. We are trying out bonds and shares again, along with term deposits, but will not re-enter the property market. (Just personal taste, because it still makes financial sense.) If the bottom falls out of everything, we still have Mrs Brillo’s jewellery to sew into the hem of her garments when we are forced to flee!

    Our present fairly comfortable position was achieved by living on one wage, and saving what there was of the other’s income (if they were in work). We had only average incomes, and no inheritances, and only one redundancy payout ($12,000) despite four redundancies for Mr Brillo in the turbulent 80s and 90s. All taxes fully paid. One small windfall, which we largely spent on a trip to visit family overseas. A great deal of illness, and no children, but responsibility for several sick elderly relatives. Noone said it was meant to be easy. Having no children has plusses and minuses, as we have had no outgoings on them but also have to provide for own care in very old age.

    We still drive an old car as a matter of choice, and do not have the latest in gadgets. At our age, few people are impressed by gimcrackery anyway! We can switch the heater on whenever we like, we can eat out at cafes if we wish, and can buy luxuries like books and magazine subscriptions and medication.

    My point is that slow and modest can win out in the end for the DIY retirement saver on even a modest or average income, and that the investments which did best for us were the ones we chose ourselves. I am sorry to say that renovating and turning over property worked best for us in terms of return.

    If Kiwisaver had existed when we were younger, we would have been all over it like a rash. But we would still have done extra saving in investments of our own devising, just to be on the safe side. Baskets may now be plentiful, but eggs are still hard to come by!

    • RedLogix 8.1

      And interesting comment Mr Brillo. Like many, many working middle class people that is pretty much the same story I could tell as well. Except at one point about 15 yrs ago I could load my entire assets into the back of the company wagon – and I had to start from zero again. But otherwise yes – I too was forced into exactly the same position of using property as the only investment vehicle that I could trust.

      The only thing that kept me going was good health and employable skills. And yet even within my own family there are members who will never enjoy that privilege through absolutely no fault of their own. They will never have ‘retirement savings’ to look forward to – so in the end it’s fallen to me as their ultimate backup.

      Personally I tend to agree with KJT – the only thing of any real future value is a safe, productive and functioning community around you. And for thirty years we’ve been discounting that future for a selfish present.

      Steven Keen once said to me that ordinary people should never have to be in a position to ‘invest’ their retirement savings. The only acceptable risk for your retirement years is zero – and ordinary people are just not in a position to manage that risk.

      My preferred solution is the UBI. A sufficiently generous income that enables anyone at any age to live securely and above the poverty line. It is the most flexible and equitable solution of the lot.

      • tc 8.1.1

        Agreed, it’s all about community/family and being able to have food/shelter/clothing which is very difficult in a bustling and growing city environment.

        You can’t eat a share certificate and how much will you need to cope with demand driven price rises as your fellow well heeled retirees can equally flash the cash.

        • Mrs Brillo

          Yes, tc, it is a worry trying to calculate how much you are going to need in future for unforseeable price rises. Mr Brillo and I are probably too risk averse, but life teaches you caution. Eventually.

          Everybody’s story is different, and one can only play the cards one is dealt. In our case those cards included no kids, repeated cancer and a couple of years (in total) with no income, living off savings. So we had to provide our own rainy day money, as you don’t get ACC for cancer and in those days there was no income protection insurance. I’d certainly buy IP insurance if I were working now, despite my feelings about the insurance industry! Also, at that time if the wife was sick and the husband was working, no state assistance was available, so living on one income became a skill one had to learn – cutting one’s coat to suit one’s cloth. We became experts on cut lunches and mended clothes, and every other cheeseparing saving we could make, to get by. We switched to stringency mode. We always assumed our broke state was only a period of restricted budgeting till we could start earning again, and meanwhile paying off the house took precedence over other expenditures.

          Don’t assume all retirees are rolling in it. Some of our retired friends and acquaintances are well heeled, some are average, and others lost their savings by investing in the likes of Hanover Finance and are living solely on govt super. Yet others were abandoned by husbands disappearing to Oz leaving them to find the money to raise their children, and never had the income to buy a house. They are as well off or badly off in old age as they ever were. Others have found their adult kids are still relying on them for handouts of one kind or another. Some are raising their grandkids for whatever reason.

          As I said, it’s different for everyone and I would never say that what we did was the only way or the recommended way, it’s just what we did, and not all of it worked.

  9. b waghorn 9

    I have to say I’m loving kiwi saver as someone who is unlikely to earn the average wage at any point in life and am uninterested in money in general its probably my only hope of a semi comfortable retirement once they put me out to pasture.
    In saying that I’m open to ideas so what would the anti kiwisaver types suggest is another option ?

    • Colonial Rawshark 9.1

      In saying that I’m open to ideas so what would the anti kiwisaver types suggest is another option ?

      A minor improvement step would be publicly owned and guaranteed Kiwisaver option, ethical investing only, with next to no fees.

      • b waghorn 9.1.1

        Yes those are good ideas I also think that they should make it tax free especially when they cut the tax credits which I’m sure will happen at some point in the nearish future.

  10. SMILIN 10

    Before the age of Key or keyage or just plain old Leverage
    We had moderately wealthy people as politicians or broke ones regaining the lost revenues Bolger Shipley and Douglas
    Now we have the people of the Keyage who are mostly so wealthy that as Geo Bush said to the 1% “you are my base”Which is something obviously rings loudly with Key
    The truth is obvious, the Welfare State of NZ is being chopped thru the National party govt continuing to remove funds and replacing retirement funding with the signing off their responsibility to allow the insurance companies to pick up the tab ( life ins)
    This govt in principle does not want to fund Super and the longer they stay in govt the less chance there will be for under 40s to have
    assurity that there will be superannuation
    You ask anyone between 15 and 40 if they know what a retirement package from the govt is, for them it has very little meaning because it is so far away and most people on it die, thats about all it means now to them because the govt doesnt want to promote it as being an economic option
    Bill English talkin about more money being around at present to up the tax take, him sounding like a drug dealer eyeing up the revenue on the street rather than the huge amount the multinationals owe that is sending us broke
    This insane position this govt takes up on where the govt debt lyes always focusing on the potential areas of left wing influence to highlight in their reporting so that we end up with a biased pack of lies constant burying reality or the past Labour govts excellent record which has be gradually eroded by his Arrogance JK and his party of office thugs
    Why should we let that tired shyte waste our time and energy he hasnt done a damn thing for this country since hes been in office except create more debt

  11. Colonial Rawshark 11

    103 year old cartoon explains current financial system

    Put this up on OM yesterday, but it is utterly relevant to KJT’s post today.


  12. keith ross 12

    M and M Brillo it is good to hear a success story from people of modest means but I think that you are making a mistake that a lot of older people make in that the cost of living now hardly allows for a family to live on one average income and I know that you say that you have no kids well that is not the way that the majority of people live their lives. For some of us the few joys that we get is to love our kids. It would be great if we had near full employment like in the 70s and early eighty’s. I was earning nearly 20 $ an hour in the 80s but in the last decade I was only earning 19 $ an hour, and that was in a position of charge of a busy kitchen for a business that was making a fortune. The same thing has happened in the states the productivity has more than doubled but the share that goes to the people producing the productivity has not increased while the share that goes to the shareholders and tree rich has more than doubled or tripled. I am not sure but isn’t it nearly 20 people in Fonterra earn over one million dollars per year? their pay had gone up massively but not the average worker. how many people earned over a million a year in the eighties?Bottom line is it is a lot harder to do what you have done starting out now than it was several decades ago.The high taxes we used to pay actually helped the modest income people acquire wealth with help into houses and work work work or a welfare system that didn’t threaten the populace helping to keep wages up. Nowadays an employer knows that you take it or you are fu…d for the lower educated people

    • RedLogix 12.1

      I was earning nearly 20 $ an hour in the 80s but in the last decade I was only earning 19 $ an hour, and that was in a position of charge of a busy kitchen for a business that was making a fortune.

      That is so wrong on so many levels. The fucking bank was probably making way more on the company overdraft for shuffling ones and zeros in a computer.

      And I know how hard busy chefs work. That’s a tough gig.

    • john 12.2

      I was working in the early 80s and earning $20 a day – not $20 and hour.

      And it cost a days wages to put petrol in the motorbike, or over two days wages to fill the car – if it wasn’t a carless day which meant you couldn’t use it.

      Ah – those were the days of milk and honey.

      • RedLogix 12.2.1

        Yeah and my very first job as a bottle cleaner at the local chemist paid 50c per hour.

        But by the 80’s I was working in the paper mills on a salary of about $60k pa, that adjusted for inflation would be about $170k pa in todays terms. Or about $650 per day.

        I’m a skilled technical person and in my working lifetime I’ve seen my productivity, skills and responsibilities dramatically increase – while my real income stagnated or even went backwards. My one income happily supported family and mortgage with some left over, but as the years went by it was no longer enough.

        The data from all over the world shows the same story in the last 40 years , working incomes barely keeping up with inflation – or at the bottom end going backwards – while the very top 0.1% of incomes have multiplied beyond all fucking belief.

        To the point now where a mere 85 people control more wealth than the bottom 50% of all humanity.

        • john

          I was on $7014 in the early 80s – so no wonder you were doing quite well – you were getting 850% more money.

          And no wonder being on such a ridiculously high wage, that it wasn’t sustainable over the years.

          Luckily for the majority of the workforce in NZ, spending power of the median wage has continued to get better and better,

          Decade after decade, wages have been going up more than inflation

          As for the bottom end going backwards – that’s total nonsense.

          The minimum wage has gone up 100% over the last decade, while inflation is only 30%.

          • RedLogix

            Nah … early 80’s I was on about $13k as a research tech for U of Auck and I recall that was at the bottom end of the market. I don’t know what you were doing to be paid only $7k.

            Over 40 years of working career I’m now at least 10 times more productive and responsible than I was back when I started in the 70’s – yet my real income has never reflected this.

            Of course the point is – how come my ‘ridiculously high wage’ was not sustainable – when the hyper-wealthy have seen their income increase by orders of magnitude over the same period?

            • john

              At such a high wage in the 80s, you WERE one of the super rich you’re now complaining about.

              Everybody’s productivity has increased. That’s why it now takes 30 man hours to build a car when it used to take 350.

              It’s also why you can buy a brand new car today for $25,000 , and it’s miles better than the one you’d pay $25,000 for in the 80s (which is probably more like $60,000 in todays money).

              We are far more productive, which has reduced the price of everything.

              • Colonial Rawshark

                It’s only “reduced the price of everything” by hiding all the costs in plain sight. Devastated towns, broken families, stagnating wages, off shored pollution, and more.

                And it is the 1% – and especially the 0.1% – which has taken the bulk of the income generated by workers much improved productivity.

                Answer the question – what were you doing in the early 80’s where you were only paid $7K pa.

          • Grant

            John. In 1981 I was earning 17k as a first year primary teacher. Six years earlier, as a school leaver at the end of 1975, I spent my summer holidays driving a road roller for $100 per week, which is about the $20 per day you say you were earning in 1981. All I can say is that you were either in a very low paying industry or on an apprentice wage.

            Here is a quote from the 1985 NZ year book referring to incomes for 1981:

            “Over half (52 percent) of the male full-time labour force had incomes between $8,000 and $15,999, while only 41.2 percent of the female labour force had incomes in this range. The median income for males in the labour force was $11,816 and for females $7,693.”


            Please note that the median income for males is nearly twice what you have claimed as your income.

            Also, I don’t know what the heck type of motorbike you were riding, but I rode bikes of increasing engine capacities from 1974 to 1981 (my “yoof”) and never had to put a days wages into one even when I was on a day long road trip.

            • keith ross

              For anyone who is interested I was a slaughter-man in the eighties and depending on the “tally”we would earn between 18 -20$ an hour and this was a high wage for then but not outrageous such as the average ceo gets today. I was running the kitchen for Speights in Wanaka till I broke my back,(badly ruptured disk) from overwork (55-65hr per wk). I am now on the last 2 papers to finishing off a degree in I.T. (B.I.T. Otago Polytechnic)which has taken me several more years than the normal 3 as I have chronic back pain. I do not think that I qualify as the “super rich” because I earned 20 $ an hour but I would be pretty well off if I earned 500 $ per hour (1000000/50wks @ 40hrper wk)now my 20 an hour adjusted for inflation does not put me anywhere near that hourly rate.(just guessing on this one )maybe some one could tell me what the rate would be adjusted for inflation? PS I have a brother who is still doing the same job in Ashburton (Y cutter) now and his hourly rate is about the same 20$now as it has always been.

            • Paul Campbell

              you have to remember that those were the days of hyper-inflation, Muldoon had his finger on the scales through much of that time until it all blew up in his face.

              As an example I started as a programmer in 1978 at $7,777pa, 6 years later when I left NZ I was earning $18k pa – within a year my replacement was earning $23k pa (I moved to the US where I started on ~NZ$ 76k pa – after the NZ$ had crashed due to Muldoon’s incompetence)

              • Grant

                Sorry Paul, was your reply to me? I’m just unsure which part of my comment you’re responding to.

              • KJT

                Just for information, New Zealand did not crash until 1987. After 3 years of the first ACT Government.

                And stagnated until Langes “Tea break”.

                Some people have short memories.

                The same idiots who are happy with National increasing borrowings to a level greater than Muldoon and with less to show for it, apart from tax cuts for the wealthy and cheaper Hawaii holidays for John Key.

    • Mrs Brillo 12.3

      I can see what you are trying to say and I do sympathise. Conventional paid employment is changing in nature, and harder to find than it was 40 years ago.

      When I was unemployed in the 1980s, I started my own business, which went exceedingly well until the Internet came along, for reasons which are too complex to go into here. But the Internet also offers opportunities which were not there before it existed, even if it is only buying and selling. Plenty of lower educated people, as you put it, are using TradeMe and the like as their source of income or as a component of their business.

      I do think the difficulty of living on one income is about the same as it always was, although luxuries will be off the menu (as they always were). Perhaps there is a generational difference in what we define as luxuries.The property market is harder to enter for young working people, and government intervention is much needed but I won’t hold my breath.

      As for the obscenity that is company directors paying themselves more and more, that has to be tackled politically. This government does not have the political will to do it. Nor the will to tackle that other obscenity, student debt. I think it is highly immoral of us to make our children pay for their own education, and to make females pay the same as males even though they will earn much less when they enter the work force. No wonder these kids are still mooching on their parents years later – a lose-lose situation for everybody. You would think the country would want to have its future work force as well educated as they could possibly be, but this government seems inclined to put up barriers and restrict that education to those who can afford it. Guess their planning really depends on having a coolie class.

      PS This was in reply to Keith Ross but for some reason it has gone in the wrong place!

  13. Sable 13

    I suspect a large number of people won’t be retiring at all and those that do, if they have the cash, will probably elect to retire off shore if they are smart.

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