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Why Most of Us Need to Work Our Money Harder

9905 Alan Clarke
9905 Alan Clarke

It is probably true that most Kiwis will not be able to save the ideal amount for retirement. Having said that, it is not a reason to despair, provided we are doing some saving and finding a balance between living for today and being prudent financially for tomorrow.

Any saving is good saving

I have met a lot of retired Kiwis who have been prudent, but have less than the ideal amount in savings. However many of these people are having quite a good retirement using a number of different strategies.

Putting our money out to work

All of us between the ages of 25 and 85 can put our money out to work, but many do not. How and why? read on…

Saving towards retirement

You are saving $500 a month towards retirement and you put it in the bank, earning up about 3% after tax.

$500 per month x 3% pa. x 23 years = $200,000

Instead you save into a balanced portfolio (work your money harder) and average another 3% pa over and above the bank.

$500 per month x 6% pa. x 23 years = $300,000

That is $100,000 more!

When you are retired

You retire with say $300,000 and leave it in the bank, earning 3% pa. after tax for 20 years.

$300,000 x 3% pa. = $9,000 pa

$9,000 x 20 years =$180,000

Instead you decide to put your money out to work in a conservative portfolio which earns 2% pa. above the bank i.e. it earns 5% pa.

$300,000 x 5% pa. = $15,000 pa.

$15,000 pa x 20 years = $300,000

An extra $120,000 to supplement your National super!

Extra money most of us would need.

Does this involve much risk?

Provided you take care to invest in a properly diversified portfolio of high quality funds, you do not have the risk of any major loss.

However you will have to put up with volatility;

  • some years you will make a bit less than the bank
  • most of the time you will average 2% pa. more
  • some years you will make quite a lot more.

Which funds?

We favour asset class funds which are highly diversified, usually across 400 bonds and 5,000 shares.

Don't forget Kiwi saver

You should also take care to ensure that your Kiwi saver funds have been put to work too.

In summary

  • Any saving is good saving.
  • Put your money out to work without delay.
  • Use common sense.
  • If you are a little unsure, at least do half and half.
  • Do a fairly comprehensive review of your finances and retirement planning annually.
  • Try not to live in the future, but pay it some heed from time to time (as above).

Alan ClarkeBuy Alan's Book in the GrownUps Store now.

This article was supplied by Alan Clarke who is the author of a book entitled "Retire Richer" which is a practical guide for everyone age 25 to 85. Alan also writes a regular blog on

Alan is an independent authorised financial adviser (AFA) and his disclosure statement is available on request and free of charge.