The more planning you do, the less you can be damaged by unexpected financial hits
The welfare state is a real hot potato. Some people believe strongly that we need to protect our most vulnerable citizens. Others begrudge paying for it.
Whatever your opinion, the reality is that:
Ending up on the unemployment, sickness or domestic purposes benefit for any length of time will almost certainly eat into your long term wealth.
New Zealand superannuation could well be a pitiful reflection of its current self by the time you and I reach the age of 65.
Accident compensation from ACC will pay 80% of your pre-incapacity weekly earnings if you qualify. But there is no guarantee the system will remain in its current form forever.
The antidote is to this worrying situation is to up your retirement savings, have a backup plan should you lose your income, and ensure that you have insurances to cover you for the unexpected.
Post-Cabinet Press Conference - John Key, PM
The value of life insurance
On the subject of New Zealand superannuation, I’ve been interviewing human resources people of late about how their companies transition workers to retirement. Every single one has staff members that have to work beyond the age of 65 because they simply can’t afford to retire on New Zealand superannuation. That’s a sobering thought and all the more reason to up your retirement savings.
Have you considered what you would do to make a living if you lost your job or business? It’s very easy to fall into a depression if you suddenly lose your job. Even simply sticking your head in the sand can result in financial ruin very quickly. Everyone should have a disaster plan that covers their employment and their finances. It’s also worth considering “portfolio” working. This is where you are a contractor, freelance, or similar and work for a number of businesses at once. It may seem insecure to some people, but it ensures you can never lose your entire livelihood from unemployment or business failure in one fell swoop.
You could spend your entire income on paying for insurances and they won’t necessarily cover you for all eventualities. There are some policies that everyone should think about. They include:
Critical illness (also called trauma) insurance pays a lump sum if you’re diagnosed with a life threatening illnesses named in the policy
Disability insurance pays out a lump sum for permanent disablement through sickness or accident
Income protection insurance pays a percentage of your income on an on-going basis if you suffer from named illnesses
Mortgage repayment insurance will pay your mortgage instalments if you become ill or disabled and
Life insurance pays out on your death.
Finally, the more planning you do, the less you can be damaged by unexpected financial hits.
The "real" Kiwi budget
Peace of mind: financial security for your children
Kiwisaver – how much should you really be saving?