BNZ chief economist Tony Alexander has been investigating options for the large number of baby boomers reaching the age of 65. Business editor Dene Mackenzie reviews those options.
Dylan Thomas wrote on a theme of raging against the dying light and BNZ chief economist Tony Alexander decided to focus on the theme after talking to a 65-year-old man contemplating buying his first home.
Asked if it was a good idea for the retirement-age man to buy the home, Mr Alexander wholeheartedly said yes.
''Getting into one's first home is an exciting time so unless someone presents me with some fairly dire financials, my answer will usually be in the affirmative.''
The main reason he said yes was who would not want to undertake such a wonderful thing at a time when for decades we had been told that come 65, we were supposed to fade out of sight and confine ourselves to walking a small dog along the beach, riding buses for free outside peak times and doing our best not to be a burden on the state.
The message for at least 25 years had been old people would be a problem for the rest and they would cause taxes to rise.
The ancillary message had been people needed to save more for their retirement.
But that made no difference to the fiscal impact unless superannuation payments were tied to people's savings, the value of their assets and their income, Mr Alexander said.
All of those things were present in Australia but few votes went to any politicians in New Zealand who proposed not even abating national superannuation but simply raising the retirement age.
Saving for retirement was a good idea, regardless of the view of the sustainability of the National Superannuation Fund.
Accruing a diversified asset portfolio over time by sacrificing small amounts of consumption (saving) over a period of decades allowed the capital to work for a person through compounding effects.
The accrued assets gave options in later years that would not exist for those who received only national superannuation, he said.
However, although he had no compunction about trying to scare the ''bejeebers'' out of people so they did cut spending and boost saving, he wanted to focus on the interaction of four other things.
The were:
-Sustained low interest rates
-Increasing life expectancy
-The tightening up of the labour market facing employers
-The joy gained from working.
If people were planning on term deposit rates sometime in the next five years jumping up to 5% to 6%, they would spend a lot of time being disappointed, Mr Alexander said.
Low returns from most conservative portfolios meant there was a strong incentive for people to not switch away from equities and property as much as they approached retirement as might be the case if it was the 1980s, 1990s or 2000s before 2008.
The case for young savers having a higher-risk growth-oriented portfolio was even more compelling.
Low returns said to older people there was value in holding on to investment property for the yield it would give and the long-term capital gain potential. It was the same for shares, local and offshore.
The second important point was New Zealanders were living longer as medicines and medical procedures improved and those who took notice of the evidence and the warnings curbed their calorie intake, smoking and drinking.
People would need retirement-era income over a far longer period than previously anticipated.
That added to the argument driven by sustained low interest rates to bias a portfolio away from low-yielding cash, term deposits and government bonds towards equities, corporate bonds and property in its various forms, Mr Alexander said.
''This means not just holding on to one's investment properties but perhaps buying more - which is one factor I believe is helping to underpin our housing markets currently.''
There was no need to stop working when plenty of employers were having it slowly dawn on them they needed to employ more older people.
Once the current migration boom passed, the labour force growth rate would plummet.
Employers would struggle to get staff and opportunities facing older people to remain in gainful employment would multiply, he said.
That was fortunate because in an environment of low returns on most portfolios, many people might need to work to supplement their retirement income.
''My advice to employers is to think how older employees could be usefully employed.''
The final point dealt with by Mr Alexander was asking why stop working, even if the person no longer needed the money.
The chances were those people had not spent their lives herding sheep or lugging coal and would be in better physical shape than past retiring generations and able to keep working beyond 65.
Plenty of people had ''great'' social networks and engaged in many social activities but in his experience, most people did not, he said.
They pretended to be loving life and actively engaged in things when they were not. In that regard, those older people were exactly like most young people - pretending to be part of some crowd because society demanded people not look too weird, and being alone was considered exactly that - weird.
''So we make up friends and outings, or perhaps more accurately allow the implication to lie in the air we are more engaged than we really are.
''The point is, don't let the buggers talk you into retiring like you'll be doing the world a favour.
Stick in it, perhaps build a 'portfolio' of part-time jobs and embrace the social interaction it will bring, along with the extra money.
''We'll all eventually have more than enough time to be in that good night. Why hurry the process by missing an opportunity for life-lengthening social engagement?''
