TT: Monumental Step

Choosing change is a lot easier than having it forced upon you, but even chosen transformation is a big thing, as Alan is about to reveal…

JANE: So, Alan, you’ve just taken a monumental step.  You’ve retired.  Aren’t you a bit young for that?

Bobcat of Leisure

ALAN: Well, that depends on what you mean by “young.” The official age of retirement here is 65 and I haven’t (quite) reached that yet. So in a strictly pedantic sense, yes, I am too young. On the other hand, ever since my very first day at work, my ambition has always been to retire. Once I confessed that ambition in a job interview. Needless to say, I didn’t get the job.

I’ve always regarded work as an irritating intrusion into my real life. So now that I’ve finally fulfilled my ambition, I actually feel quite happy about it. So in that sense, no – I don’t think I’m too young to retire.

JANE: There isn’t really an “official age” here.  It used to be that Social Security paid out the full amount at 65, but I believe that was changed recently to 67.  So, I guess you could say the retirement age used to be 65, but now it’s 67.

ALAN: One of the political parties in our upcoming election has a policy of raising the age of pension entitlement to 67. But at the moment that’s just a pipe-dream.

Of course, there’s no compulsion on anyone to retire at any age. You can carry on working as long as you want to (and as long as someone is willing to employ you!). But every New Zealander is eligible for a government pension from age 65. It won’t make you filthy rich and you might have to moderate your lifestyle a bit. But at least you have a regular, though fixed, income and you can budget around it.

JANE: Everybody?

ALAN: Yes, everybody. Rich man, poor man, beggarman or thief. It doesn’t matter who you are or what your circumstances are, when you reach 65, the pension is there for you.

JANE: That’s nice.  I’m not really sure how the fine details work out here – especially for people who haven’t contributed to Social Security.  Here in the U.S., what each person gets from Social Security is based on what he or she paid in during the time he or she was employed.

Is it the same there?  Does Peter Jackson get the same pension as you?  Do you get the same as that hypothetical “beggarman or thief”?

ALAN: Yes, he does, and, yes, I do. The pension is the same for everybody. It isn’t a contributory scheme in any sense.

JANE: Interesting.

There is an exception to the “get out based on what you paid in” formula.  Women who are married and didn’t earn an income can claim a Social Security pension based on their husband’s earnings.  (This is to cover for the fact that they were unpaid workers, raising children and maintaining the household.)

Again, I have no idea how this is worked out or if a married couple needs to file for it.  All I know is that the provisions exists.

I have been my own wage earner all my working life, so I never bothered to figure this out.  Probably one of our readers can fill you in.

ALAN: We don’t have any equivalent of that because our scheme makes no such distinctions, though the pension amount does increase slightly if you claim it for a couple. However, I am a little uncertain about Robin’s position because she is three years younger than me so, when I reach the magic age in a few months’ time, it may well be that we will have to live on a single person’s pension until she comes of age. But for the moment the point is moot since, now that I’ve retired, I’ll have no income at all until the pension kicks in next year. So for the next several months Robin, the cats and I will be living on savings.

JANE: No income?  Your job doesn’t pay a pension?

ALAN: It’s very rare for private companies to have a pension scheme for their employees. Certainly I’ve never had a job that had one, and neither have any of my friends. The general feeling seems to be that the provision of pensions is something best left to the government.

JANE: That’s interesting.  Many types of employment here offer a company pension as one of the benefits.  This pension is in addition to whatever government-based Social Security the person may draw.

Additionally, a person can set up an IRA (individual retirement account) in which they can save dollars to be drawn out after retirement.  There are several types of these.  Unless you really, really want, I’ll spare you the particulars.

ALAN: No – the devil is in the details, so you can spare me those. We do have a government-run scheme called Kiwi-Saver which is structured similarly to your IRA. I’m not a member. It was only introduced about five years ago and I never bothered joining. I was too close to the end of my working life to make it worthwhile.

JANE:  Ah, but IRAs are not government-run.  They’re run by private investment companies.

Let me give you a personal example: when I taught college, I was offered the option of participating in the college’s pension plan.  It was a good program, so I did.  When I left, I could no longer contribute, but I’d been there long enough to be “vested” so that money has sat there, pretty much always earning interest, and will be waiting for me to start drawing out when I choose to retire.

When I left teaching and started writing, I didn’t have a lot of extra income.  However, once I’d built up savings, I started investing in a SEP (an IRA for self-employed people).  I’ve done this for many years now, so that money is also waiting for me.

Additionally, when Jim retires, I can mooch off of his retirement pension from the State of New Mexico.  In fact, we can opt for a provision that, if he pre-deceases me, I can still draw on his pension.

I won’t be wealthy, but I won’t just be relying on what I have in the bank either.

ALAN: We have similar private superannuation schemes in which you invest during your working life and then draw on when you retire. I used to be in one, but I soon came to regard it as a gigantic rip-off. I made regular contributions, but the final total never seemed to grow much beyond the contributions I was making. All the interest it earned seemed to vanish into something called “fees.” So eventually I bit the bullet and pulled out of it. It cost me about $12,000 to leave the scheme, but I felt that was worthwhile. I invested the capital I took out of the scheme in long-term bank deposits and, even at today’s derisory interest rates, I still seemed to make more money than the so-called investment scheme earned. So yah, boo, sucks!

JANE:  So why did you retire early – especially since you wouldn’t have your pension?

ALAN: I was always planning on retiring at the end of the year, but circumstances at work changed and so I decided to leave a few months earlier than I had originally planned. If I’d stayed on at work, I would have had to do a lot of quite serious study and, by the time I came to the end of it, there would only have been a short time left for me to use my new knowledge and skills in my job. It all seemed a bit pointless; too much effort for too little return. So I decided to call it a day.

JANE: Isn’t it a bit of a shock, suddenly not having to go to work in the morning?

ALAN: No, not really. For the last few years I’ve only been working part time, so I am quite used to having days at home, days when I don’t have to go into the office. Retirement is just more of the same, really. The worst part is when pay day rolls around and nobody pays me any money! Now that’s a very weird feeling I’ve never had before.

In some ways I’ve been very lucky – I got my first job after I left university, and I’ve never been out of work since. There are not many people who can say that in this day and age. So of course a regular salary has always been part of my life. I’m going to miss that…

JANE: I’ve also worked pretty much steadily since I finished college.  Well, if one calls being a fulltime writer for the last twenty years “steady.”

In fact, I should get back to my work.  I’ll save asking you about what you plan to do with your acres of free time for later.

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