But there are some people who rub me the wrong way. This is true with people in “real life” and also with people in the media.
One person who can rub me the wrong way is Hannah McQueen.
I’m not sure why. It could be professional jealousy, because she’s regularly featured in the press and recently succeeded Martin Hawes as a columnist for the Sunday Star Times.
But I don’t think it’s that. Because (a) I don’t want to have the same type of media profile as McQueen – I like blogging on my own platform, where I don’t have to worry about editorial oversight, or run the risk of putting advertisers off-side. It means I can write without fear or favour. And (b) I don’t feel the same way about other money personalities like Martin Hawes, or Mary Holm, or Liz Koh. I like them and most of what they have to say, and I think they provide great content for Kiwis.
One thing that bothers me is that she seems to write and/or comment about investments and retirement when that’s not what she does through her business. (I’m looking at her disclosure statement right now, and it states that she’s a Registered Financial Adviser (RFA), not an Authorised Financial Adviser (AFA). She advises on consumer credit contracts such as mortgages and budgeting and refers to a third party in relation to insurance. She may write about these topics, but professionally, she doesn’t seem to advise on them.) I could be wrong, but this leads me to believe that some people will be contacting her or her business with incorrect expectations about the services she provides. I hope this is made clear to these clients.
I also think McQueen and I have different presuppositions about money. From what I can gather, she seems to be more bullish on property and leverage than me. For example: her comments in this article, where she is quoted as saying “The reason property outshines other investments is because of leverage”. She then provides an example, stating “The property is supposed to double in value over 10 years”, as if this sort of capital gain is a law of nature. To say any type of investment is supposed to generate a return – and on top of this, generate an annualised, compounded, capital gain of 7.2% per year – is almost offensive to me.
When I read something by or featuring McQueen, I often wince. Let’s take a recent column in the Sunday Star Times, titled “Crunching the numbers on retirement”. (Or “Run some numbers for the retirement you want” on stuff.co.nz.)
In my view, the article is counterproductive and is more likely to cause people to disengage from planning for their retirement. If anything, it instils fear, uncertainty, and doubt.
The column starts off well enough. McQueen cites various estimates about how much people might need to retire. For example:
- Westpac saying a single person might need $300,000 at retirement for “a comfortable lifestyle with holidays and steak dinners” (although I believe this article is based on an out-of-date version of the Westpac Massey Fin-Ed Centre retirement expenditure guidelines research), and
- “the Commission for Financial Literacy” (it’s been the Commission for Financial Capability for some time now…) suggesting people might need $205,000. (At short notice I can’t find where the $205,000 figure came from, but it looks like it was from years ago – this 2014 stuff.co.nz article cites the figure).
McQueen points out that “there is no one magic number, there is only your number. It would ideally be based on what you want your life to be like, rather than just the kind of life you discover you can afford at 65”. I couldn’t agree more with this point.
But many of her comments in the column are startling:
- She talks about “one Australian commentator suggest[ing] even $1 million wouldn’t buy you some particularly golden final years”. This isn’t comparing apples with apples, because Australia doesn’t have universal superannuation like we do in New Zealand. For many Kiwis, a $1 million nest egg would provide for a golden retirement, in a way it wouldn’t in Australia. This comment has no substantive value, apart from eliciting fear, uncertainty, and doubt.
- Apparently, “our default position of getting on the property ladder, paying off the mortgage and then saving for a few years won’t cut it any more”.
That’s news to me. Because if you can repay your mortgage within a reasonable time, supplement your mortgage repayments with regular contributions to KiwiSaver, and accelerate your savings after your mortgage is repaid and your kids enter the workforce, a good portion of Kiwis can get there. I’ve seen it with many clients who have done it or are in the process of doing it. They’re on track towards achieving their long-time financial outcomes without doing anything drastic (like borrowing to invest).
It’s as if McQueen is trying to sell a different approach or something…
- McQueen explains how to calculate how much you’ll “need” to have in retirement, and subtracting how much you’re likely to have. This is a sensible thing to do. But the way she explains how to do it, and the subtle assumptions she makes, really annoy me.
For one thing, she says that to calculate how much you need to retire, you simply multiply how much you’ll need by the number of years you expect to be retired. This pays short shrift to:
- the fact that we don’t really know how long we’ll live and need to address this uncertainty;
- that some people want to leave an estate or at the least have a decent buffer in case of emergencies or in case they live longer than expected;
- that retirement expenditure tends to follow a “U-shape” with spending going down during most of retirement; and
- that many people eventually downsize/rightsize their property which frees up some equity to support their retirement lifestyle.
Importantly, it also assumes a 0% real return on investments, when most people investing prudently should be able to generate at least some return from their nest egg. By assuming a 0% real return, you can end up significantly overstating how much you’ll need in retirement – in many cases, by hundreds of thousands of dollars.
In terms of McQueen’s assumptions, she also says that after you “[s]ubtract your savings from your expected costs”, you’ll find out “how far short you’ll be”. News flash: there are a lot of people who realise that they’ll have more than they need. Maybe it shouldn’t be news to me, but I think McQueen writes for a different set of people to me. Although whether she’s writing to the readers of the Money section in the Sunday Star Times is another question.
- How about the concluding paragraphs for a defeatist message:
“The most basic options for bridging the gap start with ‘earn more, spend less or retire later’ – but they aren’t necessarily palatable, or possible. / If you’re running short on time, the gap can be too large to bridge with savings alone.”
So… after reading all of this, what do you do?
If only McQueen operated a business that “can help you identify your financial goals, create a plan to make them happen and keep you on track for achieving success”.
(Ahem).
I’ll admit – this article has primarily focused on the shortcomings in what McQueen says in her article about crunching the numbers on retirement. I’ll be focusing on retirement expenditure and decumulation in the short-term future. I promise not to make my articles self-serving.